| Cheapies With a Chance 2023 - Second List of 2023 |
|
Welcome back to our second list Cheapies with a Chance for the year. While we didn't quite have ten names, we came in with nine.
There were several names that were on the cusp, and just didn't quite make it.... including several that meet our criteria, but were on the higher-end of market capitalization, so we excluded them, and came up with the list below.
A few times a year, we manually review every publicly traded company in Canada. The purpose is to uncover new ideas and hunt for companies that have slipped through the cracks.
The concept is simple. By following a simple formula, searching for value in the most overlooked part of the market, we can find market-beating opportunities. The simple criteria are:
- Growth - Quarterly revenue growth >25%
- Profitability or near profitability - Ideally, two consecutive quarters of positive net income
- Size - Under <$50M market cap and the smaller, the better. A tight share structure is also a bonus - Ideally, the best situations are <30M shares outstanding.
After we find companies that meet our revenue growth criteria, we then begin to remove companies that are not close to profitability, have too many shares outstanding, have too many red flags, or are simply too discovered.
We've had some unbelievable success with this formula, and boldly claim that even if you didn't read a single thing about these companies, you have a good chance of outperforming the market with a basket of these stocks.
Earlier this year, in January we released two lists, one the Cheapies with a Chance list and the second the Takeover List.
We'll let the results speak for themselves, see below:
|
| | | | In previous years we've uncovered some monster gems that have provided our subscribers life-changing returns.
As investors, we recognize that not every stock we own is going to be a winner; it’s part of investing. However, by sticking to a simple criterion we have routinely demonstrated we have a proven formula for finding companies that can create huge rewards for those investors.
It’s like putting a quarter into a slot machine that always spits out more cash over time. This is why we love microcaps and try to stick to our formula.
After reviewing all SEDAR filings, this year we had lots of high growth companies with a list of about 150 companies that we've reduced down to 9 that come the closest to meeting our criteria. And so today, we’re presenting the Top 9 Cheapies with a Chance companies on our watchlist.
Before we share this list, we wish to remind our subscribers that not all of these are Smallcap Discoveries Select Portfolio companies, but instead are part of our Select Watchlist, and we wanted to highlight the names that stuck out in our annual SEDAR review. Additionally, for disclosure purposes we've highlighted the names that we own shares of.
For each company, we’ll provide some key facts and a list of pros and cons. Thereafter, we’ll provide the bottom line on whether we are buying or passing and what we’d need to see to invest.
(Order according to market cap - smallest to largest)
|
| ZTest Electronics Ticker: ZTE.V
Price: $0.08
Market cap: $2.1 million
Shares outstanding: 26.6 million
Y/Y Revenue growth: 48%
Q/Q Revenue growth: 20%
EV: $2.3 million EV/E: 21x TTM Net income: $107,000
P/E TTM: 19.9x
EV/E Annualized: 3x |
| | What it does: ZTEST is a technology company listed on the Canadian Securities Exchange (CSE) under the symbol ZTE. The company is focused on monetizing the online commerce market through Conversance’s Chronicle platform, by providing a high-speed AI driven token based platform that will be capable of hosting a wide array of applications on a world wide basis.
ZTEST is also looking to create synergies with Permatech Electronics, a wholly owned subsidiary of ZTEST. Permatech is an ISO 9002 certified Electronic Manufacturing Services (EMS) provider founded in 1982. Permatech’s offerings include Materials Management, Printed Circuit Board (PCB) Assembly, Testing and Design services, which are available to support both Twenty49 and Conversance, as needed. Permatech operates from a 20,000 square foot facility in North York, Ontario, Canada. The company serves customers in the Medical, Power, Computer, Telecommunication, Wireless, Industrial and Consumer Electronics markets requiring high quality, quick-turn, small and medium size production runs.
