While the broader markets are trading near all-time highs, several Canadian stocks have underperformed over the last 12 months due to sluggish consumer spending, elevated interest rates, geopolitical tensions, and more.

Here are two such TSX stocks that have disappointed investors in 2024.

Toronto-Dominion Bank stock

The first TSX stock on my list is financial services giant Toronto-Dominion Bank (TSX:TD). Shares of TD Bank are down 30% from all-time highs due to a combination of weak results, regulatory issues, and suspension of growth targets.

In the fiscal fourth quarter (Q4) of 2024 (ended in October), TD Bank reported earnings per share of $1.97, down 15% from the year-ago period. Its net income totalled $3.64 billion in Q4, lower than consensus estimates of $4 billion.

Recently, TD Bank was slapped with a $3 billion fine as it violated anti-money laundering (AML) laws south of the border. Moreover, U.S. regulators imposed an asset cap on TD, forcing the bank to reduce its assets by 10% in the region.

These unexpected growth restrictions are likely to impact future earnings significantly, which means that TD suspended its medium-term financial targets, where it previously projected earnings per share (EPS) growth to be between 7% and 10% and a return on equity of over 16%.

Bay Street expects TD Bank to expand adjusted earnings from $7.81 per share in fiscal 2024 to $8.41 per share in 2026. So, priced at nine times forward earnings, TD Bank stock looks attractive, given it also pays shareholders a forward dividend yield of 5.4%.

TD Bank is among the largest companies in Canada and is too big to fail, which means the pullback allows you the opportunity to buy a quality stock at a lower multiple. Analysts remain bullish and expect TD stock to gain over 10% over the next 12 months. If we adjust for dividend payouts, cumulative returns would be closer to 16%.

Telus Digital stock

Down 88% from all-time highs, Telus Digital (TSX:TIXT), formerly Telus International, provides customer experience and digital business services that include mobility solutions, cloud contact centres, big data, platform transformation, and more.

Valued at a market cap of $1.1 billion, Telus Digital reported revenue of $658 million, down 0.8% year over year. The company has now reported a revenue decline for three consecutive quarters, raising concerns about its growth trajectory.

Earlier this year, Telus Digital attributed the slowdown in sales to reduced income from a leading social media company and reported an operating income of just $14 million in Q3, down from $59 million in the year-ago period. Additionally, its gross margins have narrowed from 17.7% to 14.4% over the last 12 months.

Telus is wrestling with competition and pricing pressures within the digital services segment, impacting its revenue streams and profitability. Several analysts have reduced earnings estimates for the TSX stock in 2024, leading to a lower multiple.

While the company has managed to offset a portion of this decline from growth in products powered by artificial intelligence capabilities, a competitive landscape has made it difficult for Telus Digital to sustain its top-line momentum.

Analysts expect Telus Digital to end 2024 with earnings per share of $0.42, down from $0.91 last year. Given consensus estimates, its earnings might improve to $0.6 per share in 2026.

Priced at 6.6 times forward earnings, Telus stock seems undervalued, but it will have to showcase an ability to return to steady revenue growth by the end of 2025.