Sell-off Alert: Don't Miss These Undervalued Canadian Growth Opportunities

Sell-off Alert: Don’t Miss These Undervalued Canadian Growth Opportunities

Sure, the market is down. But if you want growth stocks, consider these undervalued stocks due to pop right back up.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published March 24, 2025 9:15 pm EDT

| More on: OTEXSISTOT

Market downturns can be unsettling, but they also create opportunities. When stocks take a hit, solid companies often get dragged down with the broader market, presenting investors with a chance to buy undervalued growth stocks. Right now, several Canadian stocks fit the bill, including OpenText (TSX:OTEX), Savaria (TSX:SIS), and Total Energy Services (TSX:TOT). Each of these companies has strong fundamentals and long-term potential, making them compelling choices for investors looking to capitalize on the recent sell-off.

chart reflected in eyeglass lenses — Source: Getty Images

OpenText

OpenText is a leader in enterprise information management software, helping businesses manage and secure their data. While technology stocks often experience volatility, OpenText’s core business remains strong. In its second quarter of fiscal 2025, it reported revenue of $1.3 billion, a 13.1% decline year over year. While that drop may seem concerning, cloud revenue actually increased by 2.7% to $462 million. This shift toward cloud services reflects OpenText’s ability to adapt to industry trends.

The growth stock also delivered strong profitability. Net income surged to $230 million, a massive jump from $38 million in the same quarter last year. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $501 million, representing a 37.6% margin. These numbers show that despite some top-line pressure, OpenText remains highly profitable. It also rewards investors with a dividend, currently yielding about 2.4%, thus making it an attractive pick for those looking for both growth and income.

Savaria

Savaria operates in a completely different space, specializing in accessibility solutions for people with mobility challenges. This is a growing industry as aging populations create more demand for home elevators, stairlifts, and other accessibility products. Savaria has carved out a strong niche in this market and continues to expand.

In fiscal 2023, Savaria generated $837 million in revenue, up 6.1% year over year. This growth was driven by a 6.7% organic increase, along with a favourable foreign exchange impact of 3.2%. The growth stock’s largest segment, Accessibility, accounted for 80% of total sales in Q4 and saw revenue climb 4.3%. North America was the standout performer, with 13.6% growth in that segment.

Savaria’s margins also improved. Gross profit hit $286 million, representing 34.2% of revenue, a 200 basis point increase from the previous year. Operating income rose 12.8% to $72.2 million, while adjusted EBITDA grew 8.2% to $130.1 million. These figures indicate a well-run company with strong operational efficiency. Given the long-term tailwinds of an aging population, Savaria looks like a solid bet for continued growth.

Total Energy

Total Energy rounds out the list as an energy services provider with operations in Canada, the United States, and Australia. While energy stocks often fluctuate with commodity prices, Total Energy has managed to maintain solid financials despite the ups and downs of the industry.

For the full year ending December 31, 2024, the growth stock reported $906.8 million in revenue, a modest increase from $892.4 million the previous year. More importantly, net income saw a significant jump, rising from $41.6 million to $60.8 million. Basic earnings per share from continuing operations also increased from $1.03 to $1.56.

Total Energy’s stock recently traded at $9.20, sitting 3.6% above its 52-week low of $8.88. TOT’s market capitalization is about $350 million, and it has a price-to-earnings ratio of 8.61. These numbers suggest the growth stock may be undervalued, particularly given its strong earnings growth. For investors willing to ride out the energy sector’s cyclical nature, Total Energy offers an attractive valuation.

Bottom line

When looking for undervalued growth stocks, it’s essential to focus on companies with strong financials, solid business models, and growth potential. OpenText, Savaria, and Total Energy all fit these criteria in different ways. OpenText is a tech leader shifting toward cloud services while maintaining profitability. Savaria is capitalizing on an aging population and improving margins. Total Energy is navigating the energy sector’s challenges while delivering rising earnings.

A market sell-off can be nerve-wracking, but it also provides a chance to buy quality stocks at a discount. For investors willing to do their research and take a long-term view, these growth stocks could offer significant upside as the market stabilizes.