We recently published a list of 10 Cheap Canadian Stocks to Buy According to Analysts. In this article, we are going to take a look at where Methanex Corporation (NASDAQ:MEOH) stands against other cheap Canadian stocks to buy according to analysts.
Canadian Market Outlook 2025
In January, RBC Global Asset Management released its Market Outlook for Canada. Scott Lysakowski, the Managing Director & Senior Portfolio Manager, Head of Canadian Equities reflected on the Canadian market’s performance in 2024. He noted that the Canadian equity market, particularly the S&P/TSX Composite Index, experienced a notable year. The TSX achieved a total return of approximately 21%, which Lysakowski thinks is commendable, especially considering the broader economic context. However, this performance was somewhat overshadowed by the US market, where mega-cap stocks led the charge. The TSX’s gains, while substantial, were not as robust as those in the US, which Lysakowski attributed to the dominance of large-cap stocks in the latter part of the year.
Lysakowski noted that one interesting observation from 2024 was the brief increase in market breadth following significant events, such as elections. During these periods, mid-cap and small-cap stocks temporarily outperformed, suggesting a potential shift towards broader market participation. However, this trend was short-lived, and the year concluded with mega-cap stocks once again driving the majority of returns. The top ten stocks in the market contributed significantly to the overall performance, highlighting the persistent dominance of these large players.
Moreover, in analyzing the composition of returns for the TSX, Lysakowski suggests that it’s clear that the 21% total return consisted of a 3% dividend yield, with the remaining 18% split between earnings growth and valuation changes. Specifically, earnings growth accounted for about 9%, and multiple expansions contributed around 7%. In contrast, the US market, particularly mega-cap stocks, saw more pronounced earnings growth and multiple expansions, which explains their superior performance.
Looking ahead to 2025, Lysakowski noted that the outlook remains uncertain, partly due to macroeconomic factors such as the weakness in the Canadian dollar. This currency volatility is a significant concern for Canadian equities, as it impacts both investor sentiment and the macroeconomic outlook. Furthermore, the divergence in earnings growth between mega-cap and small-cap stocks suggests that until smaller companies demonstrate stronger earnings growth, the dominance of large-cap stocks will likely continue. This dynamic will be crucial to monitor in the coming year, as broader market participation could have a positive impact on Canadian equities.
Our Methodology
For this article, we used the Finviz stock screener, Yahoo Finance, Seeking Alpha, and CNN as our sources. Using the screener we aggregated a list of Canadian stocks that are trading below a Forward P/E of 15, with earnings growth expectations this year, and an upside potential of more than 10%. Next, we cross-checked the FWD P/E for each stock from Seeking Alpha and earnings growth from Yahoo Finance. Lastly, we ranked the stocks in ascending order of the average upside potential. Please note that the data was recorded on March 3rd, 2025.
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).
An aerial view of a petrochemical manufacturing plant, its intricate network of pipes and vats reflecting the industry’s innovation and complexity.
Methanex Corporation (NASDAQ:MEOH)
Forward P/E Ratio: 9.45
Earnings Growth This Year: 25.26%
Analyst Upside Potential: 43.05%
Methanex Corporation (NASDAQ:MEOH) produces and supplies methanol around the world, including North America, Asia Pacific, Europe, and South America. It operates production facilities in several countries, including Canada, Chile, Egypt, New Zealand, Trinidad and Tobago, and the United States. Methanex Corporation (NASDAQ:MEOH) is one of the largest producers and suppliers of methanol globally, and its operations are supported by a significant logistics network.
On February 18, the company received a Buy rating on the stock from analyst Ben Isaacson of Scotiabank, with a price target of $66. During the fiscal fourth quarter of 2024, the company experienced higher adjusted EBITDA compared to Q3 2024, driven by higher average realized prices and increased produced sales. It generated an adjusted EBITDA of $224 million. Management noted that the global methanol demand increased by approximately 3 million tons in 2024 compared to 2023 and it expects similar demand growth in 2025. In addition, Methanex Corporation (NASDAQ:MEOH) is working on acquiring OCI and is managing its finances to pay down debt and potentially reward shareholders. Lastly, the cheap valuation makes it one of the cheap Canadian stocks to buy according to analysts.
Polaris Global Equity Strategy stated the following regarding Methanex Corporation (NASDAQ:MEOH) in its Q3 2024 investor letter:
“Barbell returns defined the materials sector, with gains from Linde PLC, Yara International, Smurfit Kappa (now Smurfit Westrock), Antofagasta PLC and Mondi PLC offset by two Canadian companies, Methanex Corporation (NASDAQ:MEOH) and Lundin Mining. Methanex shares fell after the company agreed to acquire the methanol business of OCI Global for a little more than $2 billion. Methanex is slated to get OCI’s interest in two methanol facilities in Texas as well as a low-carbon methanol production business and idled facility in the Netherlands. Following the news, Barclays downgraded the stock, citing concerns about operating reliability, increased leverage and investor rotation.”
Overall, MEOH ranks 2nd on our list of cheap Canadian stocks to buy according to analysts. While we acknowledge the potential of MEOH as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MEOH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
