Most investors own individual stocks to generate market-beating returns and accelerate their retirement plans. Valued at a market cap of $2.9 billion, Hammond Power Solutions (TSX: HPS.A) has already delivered stellar returns to long-term shareholders.
Over the past decade, the Canadian stock has turned a $10,000 investment into $465,000, after adjusting for dividend reinvestments. Despite these outsized returns, HPS stock is down 32% from all-time highs, allowing you to buy the dip.
Moreover, the Guelph, Ontario-based transformer maker just posted its strongest quarter ever, and the numbers suggest the stock could be undervalued at current prices.
Here is why this Canadian value stock deserves a closer look and what long-term investors should know before gaining exposure.
Source: Getty Images
Why this top TSX stock is riding a powerful growth wave
Hammond Power Solutions has been building itself into one of the most important names in North American electrical infrastructure.
Founded in 1917, the company designs and manufactures transformers, filters, reactors, and power quality equipment used across mining, utilities, renewable energy, data centres, and industrial construction.
Data centres are now the company’s key growth driver. As artificial intelligence and cloud computing push electricity demand higher, data centre operators need more transformers and power infrastructure to keep facilities running.
Hammond has spent years expanding its manufacturing footprint to meet that demand, and these investments are now paying off.
In the second quarter of 2026, Hammond reported sales of $324.8 million, up 44.7% year over year. Growth was led by the United States and Mexico, where sales jumped 73%, driven largely by data centre shipments and stronger pricing.
- Gross margin climbed to 31.5%, up from 30.7% a year ago.
- Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose to $53.2 million, or 16.4 % of sales, compared with $33.4 million, or 14.9 % of sales, in the second quarter of 2025.
- Adjusted earnings per share came in at $2.76, up sharply from $1.72 the year before.
- Data centres now make up more than 30 % of total revenue, a threshold the company recently crossed.
Soon after the quarter ended, Hammond closed its acquisition of AEG Power Solutions, a European maker of UPS systems, battery chargers, rectifiers, and other critical power equipment. The deal adds roughly $232 million in annual revenue, a large installed service base, and new technology that positions Hammond for the next generation of data centre power architecture, including systems running on 800-volt direct current.
CEO Adrian Thomas summed up the opportunity on the company’s earnings call. “The long-term fundamentals of the business remain attractive,” he said. “Electrification, power reliability, infrastructure investment and the growing complexity of power systems continue to create opportunities for companies that can help customers solve those challenges.”
Is Hammond Power Solutions an undervalued stock
Reported net earnings dipped to $9.4 million from $13.4 million a year ago, but that decline came from one-time acquisition costs, foreign exchange losses, and higher share-based compensation tied to the AEG deal.
Canada was the one soft spot in Q2, with sales down 23.7 % due to project timing and tougher competition. Management does not see this as a structural problem, and the company’s diversified footprint across North America and India helps offset regional weakness.
Analysts tracking the TSX stock forecast free cash flow to expand to $168 million in 2030, up from $45 million this year. If HPS stock is priced at 25 times forward FCF, it could almost double within the next 40 months.
