The Canadian small caps we’ve discovered have strong ROA within their industry, indicative of a well-managed company
SmallCapPower | September 19, 2018: The four Canadian small caps on our list today all have strong Return on Assets (ROA) in their underlying industry. Return on Assets is calculated as net income divided by the firm’s total assets and provides a useful method of comparing companies within an industry that may have different capital structures. Higher ROA also indicates that management is executing the company’s strategy effectively, an important consideration when making an investment decision.
Lucara Diamond Corp. (TSX:LUC) – $2.31
Mining
Lucara Diamond is a mining company engaged in the exploration and development of diamond properties in various parts of Africa. This includes a 100% stake in the Karowe mine in Botswana. The mine was commissioned in Q2 2012 and estimates total production to be in the range of 270,000 – 290,000 carats for 2018. The Company reported net income of US$19.7M for the quarter ended June 30, 2018, on US$64.5M of revenues. This is down from the same period last year as the average price per carat sold decreased from US$1,336 in 2017 to US$856 in 2018, and so the Company’s ROA may further increase if diamond prices rise.
- Market Cap: $916 Million
- 3 Month Returns: +2.2%
- Return on Assets (LTM): +13.1%
Information Services Corporation (TSX:ISV) – $16.70
Information Technology
Information Services Corporation is a Regina-based company providing registry and information management services for public data and records. The Company works with corporate clients as well as governments. Through its subsidiaries, the Company also offers financial and legal services, as well as a host of technology solutions. The Company works with clients globally, including in Canada, the U.S., Ireland, Serbia, and the U.A.E. The Company’s most recent quarterly filing reported net income of $5.2M on $31.1M of revenue, compared to $4.7M of net income for the same period last year.
- Market Cap: $291 Million
- 3 Month Returns: -5.0%
- Return on Assets (LTM): +10.0%
Golden Star Resources Ltd. (TSX:GSC) – $0.94
Mining
Golden Star Resources is a Toronto-based company in the business of exploring and mining gold. The Company’s two flagship projects include the Wassa gold mine in western Ghana, and the Prestea mine, also located in western Ghana. The Wassa mine is an underground operation expected to produce in excess of 137,000 oz. of gold in 2018, with operating costs per oz. projected at US$600-650. Meanwhile, the Prestea mine is expected to produce in excess of 93,000 oz. of gold in 2018, with operating costs per oz. ranging from US$740-880.
- Market Cap: $360 Million
- 3 Month Returns: +9.3%
- Return on Assets: +6.7%
Magellan Aerospace Corp. (TSX:MAL) – $17.70
Aerospace and Defense
Magellan Aerospace designs and manufactures aerospace components for corporate and military clients around the globe. These products include aeroengines, aerostructures, gas turbines for power plants, helicopter safety systems, as well as rocket systems for military use. Earlier in the year, the Company invested $625,000 in research to advance its space and satellite capabilities, partnering with University of Manitoba. The Company reported net income of $23.5M on $241M in revenue for the quarter ended June 30, 2018.
- Market Cap: $1.0 Billion
- 3 Month Returns: +5.0%
- Return on Assets: +6.9%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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