Got $1,000? Invest in These 3 Canadian Undervalued Stocks

Amid the improving business environment, these three undervalued stocks can deliver superior returns.

| More on:

Despite the expectation of prolonged inflation and the announcement by the Bank of Canada to end the stimulus program, the Canadian equity markets have continued their uptrend. Investors’ optimism over the improvement in corporate earnings appears to have supported the equity markets’ growth. However, a few companies are still trading a significant discount from their pre-pandemic levels and are available at attractive valuations. So, investors can utilize the bargain in the following three undervalued stocks to earn superior returns over the next three years.

Suncor Energy

On Wednesday, Suncor Energy (TSX:SU)(NYSE:SU) reported impressive third-quarter earnings. Its operating earnings came in at $1.043 billion compared to a loss of $338 million in the previous year’s quarter. Meanwhile, its funds from operations increased by 126.5% to $2.64 billion. Increased crude production, higher refinery utilization rate, greater product realizations, and a decline in depreciation, depletion, and amortization exploration (DD&A) and exploration expenses boosted its financials.

Suncor Energy also repurchased shares worth approximately $2.6 billion in the first nine months of this year while reducing $3.1 billion of net debt. The solid third-quarter earnings appear to have increased investors’ confidence, driving its stock price by over 13% yesterday. Despite the surge, the company still trades close to 20% lower than its pre-pandemic levels. Also, its price-to-book multiple stands at an attractive 1.2.

Meanwhile, the uptrend in Suncor Energy’s financials could continue, given higher commodity prices, rising production, and its cost-cutting initiatives. Amid the optimism over its future cash flows, its management has doubled its quarterly dividends to $0.42 per share, with its forward yield standing at 5.25%. So, given its healthy growth prospects, high dividend yield, and attractive valuation, Suncor Energy could be an excellent addition to your portfolio.

Air Canada

Air Canada (TSX:AC) is my second pick. The resurgence of COVID-19 cases due to the new Delta variant has halted Air Canada’s recovery, which is still trading at a discount of 54% from its pre-pandemic levels. Also, its forward price-to-sales multiple stands at 0.7. Meanwhile, the significant discount on Air Canada’s stock price offers excellent buying opportunities for long-term investors.

Amid the reopening of economies and easing of restrictions, Air Canada has already resumed its service to various destinations worldwide. Also, it continues to strengthen its cargo segment with the addition of new aircraft and routes. The company is constructing a $16 million project at the Toronto Pearson International Airport cargo facility to expand and enhance its cold chain handling capabilities. Along with these initiatives, the introduction of its loyalty program, Aeroplan, and its cost-reduction initiatives augur well with its growth prospects.

Cineplex

My final pick would be Cineplex (TSX:CGX), which trades at over a 60% discount from its January 2020 levels. The pandemic-infused restrictions forced the company to close its avenues, severely denting its financials and stock price. Meanwhile, with the easing of restrictions, the company has opened all its scenes from July 17. With the expansion of vaccination, the entertainment industry could slowly return to normal levels of operations.

The new movie releases, subscription programs, and enhanced safety measures could also drive footfalls, thus supporting Cineplex’s financial growth. Further, the company has taken several initiatives to reduce its expenses while strengthening its balance sheet, which could aid in bouncing back quickly. With its forward price-to-sales multiple at 0.6, I believe Cineplex would be an excellent buy for investors with a longer investment horizon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends CINEPLEX INC. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Energy Stocks

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Where Will Imperial Oil Stock Be in 1 Year?

Imperial Oil is a TSX energy stock that has delivered market-thumping returns to shareholders over the last two decades.

Read more »

Pumpjack in Alberta Canada
Energy Stocks

1 Magnificent Energy Stock Down 17% to Buy and Hold Forever

Down over 17% from all-time highs, Headwater Exploration is a TSX energy stock that offers you a tasty dividend yield…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Is Cenovus Energy Stock a Good Buy?

Cenovus Energy (TSX:CVE) stock is primed for capital gains and strong total returns in 2025, driven by strategic buybacks and…

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

2 High-Yield Dividend Stocks That are Screaming Buys Right Now

Natural gas stocks like Peyto Exploration and Development are yielding above 7% today and look undervalued as natural gas strengthens.

Read more »

chart reflected in eyeglass lenses
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Cenovus?

Want to invest in Canadian energy? Canadian Natural Resources and Cenovus Energy are two of the largest, but which one…

Read more »

oil pump jack under night sky
Energy Stocks

Where Will Cenovus Stock Be in 1/3/5 Years? 

Let's dive into whether Cenovus (TSX:CVE) stock is worth buying right now and where this stock could be headed over…

Read more »