3 TSX Stocks That May Be Valued Below Their Estimated Worth

3 min read | September 16, 2024 10:39 AM PDT | By Team Kalkine Media

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Recent market fluctuations in Canada, driven by concerns over a slowing economy and persistent inflation, have created opportunities to explore stocks trading below their estimated fair value. This analysis focuses on three notable TSX stocks that appear undervalued based on their cash flows and growth prospects.

AtkinsRéalis Group

Overview:
AtkinsRéalis Group, a leading integrated professional services and project management firm, boasts a market capitalization of CA$8.79 billion. The company operates in several sectors, including Capital, Nuclear, and LSTK Projects.

Operations:
Revenue is derived from various segments, with notable contributions from Nuclear operations, generating CA$1.20 billion, and LSTK Projects, which account for CA$318.44 million.

Valuation:
Currently trading at CA$50.17, AtkinsRéalis Group is substantially below its estimated fair value of CA$76.16, reflecting a discount of 34.1%. Despite the promising earnings growth forecast of 26.3% annually, surpassing the Canadian market average, debt coverage remains a challenge. Recent contract wins and an updated earnings forecast for 2024 underline the company's potential for future growth.

Savaria Corporation

Overview:
Savaria Corporation (TSX:SIS) focuses on providing accessibility solutions for individuals with physical challenges, holding a market cap of CA$1.49 billion. The company serves markets in Canada, the United States, Europe, and beyond.

Operations:
The Patient Care segment reported CA$183.98 million in revenue, while other segments contributed CA$673.74 million.

Valuation:
Trading at CA$20.92, Savaria is significantly undervalued compared to its estimated fair value of CA$41.29, indicating a discount of 49.3%. With a robust earnings growth of 22.8% last year and a forecasted annual growth rate of nearly 30%, the company outpaces the Canadian market’s growth rate. Recent earnings reports highlight a rise in net income to CA$22 million for the six months ending June 2024, up from CA$14.83 million the previous year.

TerraVest Industries

Overview:
TerraVest Industries Inc., with a market cap of CA$1.92 billion, manufactures and supplies goods and services across energy, agriculture, mining, and transportation sectors in Canada and the United States.

Operations:
Revenue is segmented into Service (CA$201.78 million), Processing Equipment (CA$117.58 million), Compressed Gas Equipment (CA$243.77 million), and HVAC and Containment Equipment (CA$292.90 million).

Valuation:
TerraVest Industries, trading at CA$98.69, is valued below its fair estimate of CA$131.12, showing a discount of 24.7%. Recent earnings reflect a notable increase, with net income rising to CA$51.66 million for the nine months ending June 2024 from CA$28.77 million a year earlier. The company’s earnings growth forecast of 21% annually also surpasses the market average.

These stocks represent compelling opportunities for those seeking undervalued assets within the Canadian market, with potential for growth and strategic advantages

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