Hot Picks: Industrials stocks trade at discount despite growth outlook

Industrial sector stocks are trading at discounted valuations despite improving fundamentals, including stronger growth, margins and balance sheets.

BNN Bloomberg spoke with Maxim Sytchev, managing director of industrial products at National Bank, about three companies he says are positioned for upside as execution improves and demand remains resilient.

Key Takeaways

• Industrial companies are trading below peer multiples despite improving earnings growth and stronger operational performance.
• Demand is supported by long-term trends including supply chain localization, infrastructure investment and energy security.
• Nuclear, defence and data centre-related activity are emerging as key drivers of sustained industrial growth.
• Margin expansion and deleveraging are creating additional upside through improved profitability and capital flexibility.
• Defensive sectors with pricing power and M&A potential offer stability alongside growth in uncertain markets.

Read the full transcript below:

LINDSAY: It’s time for Hot Picks, and today we are zeroing in on three plays in the industrial sector. Our next guest says his three picks are trading at a discount, creating strong valuation-driven upside. For more, I’m joined now by Maxim Sytchev, managing director of industrial products at National Bank. Good morning. It’s good to have you.

MAXIM: Likewise. Thank you so much.

LINDSAY: Let’s begin right away. ATS Corporation is your first pick today. What is it that you like about this company?

MAXIM: Yeah, it’s a very interesting thesis because we live in a very uncertain environment right now, and I’m trying to focus on names that are basically decoupled from general GDP trends. Given all the geopolitical uncertainty, supply chain localization is benefiting automation companies.

What’s critical here is that it’s not just general manufacturing automation. This is really focused on health care, food and nuclear, which are verticals that are growing in a secular fashion. Given the fact that the company has moved past the electric vehicle challenges from a few years ago, we’re now facing much better EPS prospects — about 19 per cent EPS growth this fiscal year.

We have a new management team that is really focused on margin improvements, and with a much more reasonable balance sheet, we expect the company to embark back on the M&A trail. When you combine all these factors, and with the industrial space performing relatively well compared to other sectors, this is one of the few industrials that has started to work this year.

The stock is up 12 per cent year to date, but we expect materially more upside going forward. This remains our top idea in my coverage universe.

LINDSAY: And you say it’s a global leader in health care with increased optionality around nuclear, especially if new builds start to materialize in both Canada and the U.S. Is that one of the main risks for the company right now if those new builds don’t materialize as quickly as expected?

MAXIM: I don’t think there’s any real risk from that perspective. The bulk of what they do in nuclear is refurbishment work for CANDU reactors, so those projects are essentially locked in.

From a regulatory perspective, they have to refurbish these assets. Given the current push — especially with energy security concerns — there’s actually a bigger impetus to develop nuclear energy in North America. So more than anything, I think investors should be more excited about nuclear than concerned.

LINDSAY: Your next pick is Bird Construction. What is it that you like about this one?

MAXIM: Again, the government in Canada is focused on nation-building programs and projects as the country looks to strengthen its economy. What’s interesting is that Bird derives about 10 per cent of its revenue from nuclear, which is a very strong market right now. Defence is another roughly 10 per cent.

The company recently acquired capabilities that allow it to participate in larger transit projects and ports. Infrastructure development will be a key theme. It also has a large presence in industrial markets, and with base metals where they are, plus oil and gas developments and deferred projects from 2025 now resuming in 2026 — including projects tied to Dow — there’s a strong pipeline.

There are also LNG projects coming forward. This is one of the few names trading at roughly half the multiple of U.S. peers. I also believe the management team is one of the most underrated in my coverage universe.

When you combine these visible secular growth drivers, which don’t require significant government decision-making on capital allocation, this is a name that can continue to grind higher, even though the stock is already up 22 per cent year to date.

LINDSAY: Lastly, GFL Environmental is another one you’re picking today. Why is that?

MAXIM: It’s a very defensive name. Waste management is a defensive sector. We picked up coverage of this name at the end of January.

One of the interesting things is that over the last 10 years, there’s been a significant share price dislocation between GFL and the TSX. On a last-12-month basis, GFL is down about 10 per cent, while the TSX is up close to 30 per cent, which is very unusual.

I think the market over-extrapolated some pricing concerns. Expectations are now more normalized. Looking forward, we’re talking about roughly five per cent organic growth driven by pricing, with volumes expected to pick up.

Critically, leverage is now at a more manageable level, which allows the company to resume M&A, most likely in the U.S. When you combine defensive characteristics — and waste typically outperforms during periods of market dislocation — with improving margins and growth, the opportunity becomes clear.

The shares are currently flat, and I think investors are missing the opportunity. This is a name you can own for secular growth. The company has also redomiciled its headquarters to the U.S., which could support inclusion in broader indices and improve capital flows.

We’re looking at roughly 12 to 15 per cent compound annual growth in EPS for a company still trading at a discount to U.S. peers. I’m extremely bullish on the story at current valuation.

LINDSAY: The company moved its headquarters earlier this year from Ontario to Florida. What does that signal in terms of outlook and priorities?

MAXIM: The Canada-U.S. footprint remains unchanged. Management continues to operate across both markets. The primary reason for moving the headquarters to the U.S. was to gain better access to capital markets and index inclusion.

From a flow perspective, that should be a positive for the shares rather than a negative.

LINDSAY: We’ll leave it there. Interesting discussion. Maxim Sytchev, managing director of industrial products at National Bank. Thanks for joining us.

MAXIM: My pleasure.

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This BNN Bloomberg summary and transcript of the March 20, 2026 interview with Maxim Sytchev are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.