The TSX is rallying, and investor sentiment is finally shifting into higher gear. With the index hovering near record highs, many Canadian stocks have already rebounded sharply. But not all. Beneath the surface of this solid broader market rally, a handful of fundamentally strong companies are still trading at clear discounts today — offering Foolish investors a rare chance to pick up quality stocks at a bargain.
In this article, I’ll spotlight three undervalued TSX stocks that haven’t caught up to the broader rally — yet.
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TFI International stock
One such top TSX stock is TFI International (TSX: TFII), which, despite gaining over 18% in the past month, is still down nearly 32% from a year ago.
This North American trucking and logistics heavyweight operates across North America. TFII stock now trades at $126.25 per share with a market cap of $10.5 billion, and it pays a modest 2.1% annualized dividend.
In its latest quarter ended in March, TFI posted a 5% YoY (year-over-year) rise in its revenue due partly to its recent acquisitions. But its adjusted earnings took a hit, dropping 39% YoY, mostly due to weaker market demand across key segments. Nevertheless, its truckload segment actually grew 18% from a year ago, supported by the Daseke acquisition.
Despite these temporary challenges due to macroeconomic uncertainties, TFI’s focus remains on generating free cash flow, which jumped 40% YoY last quarter, reflecting disciplined execution. With strong fundamentals, recent cost optimizations, and strategic acquisitions still playing out, this TSX stock could catch up fast as sentiment shifts in the near term.
Magna International stock
Another top TSX stock that still hasn’t fully joined the broader rally is Magna International (TSX: MG), which is down over 21% from a year ago despite gaining nearly 15% in the past month. The shares of this Aurora-headquartered auto parts and mobility firm currently trade at $51.28 apiece with a market cap of $14.5 billion and offer a solid 5.3% annualized dividend yield.
In the March quarter, Magna’s revenue fell 8% YoY to US$10.1 billion, mainly due to lower vehicle production volumes, especially in Europe and North America, along with the wind-down of some legacy vehicle programs. Similarly, its adjusted earnings also dropped to $0.78 per share, hurt by weaker sales and higher warranty costs in its seating segment.
Still, Magna is focused on cutting capital expenditures and engineering costs, boosting free cash flow, and making selective investments to support long-term growth. These initiatives could help this discounted stock catch up fast as the TSX rally broadens.
Bausch Health stock
And rounding out this list is Bausch Health Companies (TSX: BHC), a healthcare stock that’s still down more than 32% over the past year despite an uptick in recent sessions.
This Laval-based pharmaceutical firm operates across a wide range of specialties, including gastroenterology, dermatology, neurology, and medical aesthetics. Right now, BHC stock trades at $6.53 per share, giving it a market cap of $2.4 billion.
In the first quarter, Bausch Health’s revenue rose 5% YoY to US$2.26 billion with the help of solid organic growth in segments like Salix and Solta Medical. However, its adjusted quarterly earnings remained flat at US$0.60 per share due to increased selling and promotion expenses.
Still, Bausch’s focus on unlocking value for shareholders remains intact, with its efforts centred on refinancing, strategic reviews, and expansion in growth markets such as skin health and gastroenterology. Moreover, if the company continues executing its growth priorities and successfully manages its debt profile, Bausch Health could stage a handsome recovery.
