The Canadian stocks we have identified have stronger operating cash flow to total liabilities ratios compared with their peer group
SmallCapPower | May 31, 2019: Cash flow to total liabilities ratio determines the number of times total liabilities can be paid off from net cash flow from operations. The higher the ratio, the better, as it is an important measure of a company’s solvency (the ability pay off its short-term and long-term obligations). Today we have discovered four Canadian stocks that have sufficient operating cash flow to cover their total liabilities. For reference, the selected companies were chosen from a list of 350 TSX listed companies that had an average ratio of 0.01x.
*Share prices as at close May 29, 2019, data obtained from S&P Capital IQ
Vecima Networks Inc. (TSX:VCM) – $9.24
Communications Equipment
Vecima Networks focuses on creating integrated hardware and scalable software solutions for broadband access, content delivery and telematics. Vecima’s technologies offer storage, and enable high-capacity broadband network access, and simplify data analytics. Vecima acquired Concurrent Computer Corporation, a business that designs advanced applications that assist in storing, protecting, transforming important media assets. On April 10, 2019, the Company announced that MediaScaleX//StorageTM software had made further advancement in becoming a cutting-edge Media Application Platform with the new release of its software-defined, hybrid object storage system. This offers high-end video application, time-shifted TV streaming, and Just-in-Time Packaging, among other features. On May 9, 2019, the Company reported Q3/19 results: revenue was $20.3M, which slightly missed analysts’ estimates of $21.8M.
- Market Cap: $206.6 M
- Cash from Operations FY2018: $21 M
- Total Liabilities FY2018: $20.8 M
- Cash from Operations/Total Liabilities: 1.01x
Winpak Ltd. (TSX:WPK) – $43.86
Containers and Packaging
Winpak operates 10 production facilities in Canada, the U.S. and Mexico. Additionally, the Company has a strategic alliance with Wipak, a European manufacturer of packaging materials, which allows Winpak to reach global customers at reduced costs. Winpak offers three unique packaging technologies: 1) rigid packaging and flexible lidding; 2) flexible packaging; and 3) packaging machinery. The Company’s products are used in the Food & Beverage, Industrial, Health Care and Packaging Machinery markets. On April 23, 2019, the Company released Q1/19 results, highlighting revenue of $224 M, which increased 1.1% QoQ.
- Market Cap: $2,850.9 M
- Cash from Operations FY2018: $130.0 M
- Total Liabilities FY2018: $141.0 M
- Cash from Operations/Total Liabilities: 0.92x
Real Matters Inc. (TSX:REAL) – $6.45
Internet and Direct Marketing and Retail
Real Matters offers network management services for mortgage lenders and insurance companies. The Company’s platform integrates its proprietary technology and network management capabilities with its large, independent qualified field professional base to provide an efficient marketplace for mortgage lending and insurance industry services. The Company’s current client base includes about 60 of the top 100 mortgage lenders in the U.S. and a few of the largest insurance companies in North America. Real Matters also provides residential real estate appraisals for the mortgage market and is an independent provider of title and mortgage closing services in the U.S. On May 2, 2019, the Company reported Q2/19 results, with revenue decreasing by 4.2% QoQ. Additionally, the Company announced its intention to amend its Normal Course Issuer Bid to increase the number of common shares to purchase for cancellation from 4M to 5M.
- Market Cap: $552.8 M
- Cash from Operations FY2018: $10.4 M
- Total Liabilities FY2018: $17.1 M
- Cash from Operations/Total Liabilities: 0.61x
Richelieu Hardware Ltd. (TSX:RCH) – $21.35
Trading Companies and Distributors
Richelieu Hardware is a North American importer, distributor, and manufacturer of specialty hardware and related products. The Company currently has a customer base of kitchen and bathroom cabinetry, storage and closet, home furnishings and office furniture manufacturers, residential and commercial woodworkers, and hardware retailers, such as renovation superstores. Overall, the Company provides 110,000 different items that are designed for its customer base of over 80,000 customers that are served at 72 centers located in North America. A few of the products offered by the Company include functional hardware, lighting systems, storage solutions, and decorative products. On April 4, 2019, the Company announced that total sales for Q1/19 grew 2.0% to $226.2M and its three acquisitions in Canada added further annual sales of about $12M. This follows an announcement on January 24, 2019, where the Company reported record sales in 2018 that reached over $1,004.4M, which was up 6.6% from 2017.
- Market Cap: $1,216.2 M
- Cash from Operations FY2018: $42.3 M
- Total Liabilities FY2018: $95.6 M
- Cash from Operations/Total Liabilities: 0.44x
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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