Today, we will discuss about Canadian small caps that have low debt. This week we had a lot to say about the companies we found in our screener. Viemed Healthcare (VMD), Information Services Corporation (ISV), Senvest Capital (SEC), Magellan Aerospace (MAL), Tecsys (TCS) and Absolute Software Inc. (ABT) was in our list.
Let’s see the different outlooks from our software:
We added a specific graph or table for each company. We will discuss them below:
Viemed Healthcare
Information Services Corporation
Senvest Capital
Tecsys
Mallegan Aerospace
Absolute Software Corporation
Viemed Healthcare has a strong outlook with a SP score over 60. Recently the score decreased, but by personal experience it is hard for a company to stay above 65 because it is a really strong score. We have growth in sales and earnings per share (EPS) over the long term. The performance spread, the difference between the return on capital and the cost of capital, is positive. It means the company creates value for the shareholders in the long term. The net income is negative on a 1-year basis, but the operating cashflow before considering the change in working capital is higher than last year. we don’t think we should bother with a decrease in last year EPS at this point. The company is also well positioned compared to the other companies of its industry based on the factors comparison table.
Information Services Corporation is at a very high score at 65. The score increased by 2 at it last review which is great specially at this score level. Once again for this company, sales and EPS saw growth. The performance spread score is above 0. The company pays a dividend and the current level is equal to one see in 2015 and 2018 which is not a bad or good sign. The company spends $14M on the dividend each year, but the company free-cash-flow has been 1.5x to 2x this amount in the last 5-year. It seems it can support its dividend easily.
Senvest Capital has the lowest SP score of our group at 53. By looking at the second picture, we can see the NOPAT is volatile. The company reports all their investment results in the income statement and the operating cashflow because of the business definition. This leads to weird accounting in some cases that are not economically meaningful. We suggest the investor to have good knowledge of accounting rules concerning the classification of cashflows and revenue recognition to fully understand the situation of the company. The company is often affected by their investments in the market. However, the company shows good results overall despite the volatility and the uncommon accounting.
Tecsys has a low SP score compared to the others, but there is interesting information about this company. Sales and EPS increased a lot in the last year and the last 5-year. The performance spread is also above 0. The company had great momentum until 2019. The results were a bit disappointing in 2019. The company shows higher volatility in its 5-year result than the others. The company still display characteristics linked to a good company. It has a great return on capital and doesn’t need debt to grow. Its exposition to hospital could lead to higher revenue and profit in the next quarters.
Mallegan Aerospace had a strong decline recently because of the recent turmoil. The company also shows slowing operating profit and the current environment will not help. The industry has a lot of difficulty and it is hard to find good points in the short-term for this company. However, the stock has a moderatly good historic and balance sheet. The lower valuation could be an attractive entry point for the long term investor. There is certainly “blood in the street” as Warren Buffet famously says.
Absolute Software Corporation has a decent score of 58. The company is identified as bad growth by our software. Surely, the operating profit didn’t grow in the last 5 years as seen in the related graph, but the company has some momentum in the last 2 years. It is possible the company will have good results because of the current environment. Companies had to figure how to work remotely and cyber security is an important part of it.
You can subscribe the Inovestor for Advisors platform for free here
If you have any questions about the article, feel free to contact Anthony :
If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
