If you’re on the hunt for undervalued stocks, there are some out there that deserve high consideration. Yet, while some look inexpensive, others look downright cheap. This is why today we’re going to get into a few glorious stocks that look on the verge of a breakthrough — ones that also have already seen improvements on the TSX today.
TransAlta
First up, we have TransAlta (TSX:TA), with a focus on producing electric energy. The thing is, shares are a fraction of what they used to be. But even despite this, the company has proven it can still generate free cash flow, supporting a recent buyback program of $150 million in 2024. TA stock has gone through some mixed quarters recently, with fluctuating power prices, weather, and more all affecting short-term earnings. But it’s the long-term investors should look to.
Analysts are optimistic about the future of TA stock, especially with a buyback program in place. And with so much growth expected in clean energy, this looks like a strong one to consider. In fact, the company announced a Clean Energy Growth Plan to invest $3.5 billion in new renewable projects. This would achieve a goal of generating $350 million in additional earnings before interest, taxes, depreciation, and amortization (EBITDA) by 2028.
What’s more, the stock looks undervalued. Analysts believe it’s similar to other renewable energy stocks, with investors not viewing the full potential. It trades at just 4.13 times earnings as of writing, with shares still down 11% in the last year. So, now is your chance to bring in a 2.42% dividend yield from this powerhouse producer.
CCL Industries
Another company to consider is CCL Industries (TSX:CCL.B), which has seen significant improvements since the pandemic. There has been demand increasing across the board, from its packaging, label, and specialty firm areas. What’s more, the company recently marked a positive shift compared to its post-pandemic lows, which were witnessed back in 2023.
Now, there are other areas that investors are keen to see growth next. This would include its radio frequency identification (RFID), which has seen huge demand, and its instructional labels for drug labelling. And with artificial intelligence (AI) now in use as well, this has made its future prospects look all but certain.
So now, CCL stock is focusing on more high-margin opportunities. This would include businesses such as RFID, as well as label products. It also means more cost efficiencies and improvements for even more cash flow. And yet again, it also looks undervalued. It trades at 23.26 times earnings, lower than its historical averages, and offers a 1.68% dividend yield. Shares are now up 6%, and that should continue to increase. Especially if we see more mergers and acquisitions take place, something the company is known for. Overall, it looks like a strong buy among these cheap stocks.
Pet Valu
Finally, remember when Pet Valu Holdings (TSX:PET) came on the market during the pandemic. Shares shot up as the company provided essentials to the huge increase in pets going home with owners. However, that now seems to be a thing of the past, with inflation and interest rates climbing. Or at least, it was.
Whether you admit it or not, the demand for pets will always be high. In fact, there is a growing pet economy here in Canada, with a “long runway for growth,” in the words of one analyst. What’s more, Pet stock has a franchise-led model that provides a more personal option compared to big-box locations. This has led to more customer loyalty and strong historical performance.
Now, Pet stock is expanding. Management is aiming to expand from 766 to 1,200 stores over the next decade. This allows for a major growth opportunity in share price as well. Yet again, the stock looks undervalued. It deserves a higher valuation given its focus and demand, so with shares down 25%, it should certainly be worth considering as the market rebounds.
