1 Undervalued TSX Stock Down 29% to Buy and Hold

While geopolitical tensions have weighed on the equity markets, the S&P/TSX Composite Index has delivered a gain of approximately 24% over the past year, reflecting resilience amid macro uncertainty.

Despite this broad-based strength, a number of fundamentally sound Canadian companies remain undervalued. The persistent macroeconomic uncertainty, short-term earnings headwinds, and cautious investor sentiment continue to restrict the share prices of these companies. However, these challenges are short-term and present opportunities to buy, as these TSX stocks are well-positioned for recovery and could deliver solid capital gains over time.

Against this background, here is an undervalued stock down about 29% from its 52-week high to buy and hold.

An attractive undervalued TSX stock

Cargojet (TSX:CJT) is an attractive, undervalued TSX stock to buy and hold. Canada’s leading air cargo operator provides time-sensitive delivery services that reach more than 90% of the country’s population, reflecting the strength and scale of its domestic network.

Cargojet stock has declined approximately 29% from its 52-week high. While Cargojet’s domestic operations have remained resilient, its transatlantic and transpacific routes have been affected by geopolitical uncertainty, weaker global trade conditions, and softer international demand. These factors have weighed particularly on its Aircraft, Crew, Maintenance, and Insurance (ACMI) and charter service segments.

Despite these external headwinds, Cargojet’s underlying fundamentals remain solid. It continues to benefit from its dominant position in Canada’s air cargo market, which provides a structural competitive advantage. A large part of its revenue is derived from long-term contracts with major customers, which contribute to operational stability and predictable cash flows.

Approximately 75% of Cargojet’s domestic network revenue is secured under long-term agreements, which include fuel cost pass-through provisions and renewal options. These contracts are further strengthened by protective mechanisms, such as surcharges for uncontrollable costs, guaranteed minimum-volume commitments, and automatic annual price adjustments linked to the Consumer Price Index (CPI).

In addition, many of Cargojet’s agreements involve guaranteed capacity arrangements, where customers pay for reserved aircraft space regardless of utilization. Contract terms typically range from four to ten years and often include extension options, strengthening long-term revenue visibility. Overall, Cargojet’s leading position in Canada’s domestic air cargo market and contractual arrangements position it well to deliver stable earnings and navigate ongoing macroeconomic uncertainty.

Buy and hold Cargojet stock

While Cargojet has underperformed the broader market, its fundamentals remain solid, and the stock is likely to rebound strongly. Cargojet will likely benefit from a diversified revenue base, an efficient aircraft fleet, and sustained momentum in its domestic operations. Additionally, the Canadian domestic air cargo market presents high barriers to entry, strengthening Cargojet’s growth prospects.

The air cargo company has strengthened its revenue visibility by renewing long-term agreements with major customers, including Amazon and DHL. A recovery in the ACMI segment is expected to further enhance profitability, as this business delivers higher EBITDA margins because flight costs are borne directly by customers. These long-term, block-hour-based contracts provide both operational stability and predictable cash flows, while deepening strategic alignment with key clients.

Cargojet remains well-positioned to benefit from structural tailwinds in e-commerce. Its partnerships with rapidly expanding e-commerce players are likely to drive sustained volume growth. As the operating environment in the international market improves, Cargojet is expected to deliver strong operating performance.

Given the pullback, Cargojet stock is currently trading below its historical valuation levels and looks undervalued. This presents a compelling long-term investment opportunity.

The post 1 Undervalued TSX Stock Down 29% to Buy and Hold appeared first on The Motley Fool Canada.

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Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cargojet. The Motley Fool recommends Amazon. The Motley Fool has a disclosure policy.