Despite the ongoing Israel-Iran conflict, the Canadian equity markets have continued their upward momentum, pushing the S&P/TSX Composite Index higher. The benchmark index has gained more than 6.5% this year and 35.8% over the past 12 months, supported largely by rising commodity and precious metal prices and improving corporate earnings.
However, the following three stocks have failed to participate in this rally and are currently trading at a significant discount to their 52-week highs. Given their solid growth prospects and attractive valuations, these three undervalued Canadian stocks present compelling buying opportunities for long-term investors.
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goeasy
goeasy (TSX:GSY), which provides leasing and lending solutions to non-prime customers, has faced significant pressure in recent months following a short-seller report from Jehoshaphat Research and weaker-than-expected third-quarter earnings. As a result, the stock has declined by more than 49% from its 52-week high, pulling its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples down to 1 and 5.8, respectively.
Meanwhile, credit demand could remain resilient in the current low-interest-rate environment, which would benefit the company. With its expanded product offerings and broader distribution network, goeasy is well-positioned to capitalize on the growth of its addressable market. In addition, its next-generation credit models, tighter underwriting standards, and disciplined collection practices should help strengthen asset quality and support long-term profitability. Considering its strong growth prospects and attractive valuation, I believe goeasy represents an excellent buying opportunity at current levels.
Waste Connections
Another undervalued Canadian stock I am bullish on is Waste Connections (TSX:WCN), which has declined about 18.6% from its 52-week high. Lower recycled commodity prices, declining renewable energy credits linked to landfill gas sales, weak solid waste volumes, and limited progress in reopening the Chiquita Canyon landfill – shut down at the end of 2024 –appear to have weighed on investor sentiment, putting pressure on the waste management company’s share price.
Despite these near-term headwinds, WCN continues to expand through both organic growth and strategic acquisitions. The company is steadily building its renewable natural gas (RNG) portfolio, with five facilities currently in operation and several additional projects expected to come online by the end of this year. Meanwhile, management also expects its new state-of-the-art recycling facility to open next year. In addition, the waste management firm plans to maintain an active acquisition strategy to broaden its footprint, supported by its strong balance sheet and healthy financial position.
Beyond expansion initiatives, Waste Connections is investing in technological advancements, including AI-driven solutions, to enhance efficiency and productivity. Improvements in employee engagement and safety metrics have also reduced voluntary turnover while boosting customer satisfaction and retention. Collectively, these initiatives should help lower operating costs and support margin expansion. Considering these factors, I believe WCN represents an attractive buying opportunity at these discounted levels.
Northland Power
Northland Power (TSX:NPI) develops, owns, and operates a diversified portfolio of energy infrastructure assets with a gross power generating capacity of 3.2 gigawatts. Although the stock has rebounded about 32% from its November lows, it still trades roughly 18% below its 52-week high.
Last month, the company reported healthy fourth-quarter results, with revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) rising 26.4% and 25%, respectively. It also generated free cash flow per share of $0.46, representing a 48.4% increase from the previous year.
Moreover, Northland Power continues to expand its production capacity and plans to invest between $5.8 billion and $6.6 billion over the next five years. Through these investments, the company aims to increase its total production capacity to 7 gigawatts by 2030, implying an annualized growth rate of approximately 16%. In addition, the company also offers a monthly dividend of $0.06 per share, yielding about 3.4% at current prices. Considering its strong growth outlook and attractive valuation, I believe Northland Power represents a compelling buying opportunity at current levels.
