At first look, there don’t appear to be too many shares which might be undervalued in in the present day’s market. I imply, the TSX Index is up greater than 60% within the final three years and is buying and selling at all-time highs. But, if we comply with the markets lengthy sufficient, we come to appreciate that there’s all the time an undervalued inventory someplace. On this article, I’ll focus on two undervalued Canadian shares that I imagine are being mispriced by the market.
Worth investing: Discovering undervalued shares
Worth investing is an funding technique that depends on discovering shares which might be buying and selling beneath their precise true worth. It’s an interesting technique as a result of if executed proper, traders can purchase shares at a reduction. Generally these reductions are deep. The rewards will be very significant, however worth investing requires conviction, guts, and most of all, persistence.
However, after all, like with something, there may be all the time threat. The chance right here being that typically what we might imagine is mispriced seems to be priced proper and is definitely a price lure. In a well-diversified portfolio, nevertheless, these measured dangers ought to show to be price it over time.
BCE
BCE (TSX:BCE) is one in all Canada’s main telecom corporations. It’s additionally one in all Canada’s greatest disappointments in the previous couple of years. Actually, what was as soon as thought-about one of many most secure shares on the TSX fell a surprising 47% within the final three years. So, the query is, is BCE inventory an undervalued Canadian inventory to purchase or one to keep away from? Let’s look into this.
The telecom large has so much going for it. The very first thing is that BCE’s business is the very defensive telecommunications business. Merely put, shoppers “want” BCE’s services. This is without doubt one of the final expenditures to be minimize in exhausting occasions, and it’s extraordinarily sticky, with recurring revenues and money flows.
However as you understand, BCE and its inventory fell into some exhausting occasions. This all got here to a head in Could 2025, when BCE slashed its dividend by 56%. In the present day, after some very troublesome quarters of declining income, profitability and earnings, issues are trying up. The corporate has taken some actual steps to shore up its steadiness sheet, de-lever, and drive development as soon as once more. These steps have included lay-offs, divestitures, and pursuing totally different development paths.
In BCE’s third quarter, the corporate posted a 1.3% enhance in income, a 5.3% enhance in adjusted earnings per share (EPS) and working money stream of $1.9 billion, which elevated 3.9% versus final 12 months. BCE inventory is buying and selling at undervalued costs in the present day: 13 occasions this 12 months’s anticipated earnings, a 5.3% yield, and 1.6 occasions ebook worth. The dividend payout ratio has stabilized as has the inventory.
CGI
CGI Inc. (TSX:GIB.A) is one in all Canada’s main info know-how giants. And it’s one other undervalued Canadian inventory to purchase now. It’s at present buying and selling at lower than 15 occasions earnings. However contemplating CGI’s lengthy historical past of earnings development and shareholder worth creation, CGI inventory is undervalued in my opinion.
As you’ll be able to see from CGI’s inventory worth graph beneath, the inventory has been a gradual performer over a few years. This displays the corporate’s regular and dependable development over time. The corporate has actually remodeled itself into a world chief, with diversified operations throughout geography and business.
It’s the sort of diversification that usually ought to command premium multiples. But, CGI has been persistently underappreciated, in my opinion. Within the firm newest quarter, the fourth quarter of 2025, income elevated 9.7% to $4.01 billion. Additionally, adjusted EPS elevated 10.9% versus the prior 12 months and working money stream got here in at $663 million or 16.5% of income.
It’s a really money producing enterprise that’s trying ahead to a vivid future. That is evidenced in CGI’s book-to-bill ratio, which got here in at 119.2% and its backlog of $31.45 billion, or two occasions income.
The underside line
The undervalued Canadian shares mentioned on this article have robust threat/reward profiles in addition to a robust chance of being revalued at greater multiples that higher replicate their true worth.
