Value investing is a proven strategy that enables you to deliver steady returns over time. However, it’s crucial to develop a portfolio comprised of companies that trade below their intrinsic value but can consistently grow revenue and earnings.
In this article, I have identified two undervalued TSX stocks that trade under $20, which Canadian investors could consider adding to their watchlist in August 2025. Let’s see why.
Is this TSX stock a good buy?
NFI Group (TSX:NFI) delivered robust second-quarter results, showcasing momentum in its operational recovery. The Canadian bus and coach manufacturer achieved a 19% year-over-year increase in quarterly adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and a $7.6 million improvement in adjusted net earnings, while return on invested capital rose 7.9%.
NFI secured 822 equivalent units in new orders during Q2, with 95% being firm orders, bringing the total backlog to 16,198 units worth $13.5 billion. Strong demand continues to be driven by government funding support across North America, with production slots now sold well into 2026 and options extending to 2030.
NFI made progress addressing its seat supply disruption, reducing incomplete buses missing seats to just 56 units as of July 18, down from peak levels in November. A new Buy America-compliant seat supplier began deliveries during the quarter, providing additional supply chain diversification and reducing reliance on the challenged supplier to approximately 30–35% of total seat requirements.
NFI completed a comprehensive refinancing, establishing a new four-year $700 million first lien facility and issuing $600 million in second lien notes. This refinancing improved liquidity to $326.7 million, enhanced covenants, and reduced interest expenses while providing greater financial flexibility.
Manufacturing gross margins improved year-over-year to 10.6% from 8%, reflecting a better backlog profile and pricing. NFI reaffirmed its 2025 guidance of $3.8–4.2 billion in revenue and $320–360 million in adjusted EBITDA.
However, the company announced a consultation process for consolidating Scottish manufacturing operations to address competitive pressures from Chinese imports in the UK market, which represent approximately 15% of quarterly revenue.
The TSX stock is forecast to end 2026 with adjusted earnings of $1.21 per share, compared to a loss per share of $1.27 in 2024. If NFI stock is priced at 20 times forward earnings, which is reasonable, it could gain close to 35% over the next 12 months.
Is this TSX stock undervalued?
Mattr Corp (TSX:MATR) reported robust first-quarter results, with continuing operations revenue rising 52% year-over-year to $320.1 million and adjusted EBITDA surging 80% to $46.6 million. The strong performance was driven by the successful integration of newly acquired AmerCable and operational improvements across the company’s modernized manufacturing footprint.
The Connection Technologies segment achieved record results, with revenue growing over 100% and adjusted EBITDA increasing more than 70% versus the prior year. AmerCable’s inclusion contributed to these gains, while DSG-Canusa continued capturing market share in industrial and automotive markets despite declining global vehicle production.
Composite Technologies’ revenue increased 11% year-over-year, driven by strong demand for Xerxes’ fuel storage and water management products, particularly in data centre applications. Flexpipe continued gaining U.S. market share despite industry headwinds, setting new revenue records in American markets.
However, Mattr faces near-term challenges from tariff-related uncertainty, which has caused some customers to delay purchasing decisions. The materials technology company benefited modestly in Q1 from customer order acceleration ahead of potential tariff implementations, but expects sequential declines in Q2 performance as market uncertainty persists.
Management maintains confidence in long-term growth prospects, supported by favourable electrification trends and critical infrastructure investment needs.
With a strong balance sheet and disciplined capital allocation focused on debt reduction and share repurchases, Mattr appears well-positioned to navigate current uncertainties while capitalizing on underlying market opportunities.
Bay Street forecasts Mattr to increase its free cash flow (FCF) to $168 million in 2029, up from just $19.3 million in 2025. If the TSX stock is priced at just 10 times forward FCF, it could more than double over the next four years.
