It’s Time to Buy: 1 Canadian Stock That Hasn’t Been This Cheap in a While

There are a number of different ways investors can try to assess whether a given stock is cheap. Whether that’s via its share price (typically a reflection of the market’s perception of its growth prospects), its valuation, dividend yield, or a range of other metrics, diverging opinions on a specific company can quickly emerge.

I tend to focus on valuations and how multiples expand or contract over time as the key indicator as to whether a given company is undervalued or not. In this piece, I’m going to highlight why I think Northland Power (TSX:NPI) could be among the cheapest TSX stocks out there.

Let’s dive in!

Valuation multiples are historically cheap

Following a decline of around 60% over the past five years (shown in the chart above), one might expect to see some significant multiple contraction with Northland Power. That is certainly the case.

The company’s forward price-to-earnings multiple now sits around 12 times. When I started covering this stock years ago, Northland Power was typically good for a forward multiple above 30 times, so that’s a dramatic drop.

A number of analysts have put forward discounted cash flow models, which should have NPI stock trading around the $40 level. But with this stock down to around $17.50 at the time of writing, that’s a very large discount to where this stock should be trading — at least, on the basis of its cash flows (how I value stocks myself).

Does this mean Northland is a buy or a value trap?

When high-quality companies like Northland with premium assets in a sector I still think has long-term growth potential (that of renewable energy) see valuations decline like this, investors have to ask a key question. Is this decline the result of some sort of structural issues that will impair Northland’s cash flows over the next five to 10 years?

If the answer to this question is yes, Northland could certainly be a value trap. That’s a possibility, and it needs to be at the back of investors’ minds. No matter how far a stock has fallen, it can fall further. And if we do see a continued shift toward fossil fuels and away from renewable energy, perhaps this will be the case.

I’m going to suggest, however, that the current political dynamics, which do not favour companies like Northland, are likely to change. My base case is that a shift in political priorities in the next three years should drive a big rally in Northland. Now, the question is just how patient investors want to be in waiting for such a rebound.

I think Northland’s rock-bottom valuation and dividend yield of 6.7% provides enough enticement for investors to wait. That’s my view.

The post It’s Time to Buy: 1 Canadian Stock That Hasn’t Been This Cheap in a While appeared first on The Motley Fool Canada.

Should you invest $1,000 in Northland Power Inc. right now?

Before you buy stock in Northland Power Inc., consider this:

The Motley Fool Stock Advisor Canada analyst team identified what they believe are the 15 best stocks for investors to buy now… and Northland Power Inc. wasn’t one of them. The 15 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,105.89!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 95%* – a market-crushing outperformance compared to 72%* for the S&P/TSX Composite Index. Don’t miss out on our top 15 list, available when you join Stock Advisor Canada.

See the 15 Stocks #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of November 17th, 2025

More reading

• A Perfect TFSA Stock Paying Out 4.2% Each Month
• This 6.8% Dividend Stock Pays Cash Out Every Month
• TSX Today: What to Watch for in Stocks on Monday, November 24
• 1 Magnificent Canadian Stock Down 17% to Buy and Hold Forever
• TSX Today: What to Watch for in Stocks on Wednesday, November 19

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.