With the S&P/TSX Composite Index continuing to climb, finding undervalued stocks has become increasingly difficult. That said, some fundamentally solid Canadian companies have recently pulled back from their highs, creating more appealing entry points for investors.
Notably, these Canadian stocks appear undervalued when compared with their earnings growth prospects. Moreover, strong demand for their products and solutions suggests they are primed for big returns in the long run.
Against this background, here are two Canadian stocks that appear undervalued and are likely to deliver significant gains.
Undervalued Canadian stock #1: Celestica
Celestica (TSX: CLS) has been one of the top-performing TSX stocks driven by artificial intelligence (AI)-led demand for its networking switches. However, CLS stock has fallen roughly 38% from its 52-week high, creating a potentially attractive entry point for investors.
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Celestica currently trades at about 26.5 times forward earnings, which appears undervalued given the company’s solid growth outlook. Celestica’s EPS is projected to nearly double in 2026. Moreover, its bottom line will likely sustain strong double-digit growth in 2027.
Celestica is also well-positioned to benefit from the ongoing expansion of AI infrastructure. Its Connectivity & Cloud Solutions (CCS) division provides networking switches, server platforms, data centre interconnect technology, storage solutions, and edge-computing infrastructure. The segment is seeing solid AI-led demand and driving the overall company’s growth.
Celestica’s CCS segment’s revenue surged 84% year over year to US$3.8 billion in Q2, accounting for roughly 81% of total company revenue. Communications revenue climbed 62%, driven by strong demand for 800G networking switches and continued sales of 400G products. Enterprise revenue jumped 167%, supported by AI and machine-learning deployments for a major hyperscaler and stronger storage demand.
Looking ahead, rising adoption of 800G networking, the launch of 1.6-terabit solutions, improving enterprise storage demand, and continued hyperscaler spending on AI infrastructure could support further growth.
Overall, Celestica’s compelling valuation and solid AI-driven growth prospects make it an attractive investment.
Undervalued stock #2: Bird Construction
Bird Construction (TSX: BDT) is another TSX stock that looks compelling on valuation. Despite gaining more than 192% over the past year, BDT still trades at a forward price-to-earnings (P/E) of about 24.4 times, which makes it undervalued considering its expected earnings growth.
Bird’s EPS is likely to grow at a strong double-digit rate through 2027, and the momentum could sustain in the years ahead due to its solid backlog.
Notably, during the first half of 2026, revenue rose 16.5% year over year, led by strong performance in its Buildings segment. The infrastructure division also benefited from the FRPD acquisition completed in October 2025. Adjusted EPS climbed 30.1%, highlighting Bird’s ability to convert rising demand into stronger profitability.
Growth could remain robust through the remainder of 2026, with full-year revenue potentially increasing more than 20% from 2025. Further margin improvement could provide an additional boost as industrial projects return to full capacity.
Bird also benefits from exposure to several long-term growth markets, including data centres, power, defence, LNG, infrastructure, mining, chemicals, and oil and gas. This diversified mix helps reduce reliance on any single market.
Its record backlog further strengthens the investment case. Contracted backlog surpassed $6.1 billion at June 30, up 30.6% year over year, while pending backlog stood at $6 billion.
With a solid balance sheet, acquisition opportunities, and a commitment to dividends, Bird appears well positioned for continued growth and shareholder value creation.