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.

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.