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.