Pros:
- Good growth
- Tiny market capitalization
- Very low EV/annualized Earnings
Cons: - Financing risk
- Inconsistent profitability
|
| Spectra Products Ltd Ticker: SSA.V
Price: $0.25 Market cap: $3.66M Shares outstanding: 14.65M Y/Y Revenue growth: 43%
Q/Q Revenue growth: 96% EV: $2.65M
EV/E: 22x |
| | What it does: Safety enhancement products for the transportation industry Spectra Products Inc., is a vertically integrated manufacturer and supplier of innovative products and services to the commercial transportation industry and the professional truck driver.
Spectra Products Inc. product line is aimed at improving fleet safety, reducing maintenance costs and improving operational productivity within the commercial trucking, commercial busing, and related industries. Spectra Products Inc. is a publicly listed company trading on the TSX Venture Exchange (TSXV: SSA).
Pros: - Small enterprise value
- Considerable amount of cash on hand
- Long history of profitability
Cons:- Small insider ownership
- One man show
- Not compounding
- Management gambled shareholder earnings into other investments
We Own Shares in SSA.V
|
| AirIQ Inc Ticker: IQ.V
Price: $0.40 Market cap: $11.75M Shares outstanding: 29.37M Y/Y Revenue growth: 23%
Q/Q Revenue growth: 42% EV: $8.92MEV/E: 2.4xTTM Net income: $3.78MP/E TTM: 3.1xEV/E Annualized: 6.4xWebsite: https://airiq.com/ |
| | What it does: AirIQ (TSXV: IQ) is celebrating it's 25th anniversary of its founding in 1997 and is a pioneer in IoT based asset management solutions. AirIQ's solutions allow commercial businesses to reliably, effectively and efficiently monitor assets in near real time. The Company develops iOS and Android mobile and web-based applications, and cloud-based solutions that stand-alone or that can be readily integrated with existing software. AirIQ solutions are mixed fleet capable and provide fleet reporting, maintenance, compliance, safety and analytics utilizing multiple hardware options including a fully integrated video telematics camera solution and a battery powered solution for non-powered assets.
Pros:
- Normal course issuer bid in place
- Healthy cash position
- Long history of profitability
- Healthy level of recurring revenues
Cons:- Recently discovered, been covered on several new blogs lately. Twitter chat has increased.
We Own Shares in IQ.V
|
| Appulse Corp Ticker: APL.V
Price: $0.45Market cap: $6.5Shares outstanding: 14.48MY/Y Revenue Growth: 32%Q/Q Revenue growth: 37%EV: $6.07MEV/E: 14xTTM Net income: $435,324P/E TTM: 14.7xEV/E Annualized: 6.4xWebsite: http://www.appulsecorp.net/ |
| | What it does:
Through its primary subsidiary, Centrifuges Unlimited Inc., and operating divisions, Appulse specializes in the sales, servicing and refurbishing of centrifuge equipment, serving both domestic and international markets, and offers full service industrial machining. The Corporation continues to expand its product base and geographic markets, in addition to pursuing further representative arrangements and joint venture opportunities.
Pros:
- Below book value
- Low number of shares outstanding
Cons:
- Very illiquid
- Heavily dependent on energy sector
|
| Nova Cannabis Ticker: NOVC.V
Price: $0.60 Market cap: $34M Shares outstanding: 57.2M Y/Y Revenue growth: 27%
Q/Q Revenue growth: 14% |
| | What it does: Nova Cannabis Inc. (TSX: NOVC) is one of Canada's largest and fastest-growing cannabis retailers with a goal of disrupting the cannabis retail market by offering a wide range of high-quality cannabis products at every-day best value prices. Nova currently owns and/or operates 92 locations across Alberta, Ontario, and Saskatchewan, primarily under its "Value Buds" banner.
Pros:
Cons:
- Only recently turned profitable.
