Looking outside the U.S. market to Canada and other developed markets, there are plenty of world-class opportunities I’d argue are vastly overlooked relative to their growth potential.
I’m going to highlight two companies that many global investors may not have heard of (but should likely be paying attention to). Both companies have solid long-term growth potential, and also carry valuations which I’d argue don’t make much sense right now.
Indeed, this is a difficult market for investors to find value right now. Here’s why these two Canadian value stocks deserve a deeper look from investors who tout themselves as value investors today.
Hydro One
One of Canada’s leading utilities giants, Hydro One (TSX:H), is a stock that’s been on a tear in recent years.
The company’s stock chart above depicts a move that’s about as up-and-to-the-right as they come. Surging from around $25 per share five years ago to more than $50 per share today, it’s the steadiness of this stock’s 100% five-year move that strikes me as worth considering.
More notably, Hydro One has seen its share price appreciation pick up over the course of the past year. That should be no surprise to many investors, given the spotlight on utilities companies as a top way to play the rise of AI, electrification, robotics, and other key mega trends driving the market.
Those looking to take advantage of rock-solid long-term growth potential, a dividend yield of 2.5% and a forward price-earnings multiple of just 24 times may certainly want to leg into this momentum right now. I think Hydro One could have plenty more upside over the long-term, and this could be just the start of a very nice journey higher for long-term investors.
Whitecap Resources
One of the most undervalued Canadian stocks in the market I’ve had my eye on for some time is Whitecap Resources (TSX:WCP).
Shares of the Canadian energy producer have seen even more impressive growth over the past five years, surging from a little more than $2 per share in 2021 to more than $10 today.
That’s good for a return of around 400% for investors who have stayed patient with this higher-risk play in the Canadian energy sector. Investors may remember that 2021 was the pandemic era, when energy prices turned negative for a short amount of time. For long-term investors willing to ride out the near-term volatility, this turned out to be the buying opportunity of the decade.
Now, I’m not expecting a similar move in oil prices over the course of the next five years. But given the fact that WCP stock is trading at just 9 times trailing earnings, while delivering a dividend yield of 6.6%, I’d argue there are few better stocks in the market from a fundamentals perspective right now.
With a reasonable breakeven price per barrel and one of the most exciting upsides of any Canadian energy stock, Whitecap Resources remains a table-pounder for me in terms of overlooked Canadian value stocks.
