The Canadian stocks we’ve discovered have plenty of capital to invest or to redistribute to shareholders
SmallCapPower | February 3, 2021: Companies that generate a high amount of free cash flow as a percentage of total capital are ones that have plenty of capital to invest or to redistribute to shareholders. Today we have identified three Canadian stocks with strong profitability, as measured by a return on capital higher than 10% over the past five years, and below-average valuations.
*Returns are based on closing stock prices as of February 2, 2021
Leon’s Furniture Limited (TSX:LNF) – $20.94
Leon’s Furniture operates several brands of department stores, including Leon’s, the Brick, the Brick Outlet, and the Brick Mattress Store. In total, the Company operates 189 stores across Canada. In addition, LNF supplies home appliances for commercial use, and offers repair services and insurance products. In November, Leon’s announced a 14.3% increase to its quarterly dividend as well as a $0.30 special dividend. The Company generates a notable 33.4% free cash flow as a percentage of total capital.
- Five-Year Return: 94%
Lassonde Industries Inc. (TSX:LAS.A) – $176.83
Lassonde Industries manufactures various ready-to-drink fruit and vegetable juices and drinks in Canada, the U.S., and globally. The Company sells its products in various packages under various trademarks, most notably the Fruité, Tropical Grove, Allen’s, Del Monte, and Oasis brands. Lassonde products end up in supermarkets, independent grocers, hotels, hospitals, and schools. Lassonde Industries has a five-year average return on capital of 14.1% and 18.1% free cash flow as a percentage of total capital.
- Five-Year Return: 23%
Canfor Corporation (TSX:CFP) – $24.93
Canfor is an integrated forest products company with interests in B.C., Alberta, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas, as well as in Sweden with its majority acquisition of Vida Group. The Company produces primarily softwood lumber and also owns a 54.8% interest in Canfor Pulp Products Inc., which is one of the largest global producers of market Northern Bleached Softwood Kraft Pulp and a leading producer of high-performance kraft paper. Canfor generates 15.1% free cash flow as a percentage of total capital.
- Five-Year Return: 70%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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