Stock prices are soaring and the TSX Composite Index remains at all-time highs, surely making some investors shy away from stocks. I have personally decreased my equity exposure in favour of cash and fixed income investments. But of course, there are always undervalued stocks in most every market. In this article, I’ll discuss three undervalued Canadian stocks that investors should consider for long-term gains. These stocks all have a track record of strong results –healthy balance sheets and strong returns.
Let’s take a look.
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CCL Industries
At first glance, CCL Industries Inc. (TSX:CCL.B) seems like an utterly boring and unimpressive stock. But if we take the time to look deeper, a different story emerges. A story of consistency, reliability, and most importantly, strong shareholder returns.
CCL is in the labels and packaging business. The company serves a variety of industries in a variety of countries. This diversification has supported strong and consistent results. In fact, this $16 billion packaging and label company has grown consistently and profitably over the last 10 years, creating shareholder wealth through both capital appreciation and dividend payments.
A five-year share price return of 32%, a growing dividend, and steadily growing earnings demonstrate that CCL is backed by real performance. The company continues to beat expectations, and drive efficiencies and financial results. In its latest quarter, revenue increased 7.9% to almost $2 billion and earnings per share (EPS) increased 12% to $1.20.
CCL generates a high return on equity (ROE) of approximately 15%, and trading at 19 times earnings, it’s one of the most undervalued stocks in Canada.
Hammond Power Solutions
Hammond Power Solutions inc. (TSX:HPS.A) is another undervalued Canadian stock worth checking out. But what does Hammond Power do?
Well, the company has a decades-long history of magnetic transformer design and manufacturing. The market for these transformers is significant, with demand coming from a variety of industries and companies. Hammond has customers in industries such as oil and gas, mining, steel, waste and water treatment, data centres, and wind power generation.
Hammond Power has been a solid performer for many years – strong margins, returns, and cash flows, all while maintaining a healthy balance sheet. Recently, investors took notice and have sent the stock price soaring, as you can see from the price graph below.
But I wouldn’t mistake this stock price performance to mean that Hammond is expensive. In fact, it remains an undervalued Canadian stock today, trading at 24 times next year’s expected earnings with an ROE of approximately 26%.
Peyto Exploration and Development
The final undervalued Canadian stock that I’ll discuss is Peyto Exploration and Development Corp. (TSX:PEY). Peyto is one of Canada’s lowest cost natural gas producers, with operations in the prolific deep basin of Alberta, with long-life and low-cost reserves.
The expected step-change increase in demand over the next few years is strengthening Peyto’s outlook and driving my belief that Peyto is an undervalued stock in Canada. The ramping up of LNG Canada, the electrification of the energy grid, the emergence of data centres, and continued global demand for North American liquified natural gas (LNG) are the major drivers for this. As you can see from Peyto’s stock price graph above, this changing industry dynamic is beginning to be reflected in Peyto’s stock price.
In Peyto’s most recent quarter (Q3/25), the company reported a 29% increase in funds from operations, to $199 million. This was driven by a 5% increase in production, and mostly, a 21% increase in the realized natural gas price, to $3.57 per million cubic feet (mcf). Peyto’s shares trade at a mere 12 times 2025 earnings, and 11.5 times next year’s expected earnings. The company generates an ROE of 13.5% and has a dividend yield of a generous 5.1%.
