Recent market volatility has intensified, with unclear interest rate prospects, slowing economic growth expectations, and persistent geopolitical tensions all making investors more cautious in their decision-making. Historical experience suggests, however, that periods of market pessimism often provide rare windows for positioning in quality companies—by the time conditions become clear, share prices typically have already rallied sharply, leaving few undervalued opportunities. Currently, GFL Environmental (TSX:GFL) and Canadian Apartment Properties REIT (TSX:CAR.UN) are trading at low valuations and are seen as two TSX stocks worth watching ahead of a recovery.
GFL Environmental is a leading North American waste management company with a highly defensive business profile. The waste management industry inherently features recurring revenue, strong pricing power, and highly predictable cash flows, enabling the company to remain stable through economic cycles. At the same time, GFL has expanded over the years through acquisitions, rapidly achieving synergies and cost savings by integrating acquired operations.
Despite continued operational strength, GFL’s share price has recently come under significant pressure. The stock currently trades at approximately CAD 49 per share, far below its 52-week high of over CAD 70. Market concerns are chiefly centered on the company’s rising debt levels and recent acquisition activities—including large equity issuances needed for financing, an already elevated leverage ratio, and uncertainty around regulatory approvals. Analysts, however, point out that short-term disruptions do not easily justify a decline of more than 25% from a year ago. On a valuation basis, GFL’s forward EV/EBITDA multiple stands at just 11.4x, notably below its five-year average of 13.3x. For long-term investors seeking quality names, GFL currently looks more like a temporary discount on a quality company due to short-term execution-related concerns.
Canadian Apartment Properties REIT is one of Canada’s largest and strongest residential rental property companies, offering investors a convenient channel into the Canadian real estate market. In recent years, persistently rising interest rates have weighed on valuations across the entire REIT sector, while expectations of slowing immigration growth have also sparked discussions about long-term rental demand prospects. With market sentiment turning pessimistic, CAPREIT’s share price has yet to fully recover.
This backdrop, however, has provided investors with an opportunity to acquire quality assets at reasonable valuations. CAPREIT currently trades at a forward price-to-adjusted funds from operations (P/AFFO) ratio of just 15.8x, well below its five-year average of 21.8x and its ten-year average of 23.4x. On the dividend front, the current yield is approximately 4.5%, significantly higher than its five-year average forward yield of 3.3% and its ten-year average of 3.2%, making the return profile more attractive than in the past.
In summary, GFL Environmental and Canadian Apartment Properties REIT operate in two defensive industries—waste management and residential rental real estate, respectively—with solid fundamentals, yet they are simultaneously trading at valuation troughs for different reasons related to interest rates, debt, and policy expectations. Before market sentiment turns more positive, the discounted state of such quality companies may offer a noteworthy window for long-term investors. Of course, any investment decision should still be made with due consideration of individual risk tolerance and evolving market conditions.
