10 Cheap Canadian Stocks to Buy

In this article, we will be taking a look at 10 cheap Canadian stocks to buy.

Near the end of 2022, recession talk was spiking in both the US and Canada, with the markets seized with inflation insecurity. Resultantly, demand for major goods was expected to stagnate for a relatively long period. Economic growth in Canada was slow but present in 2022, yet the country remains among those that are performing well economically. As we mentioned in one of our previous articles, in 2022, the nominal gross domestic product of the country was worth $2.2 trillion, ranking 15th across the world.

Canadian Economic Growth in 2022 and Beyond

According to a report published by the Toronto-Dominion Bank (NYSE:TD) in December, the Canadian economy recorded growth of about 3% in the third quarter. While employment in the country is expected to rise heading into 2023, higher inflation and rising interest rates are expected to decrease demand. Between September and December, average prices in the Canadian housing market also fell by 22% from their peak, shedding a brighter light on this sector. And when it comes to inflation, it was noted that Canada is faring a bit better than the US. The report forecasted that core inflation in the US is expected to average 4.7% in 2023, while in Canada, it is expected to be about one percentage point lower. All in all, while the economic forecast for the country is not overwhelmingly positive, it demonstrates resilience and hope for 2023.

At the start of 2023, consumer price index (CPI) inflation in Canada was noted to still be high. However, it was also seen to have declined from its peak. The major trends enabling this decline included lower energy prices, improvements in global supply chains, and the effects of higher interest rates in the economy. According to the Bank of Canada’s Monetary Policy Report published in January, CPI inflation is expected to fall to 3% by the mid-point of 2023, enabling it to return to the 2% target in 2024.

Favorable Environment for Canadian Stocks

While the slow economic growth and high inflation have resulted in recession fears and falling stock prices, when it comes to the Canadian market, domestic stocks are benefitting from the environment relative to foreign stocks. When compared to American stocks, Canadian stocks such as Bank of Montreal (NYSE:BMO) and Suncor Energy Inc. (NYSE:SU) and considerably cheaper. According to a report published by SEI Investments Company in 2022, between 2003 and 2022, the forward price-to-earnings (P/E) ratio of Canada’s S&P/TSX Composite Index has mostly stayed below that of the US S&P 500 Index. In September 2022, the P/E ratio for the former was just over 10, while that of the latter had spiked up to over 15. This trend has resulted in Canadian equities remaining attractively valued for decades.

Generally, the sectors that perform well in inflation include energy, consumer discretionary, materials, industrials, and financials. The fact that 78% of the S&P/TSX Composite Index is made up of these sectors thus indicates that Canadian equities are generally inflation-resistant. Conversely, it has been noted that these sectors only make up about 40% of the Russell 1000 Index measuring large US companies. This comparison thus highlights further how Canadian stocks may act as better investments today. Considering these factors, we have compiled a list of cheap Canadian stocks to buy.

Source:Pixabay

Let’s now take a look at the 10 cheap Canadian stocks to buy

Our Methodology

To compile our list below, we selected Canadian stocks which have a significant upside potential based on average analyst price targets. Strong price targets of these stock show Wall Street analysts believe these stocks are trading cheap and have more room to run.

Cheap Canadian Stocks to Buy

10. TELUS Corporation (NYSE:TU)

Average Analyst Price Target: $23.51

Upside Potential as of April 2: 15.01%

Number of Hedge Fund Holders: 17

TELUS Corporation (NYSE:TU) is a communication services company based in Vancouver, Canada. It provides telecommunications and information technology products and services.

Sebastiano Petti holds an Overweight rating on TELUS Corporation (NYSE:TU) shares as of February 13.

As of April 2, TELUS Corporation (NYSE:TU) was trading at an EV/Revenue multiple of 3.5.Analysts on Wall Street have placed an average price target of $22.84 on the shares, with a high forecast of $24.4. TELUS Corporation (NYSE:TU) shares were trading at $19.86 on April 2, so the price target gives it an upside potential of 15.01%.

