The Canadian market has recently experienced significant volatility, with a near 5% pullback in August followed by a strong recovery driven by positive earnings growth and an expanding economy. As the focus shifts from tech heavyweights to broader earnings growth, small-cap stocks are gaining attention for their potential value and insider activity.
Top 10 Undervalued Small Caps With Insider Buying In Canada
Overview: Cascades is a company engaged in the production and sale of tissue papers, containerboard packaging products, specialty packaging products, and recovery and recycling activities with a market cap of approximately CA$1.04 billion.
Operations: The company's revenue streams primarily come from Tissue Papers ($1.58 billion), Packaging Products - Containerboard ($2.30 billion), and Packaging Products - Specialty Products ($644 million). The gross profit margin has shown significant variation, reaching as high as 46.46% in Q3 2022 and standing at 34.75% in Q2 2024.
PE: -22.3x
Cascades, a small-cap Canadian company, is drawing attention due to its insider confidence, with Alain Lemaire purchasing 26,500 shares valued at C$255,135 in recent months. Despite challenges such as higher risk funding and interest payments not well covered by earnings, the company's forecasted annual earnings growth of 171.79% highlights potential upside. Recent corporate guidance indicates stronger Q3 results driven by improved Containerboard performance and stable Specialty Packaging outcomes. However, the Tissue Papers segment faces pressure from higher pulp prices and softer pricing.
Overview: Flagship Communities Real Estate Investment Trust operates in the residential real estate sector, focusing on manufactured housing communities, with a market cap of approximately $0.47 billion (CAD).
Operations: Flagship Communities Real Estate Investment Trust generates revenue primarily from its residential REIT segment, with the most recent quarterly revenue reported at $78.07 million. The company has shown a gross profit margin of around 66.12%, reflecting its efficiency in managing costs relative to revenue.
PE: 3.5x
Flagship Communities Real Estate Investment Trust recently reported strong Q2 2024 earnings with sales of US$21.23 million and net income of US$43.46 million, showing significant growth from the previous year. They announced a monthly cash distribution of US$0.0492 per REIT unit, equating to an annual payout of US$0.59 per unit. Despite this, earnings are forecasted to decline by 46.1% annually over the next three years due to reliance on higher-risk external borrowing for funding and large one-off items impacting financial results.
Overview: VersaBank is a Canadian digital bank that provides innovative banking solutions and cybersecurity services, with a market cap of approximately CA$0.29 billion.
Operations: VersaBank generates revenue primarily from its Digital Banking segment, contributing CA$104.90 million, and DRTC (cybersecurity services and banking and financial technology development), adding CA$10.56 million. The company's net income margin has shown variation over the periods, reaching 40.54% as of April 30, 2024. Operating expenses are a significant cost factor, recorded at CA$49.53 million for the same period.
PE: 10.2x
VersaBank, a Canadian financial institution, is currently trading at attractive levels with earnings projected to grow 22.69% annually. The bank's recent acquisition of Stearns Bank Holdingford N.A., approved by both U.S. and Canadian regulators, signifies its strategic expansion into the U.S. market. Recent insider confidence was demonstrated through share purchases in June 2024, reflecting optimism about future growth prospects. Additionally, VersaBank reported CAD 11.83 million net income for Q2 2024 compared to CAD 10.26 million a year earlier.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include TSX:CAS TSX:MHC.UN and TSX:VBNK.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]
