The highly profitable Canadian small caps on our list are potentially undervalued
SmallCapPower | May 8, 2017: Today we have identified five Canadian small caps that are trading below 5x EV/EBITDA and have an average ROE of greater than 15% over the past five years. Over the past 20 years the companies with the lowest 10% EV/EBITDA multiples have returned 2,227% compared to 500% for the S&P 500. Some experts call it the “Golden Ratio” and consider it the best metric for finding value.
Bird Construction Inc. (TSX: BDT) – $9.46
Construction & Engineering
Bird Construction Inc. operates as a general contractor in the Canadian construction market. The Company focuses on projects in the industrial, commercial and institutional sectors of the general contracting industry. It operates through the general contracting sector of the construction industry segment. In the industrial sector, it constructs industrial buildings and performs civil construction operations, including site preparation, concrete foundations, underground piping and earthwork for clients operating in the oil and gas, and mining businesses. In the commercial sector, its operations include construction and renovation of shopping malls, big box stores, office buildings, and selected condominiums and apartments.
- Market Cap: $402,209,429
- Total Revenue (LTM): $1,589,868,000
- Debt to Equity (LTM): 0.07
- YTD Price Change: 4.4%
- EV/EBITDA: 3.52x
- Avg 5 Yr ROE: 18.5%
High Arctic Energy Services Inc. (TSX: HWO) – $4.90
Oil Related Services and Equipment
High Arctic Energy Services Inc. is a Canada-based company, which focuses on providing contract drilling, completion services, equipment rental and other oilfield services to the oil and gas industry. The Company operates through providing oilfield services to customers in Canada and Papua New Guinea (PNG) segment. In PNG, the product line consists of contract drilling services, workover services and equipment rental including rig mats, cranes and oilfield related equipment. In Canada, the product line consists primarily of snubbing services and the supply of Cryogenic Liquid Nitrogen Pumping Services and equipment rentals.
- Market Cap: $260,905,591
- Total Revenue (LTM): $208,000,000
- Debt to Equity (LTM): 0.11
- YTD Price Change: -7.5%
- EV/EBITDA: 3.65x
- Avg 5 Yr ROE: 25.3%
Lucara Diamond Corp. (TSX: LUC) – $3.21
Non-Gold Precious Metals & Minerals
Lucara Diamond Corp. is a diamond mining company focused in Africa. The Company’s business consists of the acquisition, exploration, development and operation of diamond properties. The Company holds a 100% interest in the Karowe Mine and three prospecting licenses located in Botswana. The Karowe Mine is located in north-central Botswana and is part of the Orapa/Letlhakane Kimberlite district. The kimberlite at the Karowe Mine (the AK6 Kimberlite) consists of three distinct intrusions, which form a contiguous tri-lobate kimberlite pipe.
- Market Cap: $1,227,651,663
- Total Revenue (LTM): $396,810,838
- Debt to Equity (LTM): 0.00
- YTD Price Change: 5.6%
- EV/EBITDA: 4.53x
- Avg 5 Yr ROE: 20.7%
Mandalay Resources Corp. (TSX: MND) – $0.54
Diversified Mining
Mandalay Resources Corporation is a gold, silver and antimony producer engaged in mining and related activities, including acquisition, exploration, extraction, processing and reclamation. The Company’s segments include Australia, Chile, Sweden and Canada. The Company’s producing assets are its Costerfield gold-antimony mine in Victoria, Australia; its Cerro Bayo silver-gold mine in Patagonia, Chile; and its Bjorkdal gold mine in northern Sweden. The Company focuses on Challacollo silver-gold project near Iquique, Chile.
- Market Cap: $243,633,964
- Total Revenue (LTM): $249,184,249
- Debt to Equity (LTM): 0.29
- YTD Price Change: -32.5%
- EV/EBITDA: 3.63x
- Avg 5 Yr ROE: 15.4%
Spin Master Corp. (TSX: TOY) – $40.00
Toys & Children’s Products
Spin Master Corp., formerly SML Investments Inc., is a Canada-based children’s entertainment company. The Company, through Spin Master Ltd. and its subsidiaries, is engaged in creating, designing, manufacturing and marketing a diversified portfolio of toys, games, products and entertainment properties. Its portfolio includes children’s products, brands and entertainment properties, which are grouped into four product categories, including Activities, Games & Puzzles and Fun Furniture; Remote Control and Interactive Characters; Boys Action and High-Tech Construction, and Pre-School and Girls.
- Market Cap: $975,633,800
- Total Revenue (LTM): $1,550,431,722
- Debt to Equity (LTM): 0.49
- YTD Price Change: 24.3%
- EV/EBITDA: 4.25x
- Avg 5 Yr ROE: 74.5%
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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