Schonfeld Strategic Advisors was the largest shareholder in TELUS Corporation (NYSE:TU) at the end of the fourth quarter, holding 3.6 million shares. In total, 17 hedge funds were long the stock, with a total stake value of $255 million.

TELUS Corporation (NYSE:TU), like Bank of Montreal (NYSE:BMO), Toronto-Dominion Bank (NYSE:TD), and Suncor Energy Inc. (NYSE:SU), is a Canadian stock that is highly popular among hedge funds today.

9. Canadian Imperial Bank of Commerce (NYSE:CM)

Average Analyst Price Target: $49.31

Upside Potential as of April 2: 16.24%

Number of Hedge Fund Holders: 11

Canadian Imperial Bank of Commerce (NYSE:CM) is a diversified banking company based in Toronto, Canada. The company offers checking, savings, and business accounts, among more.

BMO Capital analysts hold an Outperform rating on Canadian Imperial Bank of Commerce (NYSE:CM) shares as of February 27.

In its annual report for 2022, Canadian Imperial Bank of Commerce (NYSE:CM) reported a return on equity capital of 14%. The stock has a P/E ratio of 10.55, and analysts have placed an average price target of $49.31 on the shares, which were trading at $42.42 on April 2. This gives Canadian Imperial Bank of Commerce (NYSE:CM) shares an upside potential of 16.24%.

There were 11 hedge funds long Canadian Imperial Bank of Commerce (NYSE:CM) in the fourth quarter, with a total stake value of $95.1 million.

ClearBridge Investments, an investment management firm, mentioned Canadian Imperial Bank of Commerce (NYSE:CM) in its first-quarter 2022 investor letter. Here’s what the firm said:

“We increased our financials exposure with four new additions during the quarter. Canadian Imperial Bank of Commerce (NYSE:CM), which should benefit from a consolidating bank market and higher rates as Canada catches up with the U.S. in terms of reopening and GDP growth recovery.”

8. Enbridge Inc. (NYSE:ENB)

Average Analyst Price Target: $45.35

Upside Potential as of April 2: 18.87%

Number of Hedge Fund Holders: 21

Enbridge Inc. (NYSE:ENB) is an energy company providing crude oil and other liquid hydrocarbons, among more. It is based in Calgary, Canada.

On March 29, shares of Enbridge Inc. (NYSE:ENB) were upgraded from Underperform to Neural by Credit Suisse analysts.

Enbridge Inc. (NYSE:ENB) is a stellar dividend stock with a yield of 6.98% as of April 2. The company has raised its yield for the past 28 years, making it a highly reliable dividend stock. Alongside this, the stock is undervalued considering its EV/Revenue multiple of 3.66. Analysts on Wall Street have placed an average price target of $45.35 on Enbridge Inc. (NYSE:ENB) shares, with a high forecast of $55.

Out of the 21 hedge funds long Enbridge Inc. (NYSE:ENB) in the fourth quarter, GQG Partners was the largest shareholder in the company, holding 63.7 million shares. The total stake value in the company was $2.6 billion.

7. Sun Life Financial Inc. (NYSE:SLF)

Average Analyst Price Target: $56.5

Upside Potential as of April 2: 20.99%

Number of Hedge Fund Holders: 9

Sun Life Financial Inc. (NYSE:SLF) is a life and health insurance company based in Toronto, Canada. The company provides savings, retirement, and pension products globally.

John Aiken, an analyst at Barclays, holds an Overweight rating on Sun Life Financial Inc. (NYSE:SLF) shares as of February 27.

Sun Life Financial Inc. (NYSE:SLF) has a P/E ratio of 10.05 and an EV/Revenue ratio of 2.13, both of which are low enough to consider the stock undervalued. The company’s average P/E ratio as of this December was 13.1, making its current ratio lower than the average. Analysts have an average price target of $56.5 on Sun Life Financial Inc. (NYSE:SLF) shares, with a high forecast of $73.

