Investors have been rotating out of the resources sector into the previously out-of-favour industrials sector over the past couple of months, the team at Canaccord Genuity says.
And while some of these stocks have rebounded strongly, "in most cases this has followed a dramatic de-rating through the first half of CY26, leaving many companies still trading at compelling discounts to historical valuations'', they said.
CG has identified three companies that they believe continue to offer an attractive combination of earnings growth and valuation upside despite the recent rally.
Let's see who they like.
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Aristocrat Leisure Ltd (ASX: ALL)
CG said in its research note that Aristocrat fell more than 20% in early CY26, "as a series of weaker operating trends weighed on sentiment".
They added:
While headline earnings had remained broadly in line with expectations, momentum weakened across several key drivers, including softer gaming operations (notably net adds) and a miss in Interactive, which together drove a year-long downgrade cycle in consensus estimates, contributing to the stock's underperformance.
CG said the first-half results steadied the ship, and there had been a recovery in sentiment towards the company and its valuation multiple.
They added:
Although, despite rebounding ~40% from its CY26 lows, Aristocrat remains compelling from a valuation perspective. The stock trades on a forward PE of ~22x, only modestly above its five- and ten-year average multiples. Relative to the ASX All Industrials Index, Aristocrat trades on a 12% forward PE premium, below its historical average premium of 22%.
CG said in their view the stock warranted a greater premium, supported by a number of factors, including a sustainable mid-teens earnings per share growth outlook.
Telix Pharmaceuticals Ltd (ASX: TLX)
CG said this biotechnology company was "one of the most attractive buying opportunities" among the stocks they screened.
They said the company was sharply sold off through 2025 following a string of negative pipeline developments, with the share price remaining under pressure into this year.
But the news flow has been positive this year, CG said, with progress on a number of fronts.
They added:
Telix's recent 2Q26 update reinforced the strength of its Precision Medicine franchise which continues to deliver share gains, with a +10% beat to consensus revenue, which follows a similar sized beat in the prior quarter. In combination, this news flow has helped to rebuild confidence in Telix's execution – and the long-term valuation upside potential within its development assets – supporting a strong re-rating, with the stock currently >70% above its CY26 lows.
CG said, despite the already solid gains, the stock still offered "material valuation upside" from current levels.
TechnologyOne Ltd (ASX: TNE)
This company was caught up in the indiscriminate technology sell-off earlier this year, CG said, "however, there has been no tangible evidence of any deterioration in the company's underlying fundamentals''.
The broker added:
While the stock has re-rated sharply to trade back on a forward P/E of 51x, broadly in line with its five-year average, we continue to see scope for multiple expansion as evidence builds that the business is on the right side of the AI-led structural shift, supported by continued new customer growth and healthy PBT expansion. With the stock having traded as high as 83x in mid-2025, before AI disruption concerns emerged, we believe there remains a compelling case for further valuation upside.
