Finding stocks to buy that are genuinely undervalued isn’t easy, especially on the TSX, where many of the highest-quality businesses tend to trade at a premium most of the time.
It makes sense to want to buy stocks when they’re cheap. However, at the same time, when the majority of stocks on the market are trading at or above their fair values, and you come across a stock that’s undervalued, there’s usually a reason.
That’s why identifying undervalued stocks isn’t about buying ultra-cheap names just because they once traded higher.
Instead, it’s about finding high-quality businesses where the market has become overly pessimistic, such as short-term concerns being overblown or sentiment swinging too far in one direction. Those moments can create some of the best opportunities for long-term investors.
That’s why buying stocks while they’re undervalued isn’t about trying to time a recovery or hoping for a quick rally back to fair value.
It’s about finding high-quality businesses you’d want to own for the long haul anyway, and then locking in a lower initial investment cost that can boost your returns for years to come.
So, with that in mind, if you’re looking for value stocks to buy now, here are two of the most undervalued TSX stocks that investors can buy today.
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A residential REIT to buy and hold for years
If you’re looking for stocks to buy in the market today, one absurdly undervalued TSX name worth taking a serious look at today is Killam Apartment REIT (TSX:KMP.UN).
Killam is a residential REIT that owns and operates apartment buildings and manufactured home communities across Canada, with a heavy focus on Atlantic Canada and Ontario.
Like most residential landlords, its business model is simple and highly defensive. People need a place to live, and demand for rental housing continues to outpace supply in many of the markets Killam operates in.
That predictable demand is what allows Killam to generate steady cash flow and pay a reliable dividend. The REIT also benefits from consistent rent growth over time and relatively stable occupancy, which makes it well-suited for long-term investors looking for income and stability.
What really makes Killam compelling right now, though, is its valuation. The REIT is currently trading at roughly 16.5 times its forward adjusted funds from operations (AFFO), which is below its five-year average forward P/AFFO ratio of 18.8 times.
Furthermore, Killam’s dividend yield has climbed to roughly 4.1% with the REIT trading off its high, which is now above its five-year average forward yield of 3.9%.
Therefore, if you’re looking for undervalued TSX stocks to buy now, Killam isn’t just cheap; it’s also a reliable dividend stock that can boost your passive income.
An undervalued TSX growth stock to buy today
In addition to Killam, another top TSX stock to buy while it’s still undervalued is WELL Health Technologies (TSX:WELL).
WELL isn’t just a stock you buy because it looks cheap right now. It’s a stock you buy because it has real long-term growth potential, and the market is currently pricing that potential way too conservatively.
The company operates a growing healthcare platform that combines physical clinics, digital health services, and software used by healthcare providers.
Furthermore, not only is the healthcare sector essential, but it also continues to see growing demand as populations age, and systems look for ways to improve efficiency and access.
What makes WELL one of the best TSX stocks to buy now, though, is how undervalued it is, trading well below its intrinsic value.
For example, WELL is currently trading at roughly 13 times forward earnings, which is incredibly cheap for a growth stock that continues to become more profitable each year. Furthermore, it’s also below its three-year average forward price-to-earnings ratio of about 14.8 times.
Therefore, not only is WELL one of the top TSX stocks to buy now if you’re looking for undervalued names, it’s also one of the top growth stocks to own for the next decade.
