Stella-Jones (SJ CN) Canada
Materials
A materials company that behaves more like a low-volatility industrial - SJ needs limited investment to generate impressive FCF, which it can use to supplement organic growth with acquisitions, share buybacks and dividends. An earnings CAGR of 22% for the last three years improved ROE from 15% in 2021 to 20% in 2023. Veritas expects HDD EPS growth that is underpinned by risk-mitigating attributes, including contracts that lower volatility and commodity risk by passing through more volatile costs. With a lower three-year beta than comparable companies, the ~14x P/E and ~10.5x EV/EBITDA implied at SJ’s current stock price are appealing. 1-year TP C$120 (35% upside).
Edition: 190
- 12 July, 2024