The Canadian small caps on our list may be overpriced and susceptible to a stock price correction
SmallCapPower | July 21, 2017: Price to Earnings to Growth ratio (PEG) is a valuation metric that factors in a company’s expected earnings growth. Typically, anything over 1 means that the company’s expected growth has been more than factored into its stock price. That being said, we have identified five Canadian small caps with large PEG ratios, meaning they will have to exceed their growth expectations in order to justify their current stock price.
Transcontinental Inc. (TSX: TCL.A) – $25.30
Commercial Printing Services
Transcontinental Inc. is a printing company with operations in print, flexible packaging, publishing and digital media, both in Canada and the United States. The Company’s segments include the Printing and Packaging Sector, and the Media Sector. The Printing and Packaging Sector includes the manufacturing activities of the Company, and generates revenues from various activities, such as the printing of retail flyers, magazines, newspapers, color books, personalized and mass marketing products, and the production of flexible packaging solutions in Canada and the United States. The Media Sector generates revenues through print and digital publishing products, in French and English, of various types, such as newspapers, educational books, specialized publications for professionals, retail promotional content, mass and personalized marketing, mobile and interactive applications, and geotargeted door-to-door and digital distribution services.
- Market Cap: $1,961,012,538
- EPS (LTM): $2.6
- Forward PEG: 5.1x
Acadian Timber Corp. (TSX: ADN) – $18.65
Forest & Wood Products
Acadian Timber Corp. is a Canada-based supplier of primary forest products in Eastern Canada and the Northeastern United States. The Company owns and manages approximately 761,000 acres of freehold timberlands in New Brunswick (New Brunswick Timberlands), approximately 299,000 acres of freehold timberlands in Maine (Maine Timberlands) and provides management services relating to approximately 1.3 million acres of Crown licensed timberlands. The Company operates through two segments: NB Timberlands and Maine Timberlands. It also owns and operates a forest nursery in Second Falls, New Brunswick. The Company’s products include softwood and hardwood saw logs, pulpwood and biomass by-products sold to approximately 100 regional customers.
- Market Cap: $312,037,178
- EPS (LTM): $1.0
- Forward PEG: 3.7x
SunOpta Inc. (TSX: SOY) – $12.18
Food Processing
SunOpta Inc is a Canada-based company, which operates businesses focused on a healthy products portfolio. It operates through the following segments: Global Ingredients and Consumer Products. The Global Ingredients segment aggregates its North American and international raw material sourcing and supply operating segments focused on the procurement, processing and sale of specialty and organic grains, seeds, fruits, grain- and cocoa-based ingredients, and other commodities. The Consumer Products segment provides healthy and organic food products that are consumer-packaged to retailers, foodservice distributors and food manufacturers with a range of branded and private label products.
- Market Cap: $1,047,616,245
- EPS (LTM): $0.1
- Forward PEG: 4.1x
Wajax Corp. (TSX: WJX) – $23.89
Heavy Machinery & Vehicles
Wajax Corp is a Canada-based distributor engaged in the sale and service support of mobile equipment, power systems and industrial components. The Company’s Equipment business is engaged in distribution, rental, modification and servicing of mobile equipment from manufacturers. Its Power Systems business is engaged in distribution, sales, service of heavy-duty engines, transmissions, and power generation product sales, service, and rentals across Canada. Its Industrial Components business is engaged in the distribution, servicing, engineering, custom design and assembly of industrial components for in-plant customers and original equipment manufacturers. The Company operates through a network of approximately 120 branches in Canada in over three businesses.
- Market Cap: $478,440,682
- EPS (LTM): $1.34
- Forward PEG: 2.4x
Valener Inc. (TSX: VNR) – $21.98
Natural Gas Utilities
Valener Inc. is a Canada-based energy company that holds interests in Gaz Metro Limited Partnership (Gaz Metro), whose core operations are natural gas distribution in Quebec and Vermont, as well as electricity distribution in Vermont. The Company also owns indirect interests in wind farms through its subsidiaries, Valener Eole Inc. and Valener Eole 4 Inc., which have approximately 154 turbines and an installed capacity of 340 megawatts. In Quebec, Gaz Metro has a network of over 10,000 kilometers of underground pipelines serving over 300 municipalities and 200,000 customers. In Vermont, Gaz Metro produces and transports electricity, and distributes electricity and natural gas to over 310,000 customers. Gaz Metro is involved in the development and operation of energy projects, including natural gas as fuel and liquefied natural gas as a replacement to other emission-producing energies, the production of wind power, and the development of biomethane.
- Market Cap: $853,089,035
- EPS (LTM): $1.4
- Forward PEG: 4.4x
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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