Interest rates, at least those set by central banks, have been falling faster in Canada than in many developed markets. There are certainly reasons for this, whether it be Canada’s reliance on the housing industry as a key growth driver or underlying economic weakness in recent years. By some measures, Canada is already in a recession, though economists are wary to define the current state of economic weakness as such.
That said, the Canadian stock market is clearly pricing in some continued weakness ahead. With this in mind, and some investors looking to rotate their portfolios accordingly, here are three top value stocks I think could be solid buys in this current environment.
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Alimentation Couche-Tard
I’ve long touted Alimentation Couche-Tard (TSX: ATD) as one of the top value stocks in the market, and for good reason. Trading at just 15 times forward earnings, Couche-Tard and its annualized earnings per share (EPS) growth rate of roughly 22% over the past decade looks cheap. Notably, this valuation holds after a period of steady share price appreciation shown in the chart below.
Couche-Tard has grown to this size by consolidating a still-fragmented convenience store industry. Impressively, the gas station and convenience store operator was able to bring in more than $1.5 billion of net earnings during the first half of its fiscal 2025, and this number was more than 8% higher than last year’s.
Assuming this trend continues, and the company can continue to see profitable growth moving forward, this valuation doesn’t make sense. Couche-Tard stock looks like a strong buy in this environment.
Manulife Financial
Another company that still looks like a screaming buy after a strong run-up in recent years is Manulife (TSX: MFC). The insurance giant has seen rather incredible growth over the past five years, though the stock did stagnate from mid-2021 to late 2023 and seemed like dead money to some investors.
This turnaround does appear to have quite a bit to do with declining interest rates in Canada and abroad (most notably China). The company operates one of the largest insurance and wealth management businesses in Canada and is growing its footprint considerably in China. With these markets seeing significant interest rate cuts of late, insurance companies holding longer-duration debt like Manulife are increasingly coming into investors’ purview.
I think this trend will likely continue as the company continues to make moves around the edges to improve its forward outlook. From recent hiring decisions that have been applauded to its focus on growing in Asia, this is a stock I think could have material upside from here despite its valuation of just 10 times forward earnings.
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX: TD) remains one of Canada’s five-largest banks and the one most investors look to for growth, given the company’s outsized exposure to the U.S. market compared to its peers.
Despite this fact, TD stock has seen the sort of stagnation Manulife saw in previous years. This stock has traded within a relatively narrow band over the past four years and is currently trading at the same price it did in 2021.
That said, there are reasons to believe this company’s recent uptick is sustainable and could continue moving forward. The company’s strong presence in commercial banking, wealth management, and retail banking position TD well for growth in the North American region.
Now, a $3 billion settlement over money laundering accusations in the U.S. may have turned some investors off, as well as concerns about how the North American economy will grow moving forward.
But for investors taking a much longer-term view of the company and the economy, this stock still looks attractive here, at least to me.
