The Canadian tech stocks we have identified trade at low EV/EBITDA multiples and have strong returns
SmallCapPower | June 19, 2018: The Trump administration has imposed US$34B in tariffs on China, targeted at industrial sectors supporting high-tech industries. An additional US$16B has been proposed, with effect pending further review. China has responded in kind, with tariffs targeting U.S. agriculture, automobiles, and seafood. Unlike much of the Canadian market, the tech sector could be largely unaffected by continued U.S. trade actions. The Canadian tech stocks on our list today trade at an industry-low 2018 EV/EBITDA multiples of 6.2x and hold an average YTD return of 32.7%. By contrast, other Canadian tech companies trade at an average 2018 multiple of 17.0x and the TSX has stayed flat.
Intertain Group Ltd. (TSX:ITX) – $15.60
Online Services
Intertain Group is a Canada-based online gaming company that offers bingo and casino games through a variety of separately-operated brands. Intertain is the largest online bingo-led operator in the world.
- Market Cap: $314.3M
- Enterprise Value to EBITDA FY2017: 4.7x
- Enterprise Value to EBITDA FY2018: 4.9x
- Enterprise Value to EBITDA FY2019: 4.2x
- 3 Month Total Return: -1.6%
- YTD Total Return: 8.7%
Celestica Inc. (TSX:CLS) – $15.86
Semiconductors
Celestica is a Canadian tech company that provides a variety of process improvement solutions to the electronics manufacturing segment. Celestica’s services include design and development, engineering services, raw materials sourcing, assembly & testing and supply chain management solutions. On January 24, the Company announced the acquisition of Atrenne Integrated Solutions, a durable electromechanical solutions provider focused on aerospace applications, for US$139M.
- Market Cap: $2,265.2M
- Enterprise Value to EBITDA FY2017: 6.1x
- Enterprise Value to EBITDA FY2018: 5.2x
- Enterprise Value to EBITDA FY2019: 4.8x
- 3 Month Total Return: 7.0%
- YTD Total Return: 20.3%
Sangoma Technologies Corp. (TSXV:STC) – $1.29
Communications & Networking
Sangoma Technologies is a communications solutions provider operating worldwide. The Company offers session border controllers, VoIP products including Skype for Business, and assorted phone solutions. STC surged 80% in January following its acquisition of the Converged Communication Division from Dialogic for $5.7M.
- Market Cap: $43.6M
- Enterprise Value to EBITDA FY2017: 8.7x
- Enterprise Value to EBITDA FY2018: 5.8x
- Enterprise Value to EBITDA FY2019: 4.2x
- 3 Month Total Return: 11.2%
- YTD Total Return: 84.3%
Mediagrif Interactive Technologies Inc. (TSX:MDF) – $11.00
Online Services
Mediagrif Interactive Technologies is a Canada-based e-commerce company that owns a number of web-based platforms including Joboom and Intertrade. Mediagrif employs 440 individuals and has offices in Canada, the United States and China.
- Market Cap: $163.3M
- Enterprise Value to EBITDA FY2017: 7.7x
- Enterprise Value to EBITDA FY2018: 7.2x
- Enterprise Value to EBITDA FY2019: 7.0x
- 3 Month Total Return: 6.2%
- YTD Total Return: 0.5%
Points International Ltd. (TSX:PTS) – $19.48
Online Services
Points International is a Canada-based online services company that offers a loyalty program platform, allowing purchase of loyalty rewards such as air miles. Points’ e-commerce platform integrates travel booking options with purchase options across a wide network of partners.
- Market Cap: $281.1M
- Enterprise Value to EBITDA FY2017: 17.0x
- Enterprise Value to EBITDA FY2018: 8.1x
- Enterprise Value to EBITDA FY2019: 7.3x
- 3 Month Total Return: 38.5%
- YTD Total Return: 49.8%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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