Despite the recent run-up in the Canadian stocks, I see multiple stocks trading cheaper and offering excellent value. Apart from trading cheaper, these stocks offer solid growth opportunities and are likely to deliver robust returns in the long term. Let’s delve deeper into the four top undervalued Canadian stocks you could consider buying right now.
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Scotiabank
Scotiabank (TSX:BNS)(NYSE:BNS) stock has witnessed strong growth in the recent past thanks to the improving operating environment. Notably, its stock trades at a significant discount from its peer group average despite the uptick in growth. Notably, Scotiabank’s price-to-book value (P/B0 multiple of 1.5 is well below that of Toronto-Dominion Bank, Bank of Montreal, and Royal Bank of Canada, whose P/B multiples are 1.8, 1.6, and 2.1, respectively.
I expect the uptrend in Scotiabank stock to sustain in 2021 and beyond on the back of the growth in its loans and deposit volumes, exposure to the high-growth banking markets, and economic expansion. Moreover, lower credit provisions and prudent expense management are likely to support its earnings and future dividends.
Loblaw
Loblaw (TSX:L) is another attractive stock offering excellent value. The company’s next 12-month (NTM) price-to-earnings (P/E) multiple of 14.2 is lower than that of Metro and Alimentation Couche-Tard, whose P/E multiples of 16.0 and 18.7, respectively.
While it trades cheaper than peers, Loblaw stock is likely to add stability to your portfolio and reduce downside risk. Its low-risk business remains immune to the economic cycles and consistently delivers solid comparable sales growth. Further, its growing e-commerce platform provides a solid underpinning growth. Meanwhile, its connected healthcare offerings, growing demand for online grocery pickup services, home delivery, and rewards programs bode well for future growth.
Suncor Energy
Suncor Energy (TSX:SU)(NYSE:SU) stock has gained over 42% in six months, reflecting growth in economic activities that drove oil prices higher. Meanwhile, I expect further upside in Suncor stock on the back of improving energy demand, higher volumes, and increased pricing.
Despite the recent run-up, Suncor trades well below the pre-pandemic levels, making it an attractive buy for long-term investors. I expect Suncor to benefit significantly from the improving energy demand thanks to its integrated assets, improved revenue mix, lower cost base, and strong balance sheet. Suncor Energy is focusing on lowering its debt, which bodes well for future growth. Meanwhile, the company rewards its shareholders through share buybacks and regular dividends.
Air Canada
The economic reopening and easing of travel restrictions are likely to significantly boost Air Canada’s (TSX:AC) financial performance and, in turn, its stock. Notably, Air Canada stock has already gained over 71% in one year on expectations of a revival in travel demand amid the ongoing vaccine distribution. Despite recent growth in its value, Air Canada stock is still trading at a massive discount from its pre-pandemic levels, making it a top value bet.
As the year progresses, I expect Air Canada’s revenues and capacity to improve sequentially amid an improvement in air travel demand. The company’s operating losses and cash burn could go down sequentially. Meanwhile, the air cargo business is likely to continue to support its top-line and margins.
