A proven strategy to beat the broader markets is to consistently identify quality stocks that trade at a discount to their intrinsic value. In this article, I have shortlisted two undervalued Canadian stocks you should add to your watchlist right now.
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Is this TSX stock undervalued?
Valued at a market cap of $3.7 billion, ATS Corporation (TSX:ATS) is a global automation solutions provider that designs, builds, and services automated manufacturing and assembly systems across diverse industries.
It offers comprehensive services from initial concept development and simulation through installation, commissioning, and ongoing support. ATS provides engineering design, software development, equipment integration, and contract manufacturing services, along with digital solutions that capture real-time machine performance data to optimize operations and prevent downtime.
The company serves multiple sectors, including life sciences, automotive, consumer products, food and beverage, electronics, nuclear, packaging, and energy markets. ATS combines standard automation products with custom-engineered solutions to help manufacturers improve efficiency, quality, and productivity through advanced automation technologies and comprehensive lifecycle support services.
In the fiscal first quarter (Q1) of 2026, AT reported revenue of $737 million, an increase of 6% year over year, supported by strategic acquisitions. It ended Q1 with an order backlog of $2.1 billion and a healthy trailing 12-month book-to-bill ratio of 1.17 times, which provides solid revenue visibility.
The life sciences segment represented its most considerable backlog at $1.2 billion. This segment continues to benefit from strong fundamentals, including GLP-1 drug development, radiopharma growth, and wearable medical device expansion. Notably, ATS serves 10 active customers in the auto-injector space, providing diversification within this high-growth market.
Moreover, the nuclear energy sector offers significant long-term upside as governments worldwide embrace nuclear power for carbon reduction goals.
Analysts tracking the TSX stock forecast revenue to rise from $2.53 billion in fiscal 2025 to $3.34 billion in fiscal 2028. In this period, adjusted earnings are forecast to expand from $1.47 per share to $2.65 per share. If ATS stock is priced at 20 times forward earnings, it could trade $53 in early 2027, indicating an upside potential of almost 40% from current levels.
Is this TSX stock a good buy?
Another undervalued TSX stock you should own is CGI (TSX:GIB.A), which is valued at a market cap of almost $30 billion. The TSX tech stock is down 23% from all-time highs, allowing you to buy the dip and benefit from outsized returns when investor sentiment recovers.
CGI delivered solid Q3 results with revenue up 11.4% year over year to $4.1 billion, driven by strategic acquisitions and momentum in financial services. Adjusted earnings grew 10.5% with margins maintained at 16.3%, demonstrating disciplined execution despite integration costs from recent mergers.
CGI’s robust financial position is highlighted by its impressive $30.6 billion global backlog, representing two years of revenue visibility, and a healthy 107% trailing 12-month book-to-bill ratio.
In fiscal Q3, CGI reported $487 million in operating cash flow and ended the quarter with $2.7 billion in total liquidity, which allows the company to target organic investments and acquisitions.
CGI is positioned to benefit from multiple growth drivers, including strong demand for artificial intelligence-enabled solutions, with 40% of its IP portfolio now incorporating artificial intelligence capabilities. Its partnership strategy is paying dividends, generating $2.6 billion in bookings through go-to-market partnerships, up 120% year over year.
CGI stock is forecast to increase adjusted earnings from $7.62 per share in fiscal 2024 (ended in September) to $10.80 per share in fiscal 2028. If the TSX stock is priced at 17 times earnings, which is in line with its 10-year average, CGI should trade at $183, indicating an upside potential of 36%, over the next two years.
