Falling concerns about inflation, helped by easing oil prices and a possible reopening of the Strait of Hormuz, are taking some pressure off bond yields and interest rate expectations. That gives investors a window in which cash rich businesses trading below estimated fair value can attract fresh attention. This article highlights three stocks from the Undervalued Stocks Based On Cash Flows screener that may offer that kind of opportunity.
The stocks covered below are a small sample of the opportunities, since the full screen surfaced 27 more companies with similarly compelling cash flow stories that are not covered in this article. To go deeper into the full list, identify your own shortlist and analyze each company on cash flows and valuation, head straight into the Undervalued Stocks Based On Cash Flows screener.
Kraken Robotics (TSXV:PNG)
Kraken Robotics is a marine technology company that supplies sonar and optical sensors, subsea batteries and underwater robotic systems to defense and offshore energy customers, with its Synthetic Aperture Sonar and KATFISH towed SAS lines closely tied to the cash flow focused screener theme. The business is split between Products, which generated about CA$66 million, and Services, which contributed roughly CA$41 million, giving investors a mix of equipment sales and follow on survey work. Kraken Robotics currently has a market cap of about CA$1.8b.
Investors looking at Kraken Robotics are focused on whether its SAS and KATFISH systems can convert defense and offshore energy interest into durable cash flows. Recent guidance updates and the Covelya acquisition indicate a larger order book and more recurring survey and monitoring work, while the company continues to work through losses and the challenge of integrating new assets at scale. The stock also screens as trading below an SWS cash flow based fair value estimate. The central question is whether higher margin products and services can make that gap appear too wide in hindsight.
Kraken Robotics’ cash flow story is evolving fast, but the real question is how those sonar and KATFISH contracts compare with its current valuation. Get the full picture in the 2 key rewards and 1 important warning sign
Celestica (TSX:CLS)
Celestica is a Toronto based electronics manufacturing and supply chain specialist that designs, builds and supports hardware platforms for original equipment makers, cloud providers and hyperscalers. Its long term infrastructure and AI rack programs align closely with the undervalued cash flow theme. Revenue is spread across Advanced Technology Solutions, which generated about US$3.3b, and the much larger Connectivity & Cloud Solutions segment at roughly US$12.3b, where those contract backed cloud and hyperscaler services sit. Celestica currently carries a market cap of about CA$48.7b.
Investors watching Celestica are weighing the appeal of contract backed AI and cloud infrastructure work, including its Helios rack scale AI platform collaboration with AMD, against concentrated exposure to a handful of hyperscaler customers. The stock screens as trading below an SWS cash flow based fair value estimate. Recent earnings beats, raised 2026 guidance and a large equity raise to support AI programs point to rising capital needs alongside stronger revenue visibility. For investors who can tolerate customer and funding concentration risk, the mix of high growth CCS exposure and improving margins could make Celestica a compelling candidate for deeper cash flow and valuation work.
Celestica’s AI rack and cloud programs are accelerating, yet most attention stays on the headline contracts rather than the full cash flow picture. See how the analysis report for Celestica could reframe the risk reward story.
Constellation Software (TSX:CSU)
Constellation Software acquires, builds and manages vertical market software businesses that provide mission critical tools and services to highly specific industries, from public safety to healthcare. These subsidiaries generate recurring revenue through software licensing, maintenance, hosted SaaS and services, with all reported revenue of about US$12.6b classified under Software & Programming, which fits cleanly with a cash flow focused undervaluation theme. Constellation Software currently has a market cap of roughly CA$65.2b.
Constellation Software may be worth a close look if you want exposure to a large portfolio of recurring revenue software businesses that collectively contribute to a strong free cash flow profile. The stock currently screens as trading below the Simply Wall St DCF estimate of fair value, with a P/E that is higher than many software peers. Earnings and revenue beat expectations in Q2 2026 and management continues to emphasize return on invested capital and operating cash flow as the key filters for new acquisitions. The trade off is meaningful leverage and some concern about softer organic growth as AI and customer churn reshape parts of the portfolio. This makes it especially important to understand the current discount before taking a position.
Constellation Software’s recurring cash flows and higher P/E suggest that investors may be missing how the portfolio’s risks and rewards really stack up. Review the full 4 key rewards and 1 important warning sign to see what could shift sentiment next
Seeking Alternatives Before Everyone Else
Fresh ideas often move first. By the time the crowd notices the breakout and momentum, the best entry points can be gone. Scan these under the radar picks and consider them before they become widely followed.
- Spot strong uptrends early by reviewing the 74 profitable AI stocks that aren't just burning cash that already generate cash instead of only burning it, before that story gets fully priced in.
- Target durable income streams with the 4 dividend fortresses that focus on higher yielding companies while yields are still flying under the radar for now.
- Catch potential turnaround stories before sentiment flips by checking the list of solid balance sheet and fundamentals (12 results) and see which resilient businesses may be preparing for their next move.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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