The Canadian market has shown positive momentum, with a 1.0% increase over the last week and a robust 22% rise over the past year, while earnings are anticipated to grow by 15% annually in the coming years. In this context, identifying stocks that are trading below their estimated fair value can present opportunities for investors seeking to capitalize on potential growth within an improving market environment.

Top 10 Undervalued Stocks Based On Cash Flows In Canada

Click here to see the full list of 23 stocks from our Undervalued TSX Stocks Based On Cash Flows screener.

Here's a peek at a few of the choices from the screener.

Constellation Software

Overview: Constellation Software Inc. acquires, builds, and manages vertical market software businesses across Canada, the United States, Europe, and internationally with a market cap of CA$92.57 billion.

Operations: The company's revenue primarily comes from its Software & Programming segment, which generated $9.27 billion.

Estimated Discount To Fair Value: 22%

Constellation Software is trading at CA$4,340, significantly below its estimated fair value of CA$5,565.89, indicating potential undervaluation based on cash flows. Despite high debt levels and recent insider selling, the company reported strong earnings growth with net income rising to US$177 million in Q2 2024 from US$103 million a year ago. Earnings are projected to grow substantially faster than the Canadian market over the next three years.

• Our expertly prepared growth report on Constellation Software implies its future financial outlook may be stronger than recent results.

• Click here to discover the nuances of Constellation Software with our detailed financial health report.

GFL Environmental

Overview: GFL Environmental Inc. provides non-hazardous solid waste management and environmental services across Canada and the United States, with a market cap of CA$22.03 billion.

Operations: The company generates revenue from its segments, including CA$4.79 billion from Solid Waste in the USA, CA$2.16 billion from Solid Waste in Canada, and CA$1.67 billion from Environmental Services.

Estimated Discount To Fair Value: 31.2%

GFL Environmental, trading at CA$55.45, is considerably below its estimated fair value of CA$80.64, suggesting it may be undervalued based on cash flows. Despite a recent net loss of CAD 471.2 million in Q2 2024 and insider selling, the company is projected to turn profitable within three years with earnings growth outpacing the market average. Recent debt financing initiatives aim to enhance balance sheet flexibility and align with an investment-grade structure.

• In light of our recent growth report, it seems possible that GFL Environmental's financial performance will exceed current levels.

• Unlock comprehensive insights into our analysis of GFL Environmental stock in this financial health report.

Kinaxis

Overview: Kinaxis Inc. offers cloud-based subscription software for supply chain operations across the United States, Europe, Asia, and Canada with a market cap of CA$4.63 billion.

Operations: The company generates revenue primarily from its software and programming segment, amounting to $457.72 million.

Estimated Discount To Fair Value: 44%

Kinaxis, trading at CA$158.96, is valued significantly below its estimated fair value of CA$283.67, highlighting potential undervaluation based on cash flows. Recent client acquisitions like Ono Pharmaceutical and Mahindra & Mahindra bolster its presence in life sciences and automotive sectors. Despite activist pressure for a sale due to leadership changes, Kinaxis maintains strong revenue growth projections exceeding market averages and continues leveraging its AI-driven platform to enhance supply chain efficiencies globally.

• The growth report we've compiled suggests that Kinaxis' future prospects could be on the up.

• Delve into the full analysis health report here for a deeper understanding of Kinaxis.

Taking Advantage

• Unlock more gems! Our Undervalued TSX Stocks Based On Cash Flows screener has unearthed 20 more companies for you to explore.Click here to unveil our expertly curated list of 23 Undervalued TSX Stocks Based On Cash Flows.

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Looking For Alternative Opportunities?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.

• Diversify your portfolio with solid dividend payers offering reliable income streams to weather potential market turbulence.

• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include TSX:CSU TSX:GFL and TSX:KXS.

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