In this article, we will discuss the 10 Undervalued Canadian Stocks to Buy Now.
Q1 2025 saw some challenges to the financial markets, primarily because of trade issues, says Sun Life (a Canadian-based international financial services company). The US decided to impose extra taxes, known as tariffs, on goods coming from numerous countries, including Canada. This move impacted the investors’ sentiments as to how it might slow down business and economic growth, not only in Canada but globally. The firm noted that Canada’s economy remains strong, and the BoC is no longer concerned with inflation. It lowered the interest rate by 50 bps to 2.75% as an effort to manage the economic impact of US tariffs.
Current State of Canada’s Economy
Canada’s economy strengthened at the end of 2024, says Sun Life, thanks to the lower interest rates. That being said, the markets remain nervous about economic strength. As per the firm, Canada’s economy saw a growth of 2.6%, annualized over Q4 2024. Consumer spending acted as the critical growth driver. Also, reduced interest rates aided in driving consumer spending. The country’s economy also benefited from the stronger exports.
The firm also highlighted that Canada’s unemployment rate sat at 6.6% as of February. BoC decided to reduce rates in part because of the improving labour market. Notably, Canadian equities touched a new high early in the quarter. Talking about the sectors, the Materials and Utilities sectors were tagged as the strongest performers. However, the Health Care and IT sectors saw the weakest returns.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What’s Next for Canadian Equities?
Bloomberg, while quoting Scotiabank, mentioned that Canada’s stock markets are expected to outperform after avoiding the worst of Trump’s tariffs. Scotia Capital Inc. provided a double upgrade to Canadian equities, from “Underweight” to “Overweight,” with analysts highlighting that both Canada and Mexico have managed to dodge the bullet in the escalating trade war. As per Bloomberg Intelligence analysts Gillian Wolff and Gina Martin Adams, TSX valuations are low relative to pre-pandemic levels, which offer a buffer against economic volatility and trade war.
The analysts at Scotia Capital Inc. believe that the escalating trade war announcement is negative for the US and the rest of the world. Scotiabank has dropped emerging market equities to “Underweight” from “Neutral,” mentioned Bloomberg.
With this in mind, we will now have a look at the 10 Undervalued Canadian Stocks to Buy Now.
A money manager reviewing quantitative and fundamental analysis before investing in a public company.
Our Methodology
To list the 10 Undervalued Canadian Stocks to Buy Now, we used a screener to shortlist Canadian companies that trade at a forward P/E of less than ~20.0x. Next, we mentioned hedge fund sentiment around each stock, as of Q4 2024, and ranked them in ascending order of this metric.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Undervalued Canadian Stocks to Buy Now
10. Bank of Montreal (NYSE:BMO)
Forward P/E as of April 4: ~11.03x
Number of Hedge Fund Holders: 17
Headquartered in Montreal, Canada, Bank of Montreal (NYSE:BMO) offers diversified financial services. Canaccord Genuity analyst Matthew Lee has maintained the bullish stance on the company’s stock, providing a “Buy” rating. The analyst’s rating is backed by factors demonstrating the bank’s robust financial performance and strategic positioning. The analyst highlighted that its performance in critical areas, including Canadian and US personal and commercial banking, capital markets, and wealth management and insurance, exceeded the estimates. Also, Bank of Montreal (NYSE:BMO)’s capital strength was above expectations, exhibiting its healthy financial foundation. The rate cuts by the Bank of Canada offer numerous benefits for the bank.
Notably, reduced interest rates tend to stimulate borrowing, which can result in higher demand for mortgages, personal loans, and business financing. Such an environment could help Bank of Montreal (NYSE:BMO) improve its loan portfolio and potentially enhance its market share in critical lending segments. The acceleration of YoY growth in mortgage balances throughout the industry hints at the potential recovery in the broader housing market. Bank of Montreal (NYSE:BMO) can capitalize on these trends by refining the mortgage offerings and targeting underserved segments. Given its strength of deep geographic and business diversification, the company remains well-placed to compete as well as grow in the dynamic operating environment.
9. BCE Inc. (NYSE:BCE)
Forward P/E as of April 4: ~11.6x
Number of Hedge Fund Holders: 22
BCE Inc. (NYSE:BCE) is a communications company that is engaged in providing wireless, wireline, internet, streaming services, and television (TV) services. The company has its headquarters in Verdun, Canada. National Bank upped the company’s stock to “Outperform” from “Sector Perform.” The firm’s analyst believes that the stock is yet to reflect opportunities to reduce leverage. Furthermore, BCE Inc. (NYSE:BCE) appears to be a relatively safer stock amid Trump-induced market uncertainty, says the firm. Elsewhere, Canaccord Genuity analyst Aravinda Galappatthige maintained a “Hold” rating on the company’s stock.