Nine hedge funds were long Sun Life Financial Inc. (NYSE:SLF) in the fourth quarter. Their total stake value was $225 million.

6. Manulife Financial Corporation (NYSE:MFC)

Average Analyst Price Target: $22.24

Upside Potential as of April 2: 21.13%

Number of Hedge Fund Holders: 10

Manulife Financial Corporation (NYSE:MFC) is another life and health insurance company on our list. It is based in Toronto, Canada.

John Aiken at Barclays holds an Overweight rating on Manulife Financial Corporation (NYSE:MFC) shares as of February 27 as well.

On valuation, Manulife Financial Corporation (NYSE:MFC) has a P/E ratio of 7.76 and an EV/Revenue multiple of 3.66. The average price target placed on the shares by analysts is $22.24, while Manulife Financial Corporation (NYSE:MFC) was trading at $18.36 on April 2. This gives the stock an upside potential of 21.13%.

Galibier Capital Management was the largest shareholder in Manulife Financial Corporation (NYSE:MFC) at the end of the fourth quarter, holding 2.6 million shares. In total, 10 hedge funds were long the stock. The total stake value in the company was $118 million.

Manulife Financial Corporation (NYSE:MFC), like Bank of Montreal (NYSE:BMO), Toronto-Dominion Bank (NYSE:TD), and Suncor Energy Inc. (NYSE:SU), is a Canadian stock with immense upside potential according to analysts today.

5. Bank of Montreal (NYSE:BMO)

Average Analyst Price Target: $108.62

Upside Potential as of April 2: 21.89%

Number of Hedge Fund Holders: 12

Bank of Montreal (NYSE:BMO) is a diversified banking company based in Montreal, Canada. It offers personal banking products and services.

Joo Ho Kim, an analyst at Credit Suisse, holds an Outperform rating on Bank of Montreal (NYSE:BMO) shares as of March 1.

Bank of Montreal (NYSE:BMO) has a P/E ratio of 7.54, which makes it a bargain relative to other Canadian banks with P/E ratios mostly above 9. Analysts have an average price target of $108.62 on the shares, with a high forecast of $118.51.

There were 12 hedge funds long Bank of Montreal (NYSE:BMO) in the fourth quarter, with a total stake value of $108 million.

4. Nutrien Ltd. (NYSE:NTR)

Average Analyst Price Target: $91.61

Upside Potential as of April 2: 24.05%

Number of Hedge Fund Holders: 40

Nutrien Ltd. (NYSE:NTR) is a fertilizers and agricultural chemicals company based in Saskatoon, Canada. The company provides crop inputs and services.

HSBC analysts have a Hold rating on Nutrien Ltd. (NYSE:NTR) shares as of February 21.

The company is among the largest fertilizer companies in the world, with immense dominance in potash and phosphates. Nutrien Ltd. (NYSE:NTR) has an EV/Revenue multiple of 0.11 and a P/E ratio of 7.74. Analysts have an average price target of $91.61 on the shares.

Nutrien Ltd. (NYSE:NTR) had 40 hedge funds long its stock in the fourth quarter. Their total stake value was $755 million.

ClearBridge Investments, an investment management company, mentioned Nutrien Ltd. (NYSE:NTR) in its third-quarter 2022 investor letter. Here’s what the firm said:

“However, we believe this is exactly the kind of environment that separates the highest-quality companies from their peers and allows them to strengthen their competitive positioning. For example, Nutrien Ltd. (NYSE:NTR), a Canadian fertilizer company, was a top contributor during the quarter. While the war in Ukraine and economic sanctions on Russia have significantly reduced the output of two of the world’s largest agricultural producers, Nutrien has benefited from a strong global agricultural cycle and from farmers seeking to increase their output and capitalize on higher agricultural prices.”

