It’s not hard to feel the fear these days. With inflation creeping back, trade tensions rising, and the TSX lagging global markets, many investors are retreating to the sidelines. But sometimes the best opportunities come when others are giving up. If you’re willing to zig when others zag, two under-appreciated TSX stocks offer real value right now. Those are OpenText (TSX:OTEX) and Cargojet (TSX:CJT).
Let’s be clear: these aren’t flavour-of-the-month growth darlings. In fact, both Canadian stocks have seen their share prices slump over the past year. But scratch beneath the surface and there’s a very different story taking shape.
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OpenText
OpenText recently reported third-quarter results for fiscal 2025, and while total revenue dropped 13.3% year over year to US$1.3 billion, that headline masks some important wins. Cloud revenue, arguably the company’s most important long-term growth engine, rose 1.8% to US$463 million, marking its 17th straight quarter of organic growth. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also held strong at US$395 million, giving the Canadian stock a healthy 31.5% margin.
CEO Mark Barrenechea acknowledged some “demand volatility” but emphasized OpenText’s ability to deliver free cash flow, and invest in strategic areas like cybersecurity and artificial intelligence (AI). The company’s Titanium X platform and Aviator AI suite are already expanding into hybrid environments, and OpenText has doubled down with a $200 million final phase of its business optimization plan. While this does result in 2,000 job cuts, it’s expected to save up to $550 million annually by 2027.
So, what’s the value proposition? OpenText is now trading at just 7 times forward earnings and 1.5 times sales, well below its historical average. It sports a 3.7% dividend yield with a sustainable 42.5% payout ratio and has repurchased $266 million worth of shares this fiscal year. With earnings per share (EPS) of US$0.82 in the last quarter and a forward price-to-earnings (P/E) ratio under 10, this Canadian stock is simply cheap. Especially for a company with nearly $1.3 billion in cash and over $1.4 billion in annualized adjusted EBITDA.
Cargojet
Then there’s Cargojet, a logistics name that has become something of a market punching bag over the last year. The Canadian stock is down roughly 17% over 12 months, even after delivering a standout Q1 2025.
Revenue rose 8.1% year over year to $249.9 million, while adjusted EBITDA increased to $80.8 million, translating to a solid 32.3% margin. Net earnings jumped 47.7% to $48 million, with basic EPS soaring 58.2% to $3.07. That’s no small feat in a tough global cargo market.
Despite soft free cash flow at negative $45.9 million this quarter, Cargojet is still buying back shares. It repurchased 272,922 shares for $32.2 million in Q1 and continues to reward shareholders with a 1.5% dividend yield and a payout ratio under 18%.
What’s holding the stock back? Concerns about debt (over $840 million) and volatility in the global trade environment have weighed on sentiment. Yet, Cargojet is well-positioned to benefit from changing trade patterns and near-shoring trends. It’s the only company in Canada with a national overnight air cargo network, and it continues to deliver on-time performance above 99%. That sort of operational dominance isn’t easy to come by.
Bottom line
To be fair, both Canadian stocks face their own risks. OpenText is still digesting the Micro Focus acquisition and has a heavy debt load, while Cargojet is exposed to cyclical demand swings and hefty capital costs. But the reward-to-risk ratio is tilting in investors’ favour, especially at current prices.
So when others are running scared, consider stepping in. OpenText and Cargojet are two TSX stocks trading at attractive valuations, supported by strong margins, improving cash flows, and long-term growth potential. Buying value doesn’t mean settling for mediocre. Sometimes it just means recognizing quality before the rest of the market catches on.
