These Are the Top 5 Undervalued Stocks to Buy Right Now

These five Canadian stocks are all high-quality companies trading significantly undervalued, making them five of the best to buy now.

Daniel Da Costa

Author Bio Daniel joined The Motley Fool Canada in 2019 and brings experience in banking, investing, and financial analysis. Growing up as the son of a proprietary stock trader and educator, he developed an early interest in financial markets and a passion for helping Canadians improve their financial well-being. His work spans investment research, economic analysis, and econometric modelling, with a focus on understanding the broader forces that influence businesses, markets, and the economy. As an investor, Daniel looks for high-quality businesses with long-term growth potential, reliable income, and attractive valuations. Outside of finance, Daniel enjoys spending time with his family, playing hockey, running, and sailing. Areas of Expertise Investment research, economic analysis, econometric modelling, banking, financial analysis, business fundamentals, long-term investing, dividend investing, and company valuation. Favorite Investment Quote "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." — Warren Buffett

Published February 25, 8:30 pm EST

Finding undervalued stocks that you can confidently buy for the long haul is one of the most rewarding parts of investing your money in the market. When you spot high-quality businesses trading at prices way below their real worth, you get the chance to buy before the rest of the market catches on.

The key for investors is to focus on high-quality businesses. Stocks trade cheaply all the time. However, if the underlying company isn’t a high-quality business, there’s no guarantee that it actually recovers.

So, with that in mind, if you’ve got cash you’re looking to put to work right now, here are five undervalued Canadian stocks that you can buy today and plan to hold for years.

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Three undervalued dividend stocks to buy now

If you’re a dividend investor looking for high-quality Canadian stocks that you can buy undervalued today, three of the best to consider are BCE (TSX: BCE), Canadian Apartment Properties REIT (TSX: CAR.UN), and Northland Power (TSX: NPI).

BCE, the $33 billion telecom stock, is one of the best dividend stocks to buy undervalued right now. Not only is the stock offering a yield of roughly 5% today, but it also trades at a forward enterprise value to earnings before interest, taxes, depreciation and amortization (EV/EBITDA) ratio of just 7.1 times today. That’s well below its five-year average of 8 times and 10-year average of 8.2 times.

Furthermore, it currently trades at a forward price-to-earnings (P/E) ratio of 13.9 times, compared to 16.5 and 16.6 over those same periods. That’s a meaningful discount for one of Canada’s most reliable telecom giants, which owns essential networks that constantly generate steady cash flow.

A solid REIT

Meanwhile, Canadian Apartment Properties (CAPREIT), the largest residential REIT in Canada, is another solid choice. Its dividend yield has risen to roughly 4.2% as the stock has sold off, and today the stock trades at a forward price-to-adjusted-funds-from-operations (P/AFFO) ratio of 17 times today. That’s significantly lower than its five-year average of 22.5 times and 10-year average of 23.5 times.

That significant discount for Canada’s largest apartment REIT is hard to ignore, making CAPREIT one of the best undervalued Canadian stocks to buy now.

Finally, Northland Power, a renewable energy company with significant long-term growth potential, currently trades at a forward EV/EBITDA of 9.1 times today. That’s much cheaper than its five-year average of 11.4 times and 10-year average of 12.8 times. In addition, its dividend yield is sitting at nearly 3.6% today with the stock trading at these undervalued levels.

So, if you’re a passive income seeker looking for high-quality Canadian stocks to buy while they’re undervalued, these three names are certainly top picks.

Two of the best stocks to buy for growth

If dividend income is less important to you, or you’re simply looking to buy high-quality, high-potential growth stocks while they trade undervalued today, two of the best to consider are Cargojet (TSX: CJT) and goeasy (TSX: GSY).

goeasy has been one of the best growth stocks to buy for years, but after temporary headwinds impacted the share price recently it is now trading unbelievably cheap. And while GSY is classified as a growth stock because it rapidly continues to expand its operations, it also offers an attractive dividend yield of 5.3%.

What really makes goeasy compelling, though, is just how cheaply it trades. Right now, its forward P/E ratio is sitting at just 5.8 times. That’s well below its five-year average of 10.1 times and 10-year average of 9.7 times.

Finally, Cargojet is another high-quality growth stock to buy while it’s still undervalued, especially with all the long-term growth potential it has as Canada’s leading air cargo operator.

Currently, Cargojet trades at a forward EV/EBITDA of just 7.2 times. That’s lower than both its five-year average of 8.6 times and 10-year average of 9.8 times.

So, if you’ve got cash that you’re looking to put to work right now, these five Canadian picks are hands down the best undervalued stocks to consider today.