A proven strategy to generate outsized gains is to invest in quality stocks trading at a discount to their intrinsic value. Canadian investors need to identify companies poised to grow revenue and earnings steadily while trading at a reasonable valuation. In this article, I have identified one magnificent TSX stock that is down 80% from all-time highs. Let’s see why this undervalued Canadian stock should be part of your watchlist right now.

Should you buy this TSX stock today?

With a market cap of $658 million, Mattr (TSX:MATR) is a materials technology company operating through the Composite Technologies and Connection Technologies segments. It manufactures flexible composite pipes, underground storage tanks, stormwater management products, and heat-shrinkable components for transportation, communication, water management, and energy markets worldwide.

Mattr wrapped up a transformative 2024, capping the year with the acquisition of AmerCable. Despite challenging market conditions, it also made substantial progress on modernizing its North American manufacturing footprint.

The Toronto-based company, which changed its name from Shawcor in January 2024, saw its fourth-quarter (Q4) revenue from continuing operations rise 8.5% to $207.8 million compared to the same period last year, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from continuing operations fell 50.9% to $12.7 million.

For the full year, revenue from continuing operations edged up 0.5% to $885.3 million. However, adjusted EBITDA dropped 28.2% to $108.2 million due to $17.7 million in non-capitalizable costs related to the company’s manufacturing modernization program.

“2024 was a transformative year for Mattr, a year in which we reshaped our production network to better serve our North American customer base and positioned ourselves for growth in 2025 and beyond,” said CEO Mike Reeves during the earnings call.

The company’s Composite Technologies segment, which includes Flexpipe composite pipes and Xerxes underground storage tanks, saw Q4 revenue increase 6.9% year over year to $120.3 million, driven by higher fuel tank sales and increased composite pipe sales in North America.

Meanwhile, the Connection Technologies segment, which manufactures heat-shrink products and wire and cable solutions, delivered record Q4 revenue of $87.5 million, up 11% from the prior year.

Mattr expects “meaningful year-over-year growth in 2025 revenue and adjusted EBITDA,” led by its Connection Technologies segment (now bolstered by the AmerCable acquisition) and its Xerxes business.

Mattr also addressed potential tariff impacts, noting that approximately 30% of its continuing operations revenue comes from products crossing the U.S.-Canada border, while approximately 45% of its cost of goods sold relates to cross-border materials.

Executives remain confident in Mattr’s long-term strategy, reiterating their ambition to deliver annual EBITDA growth above 10% while driving EBITDA margins above 20%, with the AmerCable acquisition expected to accelerate progress toward these goals.

What is the target price for the cheap TSX stock?

Bay Street expects Mattr to increase revenue from $958 million in 2024 to $1.5 billion in 2027. Comparatively, adjusted earnings per share are forecast to expand from $0.70 in 2024 to $1.92 in 2027.

Moreover, the TSX stock is projected to end 2027 with a free cash flow of $146 million in 2027, compared to a free cash outflow of $59 million last year. If MATR stock is priced at 10 times forward FCF, it should more than double in valuation over the next two years. Analysts remain bullish and expect cheap TSX stock to gain close to 50% over the next 12 months, given consensus price targets.

The post 1 Magnificent TSX Stock Down 80% With Massive Growth Potential appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Valued at a market cap of $8.5 billion, Canadian Tire (TSX:CTC.A) stock has trailed the broader markets in the past decade. Since May 2015, the TSX stock has returned just 17% to shareholders. If we adjust for dividend reinvestments, cumulative returns are closer to 59%.

Today, Canadian Tire stock trades 30% below its all-time highs and offers a tasty dividend yield of 4.7%. Let’s see if this TSX dividend stock should be on your watchlist right now.

Should you own this TSX dividend stock right now?

In 2024, Canadian Tire reported adjusted earnings of $12.62 per share, an increase of almost 13% year over year. Despite a challenging retail environment, CTC demonstrated an ability to control costs while promoting key categories.

The retailer reported modest growth in the fourth quarter (Q4), with retail and comparable sales excluding petroleum up more than 1% across banners. Revenue increased 1.3% to $4.1 billion after seven consecutive quarters of decline, driven by higher Canadian Tire retail shipments and growth at Helly Hansen and Mark’s.

Triangle Rewards continues to be a key growth driver, with loyalty members shopping more frequently and spending more than in 2023. Loyalty penetration reached 54% of sales in 2024, up 141 basis points from the previous year. After a strategic review, the company also finalized its decision to retain full ownership of Canadian Tire Financial Services.

Cost control remains impressive, with normalized retail operating expenses down $15 million in Q4. Supply chain modernization efforts in Calgary and Montreal delivered $20 million in savings during 2024. Corporate inventory dollars finished 5% below last year as Canadian Tire maintains disciplined inventory management while focusing on product assortment vitality.

Looking ahead, Canadian Tire faces uncertainty around potential U.S. tariffs, though management expressed cautious optimism about consumer trends. It is well-positioned with forward currency hedging for over 80% of its 2025 U.S. dollar requirements at rates below current spot prices, providing some margin cushion.

Is this TSX stock undervalued?

Analysts tracking Canadian Tire expect its sales to increase from $16.36 million in 2024 to $17 million in 2029, indicating a compounded annual growth rate of less than 1%. Comparatively, adjusted earnings per share are forecast to grow by 4% annually from $12.6 in 2024 to $15.4 in 2029.

Today, the TSX stock trades at a forward price-to-earnings multiple of 12 times, higher than its five-year average multiple of 11 times. If Canadian Tire stock is still priced at 11 times forward earnings, it will trade around $163 per share in early 2028, indicating an upside potential of 8% from current levels. Given consensus price targets, CTC stock trades at a 6% discount in May 2025.

A key near-term driver for CTC stock will be its Q1 earnings report. Bay Street expects it to report revenue of $3.55 billion in the March quarter with an adjusted earnings per share of $1.28. While revenue is forecast to grow by 0.9%, earnings might decline by 7% year over year.

I think Canadian Tire stock is unlikely to deliver outsized gains to shareholders over the next three years. However, it remains attractive to income-seeking investors as the stock offers a forward yield of almost 5%.

The post Where Will Canadian Tire Stock Be in 3 Years? appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.