While the Canadian stock market is near its all-time high, there are still opportunities for investors who take the time to dig deeper. Even in a market that seems expensive, some stocks are priced attractively for those willing to explore beyond the surface.

If you're holding excess savings that you don't need in the short term, stocks can offer higher long-term returns. Among them, dividend-paying stocks can provide steady income while also benefiting from potential price appreciation. One such stock that seems to be on sale right now is Premium Brands Holdings (TSX:PBH).

A long-term growth story with short-term challenges

Premium Brands Holdings, a packaged foods company, has been on a downward trajectory since late 2021. Over the last couple of months, it has dropped nearly 17%, extending a broader decline of over 40% from its peak several years ago. This presents an opportunity for investors who are willing to look beyond the volatility and focus on long-term potential.

In late 2021, Premium Brands' stock soared to about $136 per share as the company's adjusted earnings per share (EPS) grew by an impressive 47%. However, maintaining such rapid growth is challenging, and the company faced a slowdown in the following year, with EPS growth decelerating to just 8%. As a result, the stock saw a valuation drop, with its price-to-earnings (P/E) ratio shrinking from a peak of 32 to around 17 by late 2022. Currently trading just over $79 per share, the P/E ratio is now around 20, which is more in line with the company's historical levels.

Strong fundamentals with room for improvement

Despite the recent stock price decline, Premium Brands' fundamentals remain solid. In its most recent quarterly report, the company showed a 2.7% year-to-year increase in the year-to-date revenue, reaching $4.8 billion. More importantly, its adjusted EBITDA – a key measure of cash flow – rose 5.5%, expanding its EBITDA margin to 9.2%.

Earnings were up 6.3%, and EPS increased by 6.7%. However, adjusted EPS saw a decline of 7.9%, which might concern some investors. The trailing-12-month free cash flow decreased marginally by 1.1%, resulting in a payout ratio of 59%, indicating that the company is still able to comfortably support its dividend payments.

Premium Brands is also making strategic moves to free up cash, including the sale of a vacant property for $26 million and plans to sell and lease back a production facility for $92.5 million. This is part of a broader effort to streamline operations and fund future growth.

A promising future and strong management commitment

Looking ahead, much of Premium Brands' growth depends on its acquisition strategy. The company's chief executive officer (CEO) highlighted that the acquisition pipeline remains strong, with several transactions expected to close this quarter. Premium Brands is targeting $10 billion in sales and a minimum adjusted EBITDA margin of 10% by 2027 – for example, driven by its focus on higher-growth categories like protein and baked goods.

Management's confidence in the future is reflected in its actions: last month, four of the company's directors, including the CEO and chairman, purchased (directly, indirectly, or under their direction) $5.4 million worth of common stock at an average price of $77.82 per share. This shows that insiders believe the stock is undervalued at current prices.

Additionally, the consumer staples stock offers an attractive dividend yield of nearly 4.3%, with a 10-year dividend growth rate of 9.6%. This makes it an appealing option for dividend-seeking investors looking for both income and long-term growth.

The Foolish investor takeaway

Premium Brands Holdings might be down, but it's far from out. With a solid business model, strong management, and promising growth prospects, this stock could be a bargain at current prices. If you're looking for a dividend stock with upside potential, now might be the perfect time to explore potentially adding Premium Brands to your diversified portfolio.