The stock market is a zero-sum game where one’s loss is another’s profit. Every situation has a winner and a loser. Winners chase fear and go bargain hunting. They don’t look for a high price but good value, which can be derived from future earnings potential. When picking winning stocks, look at past growth as a reference to gauge the company’s future growth potential in challenging times. Use that knowledge to identify stocks that have future growth potential, which the market has not realized.
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Top bargain stocks to buy today
One stock that keeps making new highs and is considered super expensive because its per share price is equivalent to an average Canadian’s one-month salary is now trading at a 21% bargain from its all-time high of $5,300. Believe it or not, Constellation Software (TSX: CSU) is a too-good-to-miss bargain at $4,393.
Let’s go back to December 2021, when tech stocks were in a bubble, and Constellation stock reached $2,352. When the bubble burst in 2022 due to overvalued stocks, Constellation’s stock also fell 16%. The company used this opportunity to buy more vertical-specific software companies at a bargain. Within 15 months, the stock recovered from the dip and surpassed its previous high. Those who bought at the bargain gained 31%, while those who bought at the peak gained 0%.
The business model and opportunities remain the same for Constellation. The team keeps looking for new acquisitions and plows in the cash flow from annual maintenance fees. The company reported a 68% year-over-year dip in net income in the second quarter because of foreign exchange loss and TSS membership liability revaluation. These expenses do not evaluate the company’s performance but show a short-term headwind.
However, this decline has created an opportunity for bargain hunters to buy this growth stock at a forward price-to-earnings ratio (P/E) of 28 times. The recovery to its previous high of $5,300 alone will generate 21% capital appreciation.
Canadian National Railway
Canadian National Railway (TSX: CNR) stock is trading at a 28% discount from its March 2024 peak of $179. Behind the dip is a slowdown in trading volumes from the tariff war and a change in product mix. It transmits goods like petroleum and chemicals, metals and minerals, forest products, coal, grain and fertilizers, and automobiles, and earns revenue from freight charges.
Canadian National Railways reduced its adjusted diluted earnings per share (EPS) guidance for 2025 from 10%–15% growth to mid-to-high single digits. However, the government is looking at alternative trade partners to reduce dependence on the United States. This could lead to new routes and higher domestic transportation.
The stock is trading at a forward P/E ratio of 15.3 times, its lowest in five quarters. While the downturn could continue for the remainder of 2025, a recovery in trade could boost Canadian National Railways’ share price. While I don’t expect the stock to reach its previous high of $179, a $150–$160 price could be achieved.
The bargain in CNR is not the price but the 2.7% annual dividend yield. The company has been growing its dividend per share annually in the range of 5–20%.
Air Canada stock is a bargain below $19
Another bargain is Air Canada (TSX: AC) at any price below $19. In the post-pandemic world, the airline stock has been range-bound, hovering between $14 and $26. The stock hits the upper price band mostly in July or December, when seasonal summer and holiday travel demand peaks.
Air Canada’s $8.4 billion liquidity and passenger load factor above 80% acts as a support at the $14 share price. However, the debt and equity capital raised during the pandemic have increased its total long-term debt to $11.8 billion and diluted its earnings per share. This equity dilution caps the share price rally at $26.
The airline has started repurchasing shares, but it will take a significant repurchase to help the stock break its $26 cap. In the meantime, you could consider buying the stock below $19 and selling it at a price of $25.
