Investing in undervalued stocks growing at a steady pace is a proven strategy to generate market-beating returns for shareholders. In this article, I have identified two cheap TSX stocks that are well-positioned to deliver outsized returns over the next five years. Let’s see why.
Source: Getty Images
Is this TSX stock a good buy right now?
Valued at a market cap of $5.5 billion, MDA Space (TSX: MDA) provides satellite-based geo-intelligence solutions for national security and climate monitoring, autonomous robotics for space and planetary missions, and satellite communication systems.
MDA Space operates RADARSAT-2, distributes satellite imagery and data, develops robotic systems for space exploration, and builds communication satellites for broadband internet and IoT connectivity serving government and commercial clients globally.
MDA Space reported robust second-quarter results, showcasing strong execution across its diversified space technology portfolio. It also secured transformational contract awards, positioning the company for sustained growth.
In Q2, MDA Space reported revenue of $373 million, a 54% year-over-year increase, driven by increased activity in its Satellite Systems business. Its adjusted EBITDA grew by 57% year over year to $76 million, indicating a healthy margin of 20.4%.
Moreover, MDA updated its full-year guidance, expecting revenue between $1.57 billion and $1.63 billion and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $305 million to $320 million.
Notably, MDA Space secured a $1.8 billion contract with EchoStar to design and manufacture over 100 MDA AURORA direct-to-device satellites for the world’s first 3GPP 5G-compliant non-terrestrial network. With options potentially expanding the contract to $3.5 billion and over 200 satellites, this represents a cornerstone win in the growing direct-to-device market.
The EchoStar contract marks MDA Space’s fourth LEO constellation award in three years, cementing its leadership in next-generation satellite manufacturing. The company’s Montreal facility expansion will enable production of up to 2 satellites daily by Q4, creating the world’s largest high-volume manufacturing facility in its class.
Analysts tracking the TSX stock forecast revenue to increase from $1.08 billion in 2024 to $2.32 billion in 2027. In this period, adjusted earnings are forecast to expand from $0.88 per share to $2.20 per share.
Today, MDA stock is priced at 28 times forward earnings, which is higher than its three-year average of 18 times. If the TSX stock is priced at 25 times earnings, which is a reasonable valuation, it could trade around $58 in early 2027, indicating an upside potential of over 35% from current levels.
Is this TSX stock undervalued?
Valued at a market cap of $12.5 billion, Propel Holdings (TSX: PRL) is part of the financial lending segment, which is quite cyclical. Despite a challenging macroeconomic environment, Propel grew its revenue by 34% year over year to $143 million, while total originations funded increased by 35% to $194 million. Its adjusted net income rose 22% to $19.2 million as the company exceeded $50 million in monthly revenue for the first time in June.
Propel explained that credit market tightening continues to create opportunities as traditional lenders become increasingly selective. According to Federal Reserve data, 23% of credit applications were rejected in June, the highest level since 2014, with rejection rates for consumers with credit scores below 680 reaching 57%. This environment drives higher-quality borrowers to Propel’s platform while the company maintains strong credit performance.
The UK operation, QuidMarket, exceeded expectations with 68% growth in total originations, while Canadian revenue grew 55% year-over-year. The company’s Lending-as-a-Service program generated record revenues with over 60% sequential growth, positioning Propel to more than double this revenue stream in 2026.
Analysts tracking PRL stock forecast adjusted earnings to grow from $1.64 per share in 2024 to $3.84 per share in 2027. If the TSX stock is priced at 13 times forward earnings, which is relatively cheap, it should double over the next 18 months.
With strong market tailwinds, geographic diversification, and technology-driven efficiency gains, Propel appears well-positioned to capitalize on credit market disruption while maintaining disciplined growth.
