There’s just something about undervalued stocks — those that everyone else seems to be overlooking and offer a prime opportunity. Today, that’s what we’re focusing on. Two discounted stocks could remain some of the best options on the TSX today, especially for long-term investors.
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LMN
Lumine Group (TSX:LMN) might just be one of the best-kept secrets on the TSX right now. Born out of Constellation Software, Lumine carries the DNA of one of Canada’s most successful tech compounders, yet it’s trading at a valuation that suggests the market hasn’t caught on. Where Constellation focuses broadly, Lumine zeroes in on communications and media technology, software platforms used by telecom companies, broadcasters, and media firms worldwide.
The Canadian stock’s strategy is simple but powerful: it acquires niche software firms, improves their performance, and holds them forever. It’s a model that Constellation perfected, and Lumine is now executing it in a growing global sector. Financial performance has been quietly impressive. In its latest quarterly results, Lumine reported revenue of roughly $184 million, up 13% from the previous year, driven by both organic growth and new acquisitions. Free cash flow increased 705% as well, from $9.7 million to $78.4 million year over year. Management has already guided to continued margin strength and active deal-making through 2025, suggesting this momentum is just beginning.
What’s puzzling is how little attention Lumine gets. Constellation Software went through the same early phase of indifference before becoming one of the best-performing stocks in Canadian history. Lumine could follow a similar path if it continues to compound earnings at this pace while staying underpriced. With its recurring revenue base, disciplined acquisition strategy, and deep roots in one of Canada’s greatest tech success stories, Lumine offers a unique mix of safety and upside.
MDA
MDA (TSX:MDA) could be one of those rare Canadian tech and aerospace names that investors will look back on and wonder how it ever traded this cheap. The Canadian stock sits at the centre of the booming global space economy, yet its valuation still reflects that of a slow-moving industrial firm. MDA is Canada’s flagship space technology company, with operations spanning satellite systems, space robotics, and Earth observation. It’s the company behind the iconic Canadarm, but today it’s doing far more than robotic arms. Its technology is used in everything from broadband connectivity and climate monitoring to space missions involving NASA and the Canadian Space Agency.
Financially, MDA is in growth mode. In its most recent quarterly results, the Canadian stock reported revenue of $373.3 million, up 54% year over year, with a backlog exceeding $4.6 billion. That backlog is a crucial indicator of future earnings power, representing long-term contracts that will generate steady cash flow for years. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also climbed more than 57%, reflecting improved margins and strong demand across all segments.
Yet there’s more to come. MDA is a leader in space robotics, a field with massive long-term potential. It’s currently developing the Canadarm3 for NASA’s Lunar Gateway. This program alone provides multi-year revenue visibility, with contracts backed by the Canadian government. Yet what’s most compelling is how undervalued the growth story remains. MDA’s order backlog, diversified revenue streams, and expansion into high-demand sectors like satellite manufacturing give it far higher visibility than most small- and mid-cap tech stocks.
Bottom line
Investors seeking out Canadian stocks bound for even more greatness should certainly add these to their watchlist. Whether it’s the expanding area of media and telecom acquisitions or the growing backlog of space robotics, there’s one thing both of these Canadian stocks offer. That’s recurring revenue. And that’s something any Canadian investor can latch on to long term.
Lumine grows by buying niche communications software businesses, boosting recurring revenue and free cash flow fast.
