If a stock falls sharply, that doesn’t necessarily make it a good value stock. A quality undervalued stock is one whose price has dropped faster than the quality of its business. That difference is what investors need to look for.
A company can face real challenges and still remain profitable, generate cash, and have a clear path forward. If the market has already priced in plenty of bad news, even a modest improvement could make that stock more appealing.
In this article, I’ll highlight two TSX stocks that may be flying under the radar right now despite their improving fundamentals.
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Premium Brands stock
The first beaten-down TSX stock worth a closer look today is Premium Brands Holdings (TSX: PBH), especially after its sharp decline despite record second-quarter results.
Based in Richmond, Premium Brands owns specialty food manufacturing and food distribution businesses across Canada and the United States. After losing nearly 31% of its value so far in 2026, PBH stock currently trades at $70.30 per share with a market cap of about $3.7 billion. At this market price, it offers a 4.8% annualized dividend yield.
Part of that weakness in PBH stock reflects investors’ lower expectations from the company after it reduced its 2026 outlook due to delayed product launches, softer demand in parts of the foodservice market, and the exit from unprofitable beef processing sales.
On the brighter side, Premium Brands’ second-quarter revenue jumped 26.3% year-over-year (YoY) to a record $2.4 billion, including 7.5% organic growth. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed nearly 30% YoY to $225 million, while adjusted earnings per share rose 17.7% to $1.53.
During the quarter, its cash generation also strengthened as the business produced $68.4 million in net free cash flow, while its total debt-to-EBITDA ratio improved to 3.8 from 4.1 in the previous quarter.
In addition, Premium Brands continues to expand its U.S. protein and sandwich businesses while benefiting from production capacity added in recent years.
Despite recent challenges, the company still expects to exceed its 2027 targets of $10 billion in revenue and $1 billion in adjusted EBITDA without further acquisitions. With PBH trading well below its recent highs despite solid growth, the stock looks increasingly interesting for investors seeking an under-the-radar recovery opportunity.
Pet Valu stock
Another deeply discounted TSX stock worth watching today is Pet Valu (TSX: PET), whose share-price decline has been far steeper than the slowdown in its underlying business.
If you don’t know it already, it’s a Canadian specialty retailer of pet food and pet-related supplies with more than 800 locations across the country. At the time of writing, PET stock traded at $17.80 per share with a market cap of $1.2 billion and a 2.9% annualized dividend yield.
Its shares have dived roughly 50% over the last year even as the company’s second-quarter results showed improving profitability. Notably, Pet Valu’s revenue increased 3.6% YoY in the June quarter, while adjusted EBITDA rose 8%. As a result, the company managed to post a solid 14.3% YoY jump in its net profit for the quarter.
Similarly, its free cash flow also improved to $32.9 million from $27.1 million a year ago. Lower selling, general, and administrative expenses helped support that improvement, although gross margin declined as price investments and higher occupancy costs weighed on profitability.
At the same time, the retailer continues to invest in its digital and loyalty platforms while expanding its store network. Pet Valu expects roughly 40 new store openings in 2026 and has reaffirmed its full-year outlook.
With its shares down about 50% while earnings, margins, and free cash flow have improved, PET could be an attractive undervalued TSX stock for patient investors willing to look beyond near-term market volatility.
