The Canadian small caps we’ve discovered have seen their net income grow faster than their revenue over the past five years
SmallCapPower | June 13, 2019: Companies are always looking to become more efficient in order to gain an edge over their competitors. One way that this can be measured is by looking at a company’s net income growth relative to their revenue growth. If net income growth is greater than a company’s revenue growth, it could mean that the company is cutting back its expenses and/or negotiating better terms with suppliers to lower cost of goods sold, making the companies more efficient. After taking a deeper dive into their financial statements to ensure they were becoming more efficient, we identified four Canadian small caps listed on the TSX that have realized greater net income growth than revenue growth during the past five years.
*Share prices as at close Tuesday, June 11, 2019, data obtained from S&P Capital IQ
Waterloo Brewing Ltd. (TSX:WBR) – $3.61
Brewers
Waterloo Brewing is a brewery based in Kitchener, Ontario. The Company produces, sells, markets, and distributes packaged & draft premium beer under the Waterloo brand name, and value beer under the Laker and Red Cap brands primarily in Ontario, Atlantic Canada, Western Canada, and the United States. WBR is reportedly the largest Canadian-owned brewer in the province, and it was also Ontario’s first modern craft brewery. On June 12, Waterloo Brewing Ltd changed its name from Brick Brewing Company Ltd.
- Market Capitalization: $127.7M
- YTD Returns: 26.7%
- 90 Day Average Trading Volume: 10,000
- Net Income, 5 Year CAGR: 63%
- Total Revenues, 5 Year CAGR: 8.75%
NFI Group Inc. (TSX:NFI) – $36.27
Construction Machinery and Heavy Trucks
Headquartered in Winnipeg, Canada, NFI Group is a leading independent global bus manufacturer, providing a variety of mass transportation solutions under brands: New Flyer, Alexander Dennis Limited, Plaxton, MCI, ARBOX, and NFI parts. On May 28, NFI acquired Alexander Dennis Limited (ADL), one of the world’s leading independent bus and coach manufacturers, for approximately US$405M, representing an implied purchase multiple of 7.3x ADL’s F2018 adj. EBITDA.
- Market Capitalization: $2.2B
- YTD Returns: 8.6%
- 90 Day Average Trading Volume: 300,000
- Net Income, 5 Year CAGR: 38.4%
- Total Revenues, 5 Year CAGR: 14.4%
Cargojet Inc. (TSX:CJT) – $84.92
Air Freight and Logistics
Cargojet provides time sensitive overnight air cargo services in Canada. Its air cargo business activities include operation of domestic overnight air cargo co-load network between 14 cities in Canada, as well as provision of dedicated aircraft to customers. CJT also operates scheduled international routes for various cargo customers between the U.S. and Bermuda, between Canada and Germany, and between Canada, Columbia, and Peru. On May 14, the Board of Directors of Cargojet declared a cash dividend of $0.2340 (1.1% annual dividend yield) per common voting share and variable voting share for the period from April 1, 2019 to June 30, 2019.
- Market Capitalization: $1.1B
- YTD Returns: 20.42%
- 90 Day Average Trading Volume: 50,000
- Net Income, 5 Year CAGR: 48.6%
- Total Revenues, 5 Year CAGR: 21.2%
Tucows Inc. (TSX:TC) – $80.19
Internet Services and Infrastructure
Tucows provides network access, domain name registration, email, mobile telephone services, and other Internet services in Canada, the United States, and Germany. The Company provides these services primarily through an Internet-based distribution network of Internet Service Providers, web hosting companies, and other providers of Internet services to end-users. The Company operates in two segments: 1) Network Access Services, which includes mobile & fixed Internet access services, Internet hosting, and network consulting services; and 2) Domain Services, which includes wholesale & retail domain name registration services and portfolio services.
- Market Capitalization: $857.2M
- YTD Returns: -2.4%
- 90 Day Average Trading Volume: 90,000
- Net Income, 5 Year CAGR: 28.7%
- Total Revenues, 5 Year CAGR: 19.6%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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