The TSX-listed Canadian stocks we’ve discovered have seen their FCF grow at an annual rate of 80% over the past three years and have an average year-to-date share price return of 43.6%
SmallCapPower | December 19, 2019: Levered free cash flow (LFCF) is a metric used by investors to determine how much money a company has after it has reinvested in the business and paid interest to debt investors. It is an important metric for investors, as it is a measure of the amount of cash that a company can use to pay dividends to shareholders and/or to make further investments in growing the company’s business. Today we have identified four TSX-listed Canadian stocks with market caps below $5.0B that have the highest three-year annualized levered free cash flow growth.
*Share price data as at December 16, 2019, data obtained from S&P Capital IQ
** LTM Levered FCF is used as a proxy for F2019 Levered FCF
***LFCF = Net Income + D&A – Capex – ∆ in WC – mandatory debt amortization
TransAlta Corporation (TSX:TA) – $9.14
Utilities
TransAlta Corporation operates over 65 hydro, wind, gas, coal and solar-power generation facilities across three countries (Canada, US, and Australia) with an operating capacity of 9,331 megawatts. The Company is Canada’s largest generator of wind power. It also engages in wholesale trading of electricity and other energy-related commodities and derivatives. The Company pays a $0.04 quarterly dividend, implying an annual dividend yield of 1.8%.
- Market Cap: $2,573.8M
- 90-Day Return: +5.1%
- YTD-Return: +61.4%
- 90-Day Average Trading Volume: 468,360
- LTM Levered FCF: $226.1M
- FY16 Levered FCF: $19.5M
- 3-Year Levered FCF CAGR: +126.3%
PFB Corporation (TSX:PFB) – $12.42
Construction Supplies
PFB Corporation is engaged in manufacturing insulating building products made from expanded polystyrene (EPS) materials and marketing these products in North America. The Company operates through two segments: Canada and the United States of America (USA). The Canada segment is engaged in the manufacturing and sales operations located in Canada for EPS products and structural insulating panels. The USA segment is engaged in the manufacturing and sales operations located in the United States for EPS products, building systems and structures, design services and installations. PFB pays a $0.09 quarterly dividend, implying an annual dividend yield of 2.9%.
- Market Cap: $83.1M
- 90-Day Return: +15.8%
- YTD-Return: +28.3%
- 90-Day Average Trading Volume: 6,300
- LTM Levered FCF: $11.4M
- FY16 Levered FCF: $1.7M
- 3-Year Levered FCF CAGR: +86.8%
Dundee Precious Metals Inc. (TSX:DPM) – $6.06
Gold Mining
Dundee Precious Metals is a gold producer operating two gold-copper mines (Chelopech and Krumovgrad) in Bulgaria, and a smelter (Tsumeb) in Namibia. The Company also holds interests in developing gold and exploration properties located in Canada and Serbia, and it has a 10.5% interest in Sabina Gold & Silver Corp., as well as a complex copper concentrate processing facility located in Namibia. On November 7, 2019, the Company announced its Q3/19 financial results – total production for the third quarter was 65.6K oz/Au and 10.1M lbs/Cu. Financial results were also highlighted by revenue of $94.9M and FCF of $21.0M.
- Market Cap: $1,087.8M
- 90-Day Return: +32.0%
- YTD-Return: +68.3%
- 90-Day Average Trading Volume: 405,580
- LTM Levered FCF: $59.2M
- FY16 Levered FCF: $13.9M
- 3-Year Levered FCF CAGR: +61.9%
Aritzia Inc. (TSX:ATZ) – $19.10
Fashion and Apparel
Aritzia engages in the design and retail of accessories and women’s apparel with Millennial appeal. The Company sells its products under the Aritzia banner, as well as other banners such as TNA, Babaton, and Wilfred. Aritzia operates a network of 61 retail stores across Canada and 20 across the United States, as well as an eCommerce portal through atrizia.com. Earlier this year, Aritzia announced the closing of a follow-up equity offering for total gross proceeds of $330M expected to be used to finance additional store openings and expansion into new markets. On October 15, 2019, ATZ reported Q2/19 financial results, highlighted by a 17.4% increase in revenue YoY to $241.2M and an 12.5% increase in EPS to $0.18, both of which beat analysts estimates of $229.8M and $0.13.
- Market Cap: $2,066.2M
- 90-Day Return: +8.8%
- YTD-Return: +16.5%
- 90-Day Average Trading Volume: 256,870
- LTM Levered FCF: $69.8M
- FY16 Levered FCF: $22.8M
- 3-Year Levered FCF CAGR: +45.3%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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