BCE Inc. (NYSE:BCE) announced that its wholly-owned subsidiary, Bell Canada, entered into a definitive agreement to acquire Ziply Fiber. The transaction improves Bell’s growth profile as well as strategic position by providing it a foothold in the large, underpenetrated U.S. fiber market. Also, the acquisition is expected to increase scale, diversify the operating footprint, and unlock numerous growth opportunities. In 2025, BCE Inc. (NYSE:BCE) is implementing a strategic roadmap, targeting to generate revenue growth while managing costs and capital allocation priorities. It plans to transform its business by leveraging technology, AI, and automation in a bid to modernize operations and realize operational cost efficiencies. The company saw 151,413 total mobile phone and connected device net subscriber activations in Q4 2024.
8. The Toronto-Dominion Bank (NYSE:TD)
Forward P/E as of April 4: ~10.4x
Number of Hedge Fund Holders: 25
Headquartered in Toronto, Canada, The Toronto-Dominion Bank (NYSE:TD) offers various financial products and services. Morningstar believes that the bank’s new CEO, Raymond Chun, remains focused on putting it on the right track. Notably, 2025 is expected to be a transitional year as The Toronto-Dominion Bank (NYSE:TD) has been actively remediating its US anti-money-laundering system with elevated expenses as well as continues to reposition the US balance sheet for its asset cap growth limitations, says Morningstar. The firm also added that the bank sold its 10.1% equity stake in Charles Schwab, offering it excess capital, which can be used to cover the costs related to the balance sheet optimization and for conducting share buybacks.
Elsewhere, BMO Capital has kept an “Outperform” rating on The Toronto-Dominion Bank (NYSE:TD)’s shares. The firm has noted that its robust capital position after the sale of Charles Schwab shares offers comfortable downside protection. The Toronto-Dominion Bank (NYSE:TD)’s strong capital base enables it to withstand economic downturns and regulatory challenges more effectively as compared to the less well-capitalized competitors. This can allow it to pursue strategic acquisitions or investments in new technologies, which can fuel future growth. Its healthy capital position can enable it to return more value to shareholders in the form of dividends and share buybacks, making it attractive to income-focused investors.
7. Manulife Financial Corporation (NYSE:MFC)
Forward P/E as of April 4: ~9.3x
Number of Hedge Fund Holders: 26
Headquartered in Toronto, Canada, Manulife Financial Corporation (NYSE:MFC) offers financial products and services. The company’s partnerships with alternative asset managers provide numerous opportunities for enhancing its investment capabilities and product offerings. The collaborations can also offer access to specialized expertise in areas including private equity, real estate, and infrastructure investments, potentially resulting in increased returns on invested assets. The partnerships can also allow Manulife Financial Corporation (NYSE:MFC) to provide more attractive as well as diverse products to the clients, mainly in the high-net-worth segment. The improvement in investment performance and innovative product offerings can fuel customer acquisition and retention, fueling its profitability and market share.
In Global WAM, Manulife Financial Corporation (NYSE:MFC) completed the acquisition of CQS, which is a U.K.-based multi-sector alternative credit manager. This positively contributed to Global WAM net flows and core earnings in 2024. Manulife Financial Corporation (NYSE:MFC) used the expanded investment capabilities to roll out the John Hancock Multi Asset Credit Fund in U.S. Retail. This fund is a strong addition to its growing lineup of liquid and semi-liquid alternative offerings. Notably, Global WAM ended 2024 with more than $13 billion of net inflows, reflecting a 220 bps rise in core EBITDA margin and 30% core earnings growth.
6. Royal Bank of Canada (NYSE:RY)
Forward P/E as of April 4: ~11.5x
Number of Hedge Fund Holders: 31
Royal Bank of Canada (NYSE:RY) operates as a diversified financial services company. The company is headquartered in Toronto, Canada. CIBC Capital Markets analyst Paul Holden upped the company’s stock to “Outperformer” from “Neutral.” The analyst believes that this bank typically performs well in down markets. Furthermore, he noted that Royal Bank of Canada (NYSE:RY)’s revenue mix makes it less vulnerable to slower loan growth, bad credit, and tightening margins. Notably, the earnings and balance sheet diversification are tagged as positive attributes when economic conditions get worse.
Elsewhere, Canaccord Genuity analyst Matthew Lee gave a “Buy” rating on the company’s stock, backed by factors demonstrating its healthy financial position and growth potential. Royal Bank of Canada (NYSE:RY)’s premium valuation exhibits its consistent earnings growth and strong RoE, which are being aided by a strategic emphasis on cost management and efficiency improvements. Notably, in Q1 2025, the bank saw an adjusted ROE of 17.2%, reflecting a rise of 230 bps YoY. Lee expects that Royal Bank of Canada (NYSE:RY)’s focus on personal and commercial banking, by using distribution network and technological innovations, can fuel client acquisition and loan growth. Overall, despite the challenges, its comprehensive growth strategy and efficiency gains place it well for future growth, justifying the analyst’s rating.