3. Toronto-Dominion Bank (NYSE:TD)

Average Analyst Price Target: $75.12

Upside Potential as of April 2: 25.41%

Number of Hedge Fund Holders: 17

Toronto-Dominion Bank (NYSE:TD) is another diversified banking company on our list. It is based in Toronto, Canada.

Analysts at Barclays hold an Overweight rating on Toronto-Dominion Bank (NYSE:TD) shares as of March 3.

Toronto-Dominion Bank (NYSE:TD) is the sixth-largest bank in North America, deriving 55% of its revenues from Canada and 35% of its revenues from the US. It has a P/E ratio of 10.76, which is lower than its five-year average P/E of 11.29. Analysts have an average price target of $75.12 on the shares.

Our hedge fund data for the fourth quarter shows 17 funds long Toronto-Dominion Bank (NYSE:TD), with a total stake value of $185 million.

2. Canadian Natural Resources Limited (NYSE:CNQ)

Average Analyst Price Target: $70.83

Upside Potential as of April 2: 27.97%

Number of Hedge Fund Holders: 41

Canadian Natural Resources Limited (NYSE:CNQ) is an oil and gas exploration company. It is based in Calgary, Canada.

Devin McDermott, an analyst at Morgan Stanley, holds an Equal Weight rating on  Canadian Natural Resources Limited (NYSE:CNQ) shares as of March 27.

The EV/Revenue multiple for  Canadian Natural Resources Limited (NYSE:CNQ) is 2.22, and its P/E ratio is 9.44. These figures show that the stock is currently undervalued relative to its intrinsic potential. The average price target on the shares is $70.83, with a high forecast of $95.

Out of the 943 hedge funds tracked by Insider Monkey in the fourth quarter, 41 hedge funds were long  Canadian Natural Resources Limited (NYSE:CNQ). Their total stake value was $1.8 billion.

1. Suncor Energy Inc. (NYSE:SU)

Average Analyst Price Target: $40.07

Upside Potential as of April 2: 29.05%

Number of Hedge Fund Holders: 47

Suncor Energy Inc. (NYSE:SU) is an integrated oil and gas company. It is based in Calgary, Canada.

Morgan Stanley’s Devin McDermott holds an Overweight rating on Suncor Energy Inc. (NYSE:SU) shares as of March 27.

Wall Street analysts have placed an average price target of $40.07 on Suncor Energy Inc. (NYSE:SU) shares, which were trading at $31.05 on April 2. This gives the stock an upside potential of 29.05%. The company’s P/E ratio is 6.94, and its EV/Revenue multiple is 1.19.

A total of 47 hedge funds were long Suncor Energy Inc. (NYSE:SU) in the fourth quarter, with a total stake value of $2.5 billion.

Artisan Partners, an investment management company, mentioned Suncor Energy Inc. (NYSE:SU) in its third-quarter 2022 investor letter. Here’s what the firm said:

“Suncor Energy Inc. (NYSE:SU), a Canada-based operator of oil sands mines, refineries and retail gas stations, was the third-largest contributor to return for the year, mainly due to higher oil prices. The share price increased by one third. Notably, the portfolio generated significant returns from energy stocks, including Suncor, Tenaris, Imperial Oil and tangentially Alimentation Couche-Tarde and Seven & i Holdings, both of which are in the gas station business. Given the cyclicality and commodity nature of the oil business, we have sold shares of these investments, including the complete sale of both Tenaris and Imperial Oil.”

See also 12 Best Canadian Stocks To Buy and Hold and 11 Undervalued Canadian Stocks To Buy.

Suggested articles:

• 10 Best Canadian Gold Stocks to Buy
• 10 High-Growth Canadian Dividend Stocks to Invest In
• 11 Most Profitable Canadian Stocks

Disclosure: None. 10 Cheap Canadian Stocks to Buy is originally published on Insider Monkey.