As expected, tariff wars are taking a toll on investors’ psyches and on the market. In fact, the TSX Index is down 4% in March, with many stocks having been hit extremely hard. As this uncertainty continues, my mind has now shifted toward finding undervalued Canadian stocks. These stocks give investors the potential for maximum upside and limited downside.
Without further ado, here are three undervalued Canadian stocks to buy now.
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BCE: Undervalued with an 11% dividend yield
The first undervalued stock I’d like to highlight is BCE Inc. (TSX:BCE). BCE has been in the news a lot lately, as the company has been dealt some big blows. First, there’s the changing regulatory environment, which has effectively destroyed many of the perks that BCE enjoyed being a “protected” Canadian telecom giant.
For example, Canada’s largest three telecom providers must give competitors access to their main fibre networks for a fee. What this means is more competition for BCE, which is driving down pricing and profits. In response, BCE has been feverishly working to extract efficiencies out of the business, effectively lowering costs in order to drive profits higher. It’s a very uncertain time for BCE.
In the last month, BCE stock has begun to react favourably as these changes are being implemented. As you can see from the graph below, BCE stock has rallied 13% in the last month after losing half of its value in the last three years. Today, the stock is yielding 11% and is trading at a mere 13 times this year’s expected earnings.
Celestica
Celestica Inc. (TSX:CLS) has recently begun a freefall. After rising significantly higher in the last year, Celestica stock finally gave way. As you can see from the graph below, Celestica stock’s price action has been really volatile.
Today, the stock trades at a mere 17 times earnings. Yet, Celestica’s earnings are growing quite rapidly. In 2024, Celestica’s earnings increased 60% and in 2025, the company’s earnings are expected to grow 50%. While estimates are not guarantees, it’s clear that this growth stock is not being valued properly given its earnings growth potential.
The ongoing tariff war certainly presents a risk for Celestica, but given the stock’s attractive valuation, I think that the risk/reward trade-off is very attractive.
Cineplex: Still undervalued
Finally, the last undervalued Canadian stock that I’d like to discuss is Cineplex Inc. (TSX:CGX). Cineplex, Canada’s premier entertainment destination, has been struggling in the last few years. Its problems have included the emergence of streaming, which has impacted the competitive landscape, as well as the pandemic, and more recently, the writer’s strike.
Fortunately for Cineplex, all of these issues, except for increased competition from streaming, have been resolved. Yet, Cineplex stock continues to struggle. In fact, it continues to trade below $10 and at a bargain price of 17 times this year’s estimated earnings and 8.5 times next year’s estimated earnings.
Cineplex’s fourth quarter results illustrate why this stock deserves to be trading at higher multiples. For example, the company saw record-breaking box office results, with attendance up 16% and a 15% increase in revenue.
Looking ahead, Cineplex is likely to continue to improve its balance sheet, invest in growth, and provide shareholder returns. In 2025, we can expect more share buybacks and the likelihood of a growing dividend, as the company continues to see momentum in its business.
The bottom line
The three undervalued Canadian stocks that I’ve discussed in this article all have an attractive risk/reward profile. This means that the potential upside is strong while the downside appears limited, as they are already trading at such undervalued valuations.
