Investors often avoid stocks that are lagging, worried that they could be “falling knives” which they should steer clear of. But some beaten-down names may just be sleeping giants — with strong fundamentals and long-term growth potential. If you’re looking to buy quality Canadian companies on sale, these two stocks deserve your attention now.
CN Rail: A historic titan on temporary tracks
Canadian National Railway (TSX:CNR) has been on a downward trend since early 2024, with its stock falling more than 20% from its peak. The reasons? A perfect storm of disruptions — including labour disputes, wildfires, and more recently, uncertainty stemming from U.S. tariff changes this year. But these issues, while impactful in the short term, don’t erase CN Rail’s long-term track record of success.
Over the past two decades, CN Rail has persistently grown its earnings and remained profitable through economic cycles. At the current price of $134.49 per share at writing, the stock trades at a blended price-to-earnings (P/E) ratio of approximately 18.2 — about a 15% discount compared to its historical average.
Even more compelling is the dividend yield. The stock now yields about 2.6%, which is about 37% higher than its five-year average of 1.9%. That’s a strong signal that the stock is undervalued. Management has a reliable history of dividend growth. Long-term investors can continue to expect growing income from the industrial stock.
If you’re seeking a stable, defensive business that could rebound once short-term headwinds subside, CN Rail is worth accumulating before the market wakes up.
Constellation Software: A rare dip in a tech juggernaut
Constellation Software (TSX:CSU) is another name that’s too good to overlook. The stock initially dipped about 15% from its 2025 high of around $5,200 to $4,400 — not unusual for a high-flying tech stock. But what really shook the market was the news that founder and CEO Mark Leonard was stepping down from his role of president of the company due to health reasons.
Following the announcement, the stock had a knee-jerk reaction, dropping to as low as $3,400. However, it quickly rebounded to roughly $4,029 per share — and did so on above-average trading volume, a clear sign that investors see this as a buy-the-dip opportunity.
Constellation’s long-term track record is nothing short of phenomenal. Over the past decade, it has delivered returns of about 23% annually — enough to turn a $10,000 investment into over $80,000. And even now, after the rebound, the stock still trades at a fair valuation relative to its historical norms. Analysts see further upside, with the consensus price target implying a meaningful discount of 26%.
Leadership continuity also helps ease concerns. While Mark Leonard is stepping back from day-to-day operations, he remains on the board. The new president, Mark Miller, previously served (and remains) as COO and has deep operational knowledge of the business — making this a seamless transition rather than a risky reset.
Investor takeaway: Buy before the herd returns
Both CN Rail and Constellation Software are temporarily out of favour — but that’s exactly what makes them compelling. They’re industry leaders with proven track records, strong fundamentals, and now, attractive valuations.
Don’t sleep on these two Canadian stocks. Smart investors are wide awake — and already buying the dip.
