One of the best strategies to generate market-beating returns is to invest in undervalued growth stocks. In this article, I have identified two such undervalued Canadian stocks that you can buy in 2026. Let’s see why.
Source: Getty Images
Is this small-cap stock still a good buy?
Valued at a market cap of $611 million, Zedcor (TSXV: ZDC) stock has returned close to 800% to shareholders in the past decade. Despite these outsized returns, the Canadian stock is down 17% from all-time highs, allowing you to buy the dip.
Zedcor provides mobile surveillance and live monitoring solutions across Canada and the United States. It rents and maintains MobileyeZ security towers and offers remote video monitoring, fixed-site surveillance, and security guard services.
Zedcor serves commercial, industrial, residential construction, energy, retail, pipeline, utilities, and infrastructure sectors with turnkey and customized security solutions.
In Q3 2025, Zedcor reported record revenue of $16 million, up 75% year over year. It also reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $5.7 million, indicating a margin of 36%.
The company’s tower fleet surpassed 2,350 units in Q3, up 1,200 from a year earlier. Its weekly production averaged over 36 towers during the quarter, in line with the management’s target of 30 to 35 units per week. Zedcor now has the capacity to manufacture more than 40 towers each week and can scale higher based on customer demand.
A focus on production efficiencies allowed the management to reduce per-tower costs by 8% to 10%. The company estimates it will lower costs by an additional 5% to 7%.
Management highlighted growing interest from retail customers, which should translate into long-term deployment opportunities beyond traditional construction sites. About a third of new business comes from competitive displacements, while two-thirds replace traditional security guards or address previously unprotected sites.
For 2025, the company remains on track to build 1,400 towers, up from the original 1,200 to 1,400 range. The 2026 target calls for 1,800 to 2,000 new towers as demand continues to accelerate.
Analysts covering the Canadian stock forecast revenue to increase from $33 million in 2024 to $216.4 million in 2029. Adjusted earnings are projected to expand from $0.02 per share to $0.52 per share in this period.
If Zedcor stock is priced at 20 times earnings, which is reasonable, it could double over the next three years.
Is this TSX stock undervalued?
Valued at a market cap of $840 million, Doman Building Materials Group (TSX: DBM) is a Canadian wholesale distributor of building materials and home renovation products across the United States and Canada.
The company supplies lumber, treated wood, siding, decking, roofing, insulation, and engineered wood products to independent lumber yards, dealers, home improvement chains, and retailers. Doman also operates timber management and pressure-treating facilities, serving new construction, renovation, and industrial markets.
Doman Building Materials posted mixed third-quarter results as the Canadian building products distributor navigated through lumber pricing volatility while maintaining steady volumes across its operations.
In Q3 2025, it reported revenue of $795 million, an increase of 20% year over year, driven by the Doman Tucker Lumber acquisition completed in October 2024.
It reported EBITDA of $62 million, up 34% year over year, while net earnings were $18.1 million. The company maintained a quarterly dividend of $0.14 per share, marking the 62nd consecutive quarter of shareholder distributions.
Combined with strong operating cash flow, Doman reduced revolving debt by $150 million year-to-date, bringing total available liquidity to over $400 million. Leverage declined to 3.8 times EBITDA from recent peaks following the Tucker acquisition.
Given consensus price targets, the TSX stock trades at a 14% discount in December 2025. If we adjust for dividends, cumulative returns could be closer to 20%.