- TTM loss
|
| California Nanotechnologies Corp Ticker: CNO.V
Price: $0.21 Market cap: $6.67M Shares outstanding: 31.8M Y/Y Revenue growth: 30%
Q/Q Revenue growth: 55% |
| | What it does: At Cal Nano, we envision a world in which our advanced technologies are used to help make the most innovative products on this planet and beyond. We are trusted by global leaders to help push the boundaries of applied material science by utilizing our unique technical expertise and vision. Headquartered in Los Angeles, California, Cal Nano hosts a complement of advanced processing and testing capabilities for materials research and production needs. Customers range from Fortune 500 companies to startups with programs spanning aerospace, renewable energy, defense, and semiconductors.
Pros:
- Strong recent rate of growth
Cons:
|
| Reklaim Ltd. Ticker: MYID.V
Price: $0.07 Market cap: $7.6M Shares outstanding: 108M Y/Y Revenue growth: 81% Q/Q Revenue growth: 62% EV: $8.45M
EV/E: N/A
TTM Net income: ($1.23M)
P/E TTM: N/A
EV/E Annualized: 9.4x
Website: https://www.calnanocorp.com/
|
| | What it does: Offering compliant, zero-party data to Fortune 500 brands, platforms, and data companies, Reklaim allows consumers to visit the application, confirm their identity, and unveil data collected and sold for years without the consumer's explicit consent. Reklaim enables consumers to take back control of this data by setting up a Reklaim account through which, should they choose to, they can be compensated for their data.
Pros:
- Undiscovered
- Strong revenue growth
Cons:
- Only recently turned profitable
- High share count
- Financing risk
|
| CanadaBis Capital Inc. Ticker: CANB.V
Price: $0.23 Market cap: $31.5M Shares outstanding: 137M Y/Y Revenue Growth: 162% Q/Q Revenue growth: 123%
|
| | What it does: CanadaBis Capital Inc., is a vertically integrated Canadian cannabis company focused on achieving large-scale growth, from cultivation to retail, in the fast-emerging global cannabis market. By targeting organic growth opportunities alongside the right-fit partners, we remain focused on finding and capitalizing on chances to grow, diversify and continue to lead our industry.
Our integrated subsidiaries:
- Stigma Pharmaceuticals Inc. – 100% held
- 1998643 Alberta Ltd. (operating as "Stigma Grow") - 100% held;
- www.stigmagrow.ca
- Full Spectrum Labs Ltd. (operating as "Stigma Roots") - 100% held
- 2103157 Alberta Ltd. (operating as "INDICAtive Collection") -100% held;
- www.indicativecollection.ca
- Goldstream Cannabis Inc. - 95% held
Pros:- Strong growth
- Several quarters of profit
- High insider ownership
Cons:
We Own Shares in CANB.V
|
| Thermal Energy Energy International Inc. Ticker: TMGV
Price: $0.18 Market cap: $29.6M Shares outstanding: 164M Y/Y Revenue growth: 33%
Q/Q Revenue growth: 84% EV: $28.95M
EV/E: 54x TTM Net income: $531M P/E: 55.7x EV/E Annualized: 7.5x
|
| | What it does: Thermal Energy International Inc. provides energy efficiency and emissions reduction solutions to Fortune 500 and other large multinational companies. We save our customers money by reducing their fuel use and cutting their carbon emissions. Thermal Energy's proprietary and proven solutions can recover up to 80% of energy lost in typical boiler plant and steam system operations while delivering a high return on investment with a short, compelling payback.
Thermal Energy is a fully accredited professional engineering firm with engineering offices in Ottawa, Canada, Pittsburgh, USA, as well as Bristol, UK, with sales offices in Canada, UK, USA, Germany, Poland, and Italy. By providing a unique mix of proprietary products together with process, energy, and environmental engineering expertise, Thermal Energy can deliver unique, site-specific turnkey and custom engineered solutions with significant financial and environmental benefits for our customers.
Pros: - Strong growth
- Strong backlog
- Well managed
Cons:
- High share count
- Low insider %
We Own Shares in TMG.V
|
| |
