Macroeconomic conditions sometimes cause market rotation and mispricing of even high-quality stocks. If this occurs, value investors buy them and sell them when they rise to their true or intrinsic value. Three undervalued Canadian stocks should be on investors’ buy lists right now.
Source: Getty Images
Supplier of choice
Stella-Jones (TSX:SJ) is grossly undervalued vis-à-vis the essential nature of its business. Moreover, SJ is absurdly cheap at $82.72 per share. Its 52-week high is $101.31. The 1.6% dividend compensates for the temporary weakness.
The $4.5 billion company provides manufacturing infrastructure solutions, including treated wood products, steel structures, and utility pole crossarms. Stella-Jones’ customers are major electrical utility companies, railroad operators, and telecom giants in North America.
In Q1 2026, sales increased 2.3% year-over-year to $791 million, while net income fell 35.5% to $60 million compared to Q1 2025. Around 76% of sales come from the U.S. business. Stella-Jones experienced price pressures during the quarter, as evidenced by a decline in gross profit margin to 19.6% from 21.7% a year ago.
Eric Vachon, President and CEO of Stella-Jones, notes the strong performance of Utility Products, alongside sustained demand for wood utility poles. He said the current focus is on optimizing the Railway Ties production network. The company is also deciding on the site of its new U.S. steel lattice manufacturing facility.
The financial objectives from 2026 to 2028 are $4 billion in annual sales and an annual organic sales growth rate of 4% to 5%.
Turnaround story
Saputo Inc. (TSX: SAP) is on the cusp of a breakout following the vastly improved financial results in Q4 and full-year fiscal 2026. Its President and CEO, Carl Colizza, said, “We delivered a solid finish to the year, reflecting disciplined execution across the business.” At $41.87 per share, the year-to-date gain is 2.3%, along with a 1.9% dividend offer. CIBC (TSX:CM) recommends a buy rating.
In the three months ending March 31, 2026, net earnings from continuing operations rose 80.5% to $157 million compared to Q4 fiscal 2025. For the full fiscal year, net earnings reached $690 million versus the $147 million net loss in fiscal 2025. The results tell a turnaround story.
The $16.8 billion Montreal-based company is one of the world’s top 10 dairy processors. Saputo produces, markets, and distributes quality dairy products such as milk and cheese, as well as cream products, cultured products, and dairy ingredients. Colizza added that Saputo has advanced its long-term strategy and strengthened its business foundation in fiscal 2026. He believes Saputo has the ability to fund near-term priorities and future growth.
Buy with caution
Algonquin Power & Utilities (TSX:AQN) can be considered an undervalued strong buy, but with caution. At $8.09 per share, the utility stock is up only 0.59%, with an enticing dividend offer at 4.2%. The 100% payout ratio could be a minor red flag. This $6.5 billion company owns and operates a diversified portfolio of regulated generation, distribution, and transmission assets.
In Q1 2026, net earnings attributable to common shareholders declined 10% year-over-year to $83.1 million. Utility stocks are rate-sensitive, although the ongoing transformation into a pure-play regulated utility could propel AQN higher.
Choose wisely
Stella-Jones and Saputo are buying opportunities due to their strong business fundamentals. Algonquin could spring a surprise if the transformation shows a predictable path forward.