5. Nutrien Ltd. (NYSE:NTR)
Forward P/E as of April 4: ~12.3x
Number of Hedge Fund Holders: 32
Nutrien Ltd. (NYSE:NTR) offers crop inputs and services. The company is headquartered in Saskatoon, Canada. CIBC upped the company’s price objective to $66 from $64, keeping an “Outperformer” rating. It believes that the company remains its preferred name in fertilizers. Given the significant underutilized potash capacity, Nutrien Ltd. (NYSE:NTR) remains well-placed to benefit from positive long-term demand for potash, says the firm’s analyst. The company managed to deliver higher upstream fertilizer sales volumes, accelerate operational efficiency and cost savings initiatives, and increase downstream Retail earnings in 2024.
The outlook for Nutrien Ltd. (NYSE:NTR)’s business in 2025 is well-aided by anticipations for healthy crop input demand and strong potash fundamentals. Annual potash sales volume guidance of 13.6 – 14.4 million tonnes remains consistent with the company’s global shipments outlook and includes some uncertainty related to the possible imposition and related impact of US tariffs and global supply availability. In 2024, the company progressed nitrogen brownfield expansions at 2 of its North American sites.
Nutrien Ltd. (NYSE:NTR) mined 35% of its potash ore tons using automation, hinting at the progress made towards its 2026 target of 40% – 50%. Such advancements offer efficiency, flexibility, and safety benefits at the sites. The company has enhanced its midstream distribution capabilities, which include the opening of a new potash terminal in the US Cornwell. Notably, the investments in its global distribution network will be Nutrien Ltd. (NYSE:NTR)’s priority to ensure it supports the growth objectives.
4. Kinross Gold Corporation (NYSE:KGC)
Forward P/E as of April 4: ~14.3x
Number of Hedge Fund Holders: 39
Headquartered in Toronto, Canada, Kinross Gold Corporation (NYSE:KGC) is engaged in the acquisition, exploration, and development of gold properties. Raymond James has kept a “Market Perform” rating on the company’s shares. The firm increased its gold and silver price estimates over the near and long term to exhibit healthy YTD performance, sector demand at higher than historical levels as well as continued political uncertainty. Kinross Gold Corporation (NYSE:KGC) delivered a record FCF of $1.3 billion, which more than doubled YoY, repaid $800 million of debt, and increased its margins by 37%, significantly surpassing the rise in gold price.
Kinross Gold Corporation (NYSE:KGC) is forecasting another strong year of production of ~2.0 million gold equivalent ounces while, at the same time, maintaining its consistent operational performance. The company’s operational focus in 2025 is expected to be on cost control, capital discipline, and delivering on planned grades. Kinross Gold Corporation (NYSE:KGC)’s Tasiast mine saw an excellent year in 2024, achieving record annual production and cash flow. The annual production was mainly because of record throughput after the completion of the Tasiast 24k project in H2 2023. Quarter-over-quarter, the production was lower because of planned lower grades and mill maintenance. However, this was partially offset by improvements in recovery.
3. Barrick Gold Corporation (NYSE:GOLD)
Forward P/E as of April 4: ~10.8x
Number of Hedge Fund Holders: 44
Based in Toronto, Canada, Barrick Gold Corporation (NYSE:GOLD) is engaged in the exploration, mine development, production, and sale of gold and copper properties. Raymond James has retained an “Outperform” rating on the company’s stock. The firm lauded Barrick Gold Corporation (NYSE:GOLD)’s control over numerous high-quality gold mines and copper assets, which supported it in generating robust cash flow. The strategic benefit the company gained from the no-premium merger with Randgold remains noteworthy. Apart from adding more tier-one assets to the portfolio, it also substantially improved the FCF.
The establishment of the Nevada JV with Newmont remains a positive development for Barrick Gold Corporation (NYSE:GOLD). The collaboration manages the world’s largest gold complex. Furthermore, the JV is anticipated to yield significant synergies, which can enhance Barrick Gold Corporation (NYSE:GOLD)’s operational efficiency and financial performance. Overall, the company’s strategic initiatives and asset portfolio place it well in the industry. Its capability to leverage high-quality mines as well as the synergies from its JV can help fuel its robust cash flow.
