As the Canadian market navigates the aftermath of the U.S. Federal Reserve's annual symposium in Jackson Hole, investors are keenly watching for signs of potential rate cuts that could impact broader economic conditions and small-cap stocks. With markets largely steady but alert, attention has turned to identifying undervalued opportunities that may benefit from any forthcoming monetary easing. In this environment, a good stock often exhibits strong fundamentals and insider buying, signaling confidence from those closest to the company's operations.
Top 10 Undervalued Small Caps With Insider Buying In Canada
Overview: Chemtrade Logistics Income Fund is a provider of industrial chemicals and services with operations in North America, holding a market cap of approximately CA$0.82 billion.
Operations: The company generates revenue primarily from its EC and SWC segments, totaling CA$1.78 billion. The gross profit margin has varied, reaching a peak of 23.63% in Q3 2023. Operating expenses have ranged between CA$69 million to CA$147 million over the periods analyzed.
PE: 8.4x
Chemtrade Logistics Income Fund, a small cap in Canada, is navigating challenges with declining earnings and high debt levels. Despite lower profit margins at 7.8% compared to last year's 12%, the company maintains consistent dividends, recently declaring CAD$0.055 per unit for August 2024. Insider confidence is evident with recent share purchases by key individuals over the past few months. The firm also completed a CAD$250 million fixed-income offering, signaling robust capital-raising capabilities amid financial pressures.
Overview: Nexus Industrial REIT is a real estate investment trust focused on owning and managing a diversified portfolio of industrial properties, with a market cap of approximately CA$1.16 billion.
Operations: Nexus Industrial REIT generates revenue primarily from investment properties, with recent quarterly revenue of CA$167.21 million. The company reported a gross profit margin of 71.56% and a net income margin of 99.45%. Operating expenses for the same period were CA$8.65 million, while non-operating expenses amounted to -CA$55.27 million.
PE: 3.6x
Nexus Industrial REIT, a small cap in Canada, reported Q2 2024 sales of C$43.91 million, up from C$38.42 million last year, but net income fell to C$43.53 million from C$77.22 million. Despite earnings forecasted to decline by an average of 46% annually over the next three years and interest payments not well covered by earnings, insider confidence is evident with recent share purchases throughout 2024. The company’s external borrowing poses higher risks compared to customer deposits but remains a notable player in the industrial real estate sector with stable cash distributions of C$0.05333 per unit monthly.
Overview: VersaBank operates as a digital bank providing financial services and cybersecurity solutions, with a market cap of CA$0.28 billion.
Operations: VersaBank generates revenue primarily from Digital Banking ($104.90 million) and DRTC services ($10.56 million). Over the analyzed periods, net income margins have shown variability, with a notable increase to 40.54% as of August 2024. Operating expenses are a significant cost component, consistently impacting net income across the years.
PE: 10.1x
VersaBank, a small Canadian financial institution, is making headlines with its recent strategic moves. The bank's net income for Q2 2024 was C$11.83 million, up from C$10.26 million the previous year, indicating solid performance. Recent insider confidence is evident as executives have been purchasing shares over the past six months. Additionally, VersaBank's expansion into the U.S., marked by new senior appointments and regulatory approvals for acquiring Stearns Bank Holdingford N.A., showcases its growth ambitions and potential future value.
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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:CHE.UN TSX:NXR.UN and TSX:VBNK.
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