This year, not many stocks look especially cheap. Markets have been rising for over 12 months now, and it shows: multiples keep climbing higher. Still, pockets of value can be found if you know where to look. In this article, I explore three cheap Canadian stocks still waiting for their starting gun.
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Air Canada
Air Canada (TSX: AC) is a Canadian stock that has been cheap for a while, yet has taken its sweet time rising from its undervalued level to reflect its intrinsic value. Partially, it’s because the company keeps getting bad news: first, COVID; then, the 2022 oil price rally; finally, this year’s flight attendants’ strike. The COVID pandemic was a genuine, fundamental problem for Air Canada: it cost the company $4.6 billion in 2020, and more billions in 2021. However, the other issues that appeared in recent years were relatively minor. The oil price spike in 2022 did increase jet fuel costs, but AC was very profitable that year regardless. Meanwhile, the earnings impact of the flight attendants’ strike was estimated at $350 million – not that big in the grand scheme of things.
Air Canada is currently undergoing a large capital expenditure (CAPEX) cycle, with about $18 billion of CAPEX expected over the next three years. This CAPEX largely consists of buying new airplanes, which will enable AC to offer more routes. Some investors are concerned about the sheer amount of spending, but the opportunity here is massive.
AC stock is by far the worst performer in my portfolio this year, yet I remain happily long. The cheapness is what keeps me here.
Suncor Energy
Suncor Energy Inc (TSX: SU) is a Canadian oil integrated oil company. It is among the most diversified energy businesses in Canada, being active in exploration, production, refining, and operating gas stations. The company has a pretty high dividend yield, above 4%. Although today’s oil prices (moderately high) do not predict spectacularly high earnings for Suncor, they are sufficient for the company to stabilize its profits at where they are now. With the company trading at approximately 10 times earnings, it might just be an undervalued buy.
EQB Inc
EQB Inc (TSX: EQB) is a Canadian bank stock that still has a “Canadian bank” valuation, trading at a humble 9.4 times earnings. While big Canadian banks historically traded at multiples similar to EQB’s, they got pricey this year, thanks to a string of solid earnings releases and investors seeking to diversify away from tech stocks, which have gotten very pricey. The company is a branchless bank, which gives it lower overhead costs than most banks. EQB makes for an intriguing buy.
The bottom line
The bottom line on cheap stocks in 2025 is that, while they are rare, they do exist. Especially if you are willing to look into sectors like banking and energy, you can find value. Some of these cheap stocks haven’t gotten the starting gun yet. But they probably will get it at some point in the future. For a discerning investor, the key is to get in before that occurs.
