canadian stocks

2 Potential Value Stocks Amid Record High Markets

ByDylan Callaghan Published On:

Markets hitting all-time highs can make selecting investments more difficult. This is particularly true for value investors, as Canadian stocks are also trading at record valuations.

Despite this, if you look hard enough there is always value to be had. This is true regardless of market conditions. With that in mind, here are two stocks that are trading at cheap valuations and rank a perfect 10 in terms of value according to Ycharts.

MCAN Mortgage Corp (TSX:MKP)

MCAN Mortgage (TSE:MKP) is a mortgage investment company that generates a reliable stream of income by investing its funds in a portfolio of mortgages (including single family residential, residential construction, non-residential construction, and commercial loans), as well as other types of loans and investments, real estate and securitization investments.

The company is having a decent year, but with gains of 8.62% YTD it still trails the TSX Index which is sitting on gains of 16.82% in 2021. At a couple of points, MCAN was beating the TSX Index but the recent downtrend has led to a wide performance gap.

One reason for the underperformance, is that as a financial company it benefits from rising rates. Given there is continue uncertainty related to COVID and the hesitancy by central banks to raise rates, the entire financial industry is taking a breather.

For value investors, this can be a good thing. MCAN Mortgage is now trading at only 6.1 times earnings and at a ~36% discount to its historical averages.

It is also worth noting, the MCAN offers an attractive yield of ~8.00% and has a mini three-year dividend growth streak. Yield hunters need not worry – the dividend is also well covered as it accounts for only 65% and 29% of earnings and free cash flow respectively.

Polaris Infrastructure (TSX:PIF)

Another industry that has struggled to gain a footing in 2021 is renewable energy. Companies like Brookfield Renewable Partners (TSE:BEP.UN) (TSE:BEPC), Boralex (TSE:BLX), and Innergex Renewables (TSE:INE) have struggled to keep pace with this white-hot market. In fact, most in the industry are sitting on double-digit losses in 2021.

One that is breaking the trend and sitting on gains is Polaris Infrastructure (TSE:PIF). The company is up by approximately 5% this year.

Polaris is a renewable energy pure-play with assets in Latin America – primarily in Nicaragua. The company has been taking steps to diversify and building its asset base through its hydroelectric facilities in Peru.    

The company also pays out an attractive dividend. While the company is focused on growing the business and not the dividend, investors can still benefit from a yield north of 4%. The dividend is also well covered with a payout ratio against earnings and free cash flow of ~40% and ~20% respectively.

Since the company operates in risker geo-political climates, the company often trades at a discount to peers. There are times however, where that discount is too big to ignore. It is why at Stocktrades Premium, we highlighted the stock when it was trading at only $11.54 per share.

Today, the company is once again looking attractive. Polaris Infrastructure is trading at only 10 times earnings and a 45% discount to historical valuations. Analysts agree, and have a one-year price target of $26.75 which implies 44% upside from today’s price of $18.57 per share.

Moving on, at the time of writing analysts are loving TFI International (TSE:TFII), we decided to have a closer look at the company’s status and what the future might hold.