A proven strategy to generate market-beating returns over time is to invest in quality growth stocks that trade at a discount. In this article, I have identified two undervalued TSX stocks you can buy and hold for inflation-beating returns in 2025 and beyond. Let’s see why.
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Is this TSX stock a good buy?
Valued at a market cap of $150 million, DIRTT Environmental (TSX:DRT) operates as an interior construction company. It offers interior solutions for solid and glass walls, leaf folding, headwalls, doors, casework, electrical, networks, and access floors. DIRTT serves the healthcare, education, financial services, government and military, manufacturing, non-profit, energy, professional services, retail, technology, and hospitality industries.
DIRTT Environmental reported challenging second-quarter results, as revenue declined by 6% to $38.9 million amid tariff-driven cost pressures and delayed customer orders.
The gross profit margin compressed from 37.3% to 27.8%, with 512 basis points directly attributable to tariff duties and mitigation costs. It faces 25%–50% tariffs on aluminum and steel imports from Canada, representing approximately 10% of product revenue. Management implemented price increases and is shifting production to its Savannah aluminum facility to reduce tariff exposure.
Despite near-term challenges, DIRTT’s business transformation efforts are yielding positive indicators. The 12-month forward sales pipeline reached $311 million, the first time exceeding $300 million in over two years. The company’s new integrated solutions team has already generated significant wins, including an $11 million follow-up award from a Fortune 200 semiconductor client.
CFO Fareeha Khan expects tariff costs to be “generally mitigated by Q4” with customer behaviour normalizing as organizations adapt. DIRTT targets returning to positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) in the fourth quarter while maintaining strong liquidity of $31.1 million to weather current headwinds.
Analysts tracking the TSX stock forecast revenue to rise from $162 million in 2025 to $201 million in 2027. It’s projected to end 2027 with free cash flow of $18 million, compared to less than $6 million in 2024. If DRT stock is priced at 15 times forward FCF, which is reasonable, it could gain over 75% in the next 18 months.
Is this TSX stock undervalued?
Ensign Energy (TSX:ESI) is another undervalued TSX stock you should consider buying today. Valued at a market cap of $384 million, Ensign provides oilfield services to the oil and natural gas industries in Canada, the United States, and internationally.
It offers shallow, intermediate, and deep well drilling, as well as specialized drilling services, including horizontal, underbalanced, horizontal re-entry, and slant drilling for steam-assisted gravity drainage applications; and equipment and services.
In Q2 2025, Ensign Energy reported revenue of $372.4 million, down 5% year over year, amid elevated maintenance costs and international disruptions, though the company continued gaining market share.
Management increased forward contract bookings by $250 million to nearly $1 billion in contracted revenue. The Middle East team secured a 5-year deal for two rigs in Oman worth over $120 million, while penetration of Edge Autopilot technology grew 25% year-over-year.
Ensign repaid $42.9 million in debt during the first half, remaining on target to achieve its $600 million debt reduction goal by year-end. With only $119.8 million remaining, it expects to continue deleveraging while maintaining operational flexibility through industry volatility.
Analysts tracking ESI stock forecast free cash flow to grow to $174 million in 2027, up from $142 million in 2024. So, the TSX stock is priced at just 2.20 times forward cash flow. If it’s priced at five times forward FCF, the energy stock could more than double by the end of 2026.