Sound Shore Management, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:
“For example, global gold and copper miner Barrick Gold Corporation (NYSE:GOLD) rose after posting earnings that topped forecasts driven by improved cost performance as well as higher metals prices. We initiated our investment earlier this year when the stock was trading at below normal price to earnings and price to book valuations. The depressed valuation was largely due to long-term issues driven by poor acquisitions and shorter-term inflationary pressures that had been a drag on profitability. Following Barrick’s 2019 merger with Randgold, the latter’s senior management team took the reins and have since streamlined and optimized the company’s once sprawling asset base. Today, Barrick is set to improve operations and drive organic growth which, along with a better price environment, we believe should improve returns on capital. Bolstered by a nearly debt-free balance sheet and strong free cash flows, the company is well positioned to increase dividends, share buybacks and improve its valuation.”
2. Canadian Natural Resources Limited (NYSE:CNQ)
Forward P/E as of April 4: ~12.08x
Number of Hedge Fund Holders: 54
Canadian Natural Resources Limited (NYSE:CNQ) is engaged in acquiring, exploring, developing, and producing natural gas, crude oil, and related products. The company has its headquarters in Calgary, Canada. RBC analyst Greg Pardy reaffirmed the bullish outlook on the company, tagging it as the most compelling buying opportunity amongst its Canadian majors group. The firm’s optimism reflects Canadian Natural Resources Limited (NYSE:CNQ)’s strong leadership team, shareholder alignment, FCF generation across cycles, healthy operating performance as well as strong shareholder returns.
The analysts at the firm lauded its low-cost structure and agility in capital allocation adjustments. This adaptability has been considered as a critical asset, enabling Canadian Natural Resources Limited (NYSE:CNQ) to withstand several external economic shocks. The company’s status as a low-cost producer provides it resilience against price volatility and enables it to maintain profitability in a challenging environment. Canadian Natural Resources Limited (NYSE:CNQ)’s investments in innovative technologies showcase its commitment to operational efficiency and growth. These initiatives can result in the improvement of production metrics. The company’s diverse and large portfolio is aided by long-life, low-decline assets, which can fuel top-tier operating costs and low maintenance capital. When combined, it can lead to significant and sustainable FCF, which can be repeated for decades.
1. Canadian National Railway Company (NYSE:CNI)
Forward P/E as of April 4: ~17.3x
Number of Hedge Fund Holders: 56
Headquartered in Montreal, Canada, Canadian National Railway Company (NYSE:CNI) is engaged in the rail, intermodal, trucking, and related transportation businesses. The company’s strategic position in North American trade corridors offers it ample opportunities to benefit from dynamic trade patterns. With businesses continuing to reassess the supply chains, potentially supporting nearshoring or friendshoring strategies, Canadian National Railway Company (NYSE:CNI)’s cross-border capabilities can be increasingly valuable. Also, the strong focus on sustainability and environmental concerns can bolster its strengths.
Notably, rail transportation tends to be generally more fuel-efficient and environmentally friendly versus the long-haul trucking. With companies and governments prioritizing to reduce carbon footprints, the company can see improved demand for its services as a more sustainable option. Moving forward, Canadian National Railway Company (NYSE:CNI)’s key strengths are likely to fuel its performance. These include its advantaged three-coast network with port optionality and unrivaled bypass capability around Chicago, and technology deployments (which remains a strategic value driver), among others. Also, the potential for economic recovery and growth in critical sectors, including automotive, energy, and consumer goods, can fuel increased freight volumes. Canadian National Railway Company (NYSE:CNI)’s diverse portfolio of services, together with its broad geographic coverage, places it well to tap growth opportunities.
Appalaches Capital, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:
“During the quarter, we established core positions in two railroads: Canadian National Railway Company (NYSE:CNI) and CSX Corporation (CSX). The investment thesis is simple. Domestic railroads have not seen volume growth over the last 20 years despite being the cheapest, cleanest, and safest form of freight transportation.4 The lack of volume growth and related share losses to trucking is due to the poor reliability of the networks. However, there is strong evidence to believe that this may not be the case going forward. It seems that investors are overweighting historical characteristics of the industry and not giving credit to recent and sustainable improvements in service metrics. If the rails are able to show any sign of sustained volume growth, our investment should perform very well.
The Canadian railroads have more or less operated at full capacity over the last two decades, while the U.S. networks have not. Why is that? There are a few reasons for the anemic volume growth domestically, but only one of which is not shared by the Canadian railroads: service. In 2017, had you shipped goods by rail in Canada, the odds that your shipment would arrive on time, or the “trip plan compliance” rate, was around 90% or higher. In the U.S., these levels were closer to 50%.5 Maybe you have a different opinion, but I am not particularly excited about using a shipping service that only has a coin flip’s chance of arriving on time, even if it may be more economical…” (Click here to read the full text)
While we acknowledge the potential of CNI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than CNI but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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