The Canadian small cap stocks on our list are extremely overvalued relative to their peers with high debt levels
SmallCapPower | May 15, 2017: Today we have identified three Canadian small cap stocks that could have a challenging year to say the least. These companies have some of the lowest earnings quality out of companies on Canadian exchanges, are extremely overvalued relative to their peers and have debt loads they may have trouble dealing with. Note that the relative value rank is done on a scale of 1-1,000 with 1 representing the worst possible value and 1,000 representing the best possible value.
Redline Communications Group Inc. (TSX: RDL) – $1.53
Wireless Telecommunications Services
Redline Communications Group Inc. is a Canada-based company, which develops and markets ruggedized wireless infrastructure solutions and wide-area wireless networks for a range of applications and locations. These solutions provide voice, data, video and machine-to-machine (M2M) communications in remote areas. The Company operates in four segments. The Energy/Digital Oilfields segment provides low-latency solutions to provide a communication blanket across oilfields that deliver M2M and personal communications. The Governments segment provides a range of solutions for M2M applications, including delivering video surveillance camera footage and highway and other infrastructure information. The Telecom Service segment delivers wireless broadband access to underserved locations. The Military segment provides private communications to support people and equipment in theater.
- Market Cap: $20,174,870
- Total Revenue (LTM): $20,174,870
- Debt to EBITDA: 14.06x
- YTD Price Change: 4.6%
- Relative Value Rank: 12
Canopy Growth Corp. (TSX: WEED) – $8.14
Pharmaceuticals
Canopy Growth Corporation, formerly Tweed Marijuana Inc., is a diversified cannabis company. The Company, through its subsidiaries Tweed Inc. (Tweed), Bedrocan Canada Inc. (Bedrocan) and Tweed Farms Inc. (Tweed Farms), is engaged in the business of producing and selling legal marijuana in the Canadian medical market. It is also focusing on producing and selling marijuana in the recreational market in Canada. Its core brands are Tweed and Bedrocan. Tweed is a licensed producer of medical marijuana. Tweed’s commercial license covers approximately 168,000 square feet of its Smiths Falls facility and allows Tweed to produce and sell approximately 3,540 kilograms of medical marijuana per year. Tweed’s built-out production capacity is over 10 climate controlled indoor growing rooms.
- Market Cap: $1,029,092,355
- Total Revenue (LTM): 22,955,468
- Debt to EBITDA: 10.35x
- YTD Price Change: -6.7%
- Relative Value Rank: 1
EcoSynthetix Inc. (TSX: ECO) – $2.58
Specialty Chemicals
EcoSynthetix Inc. (EcoSynthetix) is a renewable chemicals company engaged in the development of bio-based technologies as replacement solutions for synthetic, petrochemical-based adhesives and other related products in the United States, Europe, Middle East and Africa (EMEA), and Asia Pacific. Bio-based materials are used as inputs in industrial manufacturing for a range of end products. The Company operates through EcoSphere biolatex binders segment. EcoSphere biolatex binders is used by manufacturers within the coated paper and paperboard industry. It offers over two bio- based technology platforms that support application across industries, a biopolymer nanosphere technology that has scaled and validated, and a bio-based sugar macromer technology.
- Market Cap: $109,040,518
- Total Revenue (LTM): $13,915,040
- Debt to EBITDA: 10.37x
- YTD Price Change: 14.5%
- Relative Value Rank: 7
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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