Investing in quality stocks trading at a discount is a proven strategy to generate outsized gains and beat the broader indices. The market turbulence in 2025 provides long-term investors with an opportunity to buy the dip and gain exposure to undervalued TSX stocks. Moreover, if these stocks are held in a TFSA (Tax-Free Savings Account), any returns in the form of dividends or capital gains will be exempt from taxes.
In this article, I have identified three Canadian value stocks I’d add to my TFSA for tax-free compounding.
Is this cannabis stock undervalued?
Valued at a market cap of $228 million, High Tide (TSXV:HITI) is engaged in the retail cannabis business. In recent years, Canadian cannabis stocks have grossly underperformed the broader markets due to several issues that include an oversupply of marijuana products, increasing competition, cannibalization from the illegal market, and overvalued acquisitions.
High Tide stock trades 80% below all-time highs, making it attractive to contrarian investors. It reported a revenue of $522.3 million in fiscal year 2024 (ended in October) and is forecast to grow sales at an annual rate of 12% over the next five years.
Moreover, High Tide reports consistent profits and a positive free cash flow. Analysts expect the Canadian marijuana stock to expand its adjusted earnings per share to $0.64 in fiscal year 2029, up from $0.02 per share in 2024.
Given consensus price targets, High Tide trades at a discount of 113% in April 2025.
A quality TSX mining stock
Valued at a market cap of $1.55 billion, Endeavour Silver (TSX:EDR) is a silver mining company with properties located in Mexico and China. In 2024, Endeavour Silver reported production of 7.6 million ounces of silver equivalent, hitting the high end of revised guidance despite equipment challenges at its Guanacevi mine. It posted a total revenue of $218 million, up 6% year over year, with adjusted earnings of $0.03 per share.
Chief Executive Officer Dan Dickson highlighted that the Terronera project has reached 89% completion, with commercial production expected in the third quarter of 2025. The $332 million project remains on budget. Endeavour is also advancing its Pitarrilla project in Durango, Mexico. This project contains nearly 600 million ounces of silver, and in 2025, $26 million will be allocated for exploration and development.
Industrial demand for electrification and renewable energy applications has driven silver prices higher, alongside growing supply constraints. Analysts also expect the mining stock’s adjusted earnings per share to increase from $0.04 in 2024 to $0.60 in 2026.
Is the undervalued TSX stock a good buy?
The final Canadian value stock on my list is Magellan Aerospace (TSX:MAL). With a market cap of $760 million, Magellan provides complex assemblies and systems solutions to aircraft and engine manufacturers and space agencies. It designs, engineers, and manufactures aero-engine and aerostructure assemblies and components for aerospace and space markets.
Analysts expect Magellan to increase its sales by 10% annually in the next two years. Comparatively, adjusted earnings are forecast to almost triple from $0.62 per share in 2024 to $1.53 per share in 2026.
If the TSX stock is priced at 25 times trailing earnings, it should trade at $20 in April 2027, indicating an upside potential of almost 50% from current levels.
