Strong financial fundamentals + industry growth = success for the profitable small cap stocks on our list
SmallCapPower | January 16, 2017: Today we return to the fundamentals and examine financially sound investments with a profitable track record. Our first filter is analyst expected Return on Equity (ROE), a metric used to assess a stock’s profitability as a function of shareholders’ invested capital. Next, we confirmed that these companies would be able to easily service debt obligations by ensuring their respected current ratios (current assets divided by current liabilities) were above 2. In the end, we identified five profitable small cap stocks trading in Canada that not only meet this criteria, but also have significant expected returns of 20%+ for investors in 2017.
Lucara Diamond Corp. (TSX: LUC) – $3.09
Non-Gold Precious Metals & Minerals
Lucara Diamond Corp. is a diamond mining company focused on Africa. The Company’s primary segments are based on individual diamond properties, being the Karowe Mine and Corporate. The principal assets of the Company and the focus of the Company’s operations, development and exploration activities reside in Botswana. Its land holdings include Karowe Diamond License, Prospecting License No. 371/2014 and Prospecting License No. 367/2014.
- Market Cap: $1,178.09 million
- Current Ratio (FY0): 7.03
- Expected ROE (FY1): 40.8%
- EPS Reported (FY0, CAD): $0.28
Computer Modelling Group Ltd. (TSX: CMG) – $9.23
Computer Modelling Group Ltd. (CMG) is a Canada-based computer software technology company serving the oil and gas industry. The Company operates through the development and licensing of its reservoir simulation software segment. It is a supplier of process reservoir modelling software with a blue-chip customer base of international oil companies and technology centers in approximately 60 countries.
- Market Cap: $732 million
- Current Ratio (FY0): 2.34
- Expected ROE (FY1): 37.6%
- EPS Reported (FY0, CAD): $0.32
Intertape Polymer Group Inc. (TSX: ITP) – $23.81
Non-Paper Containers & Packaging
Intertape Polymer Group Inc is a Canada-based company, which operates in the specialty packaging industry in North America. It develops, manufactures and sells a range of paper and film-based pressure sensitive and water activated tapes, polyethylene and specialized polyolefin packaging films, woven coated fabrics and complementary packaging systems for industrial and retail use. Its products consist of carton sealing tapes, including pressure sensitive and water-activated tapes; industrial and performance specialty tapes, including masking, duct, electrical and reinforced filament tapes; shrink film; stretch wrap; lumberwrap, structure fabrics and geomembrane fabrics, and non-manufactured flexible intermediate bulk containers.
- Market Cap: $1,406 million
- Current Ratio (FY0): 2.45
- Expected ROE (FY1): 25.8%
- EPS Reported (FY0, CAD): $1.24
Evertz Technologies Ltd. (TSX: ET) – $16.93
Communications & Networking
Evertz Technologies Limited is an equipment provider to the television broadcast telecommunications and media industries. The Company designs, manufactures and markets video and audio infrastructure equipment for the production, post-production and transmission of television content. Its solutions are purchased by content creators, broadcasters, specialty channels and television service providers to support their multi-channel digital and high definition television (HDTV) and high bandwidth low latency Internet Protocol (IP) network environments, and by telecommunications and new-media companies.
- Market Cap: $1,276 million
- Current Ratio (FY0): 5.36
- Expected ROE (FY1): 23.8%
- EPS Reported (FY0, CAD): $0.94
Pollard Banknote Ltd. (TSX: PBL) – $8.10
Casinos & Gaming
Pollard Banknote Limited (Pollard) is a provider of products and services to the lottery and charitable gaming industries across the world. The Company produces and provides a line of instant tickets and lottery services, including licensed products, distribution, SureTrack lottery management system, retail telephone selling (telsell), marketing, iLottery, interactive gaming, Social Instants, retail management services and instant ticket vending machines. In addition, Pollard’s charitable gaming product line includes pull-tab (or breakopen) tickets, bingo paper, pull-tab vending machines and ancillary products, such as pull-tab counting machines.
- Market Cap: $191 million
- Current Ratio (FY0): 2.61
- Expected ROE (FY1): 21.5%
- EPS Reported (FY0, CAD): $0.32