While technology stocks, outside of Research in Motion (TSX:RIM) haven’t had the world press beating a path to their door they do, in fact, make a good showing in terms of profitability. In this Cantech Letter survey, we take a look at Canada’s most profitable tech stocks. All stocks from the TSX and TSXV technology, cleantech and life sciences sectors were eligible, and the numbers are based on earnings from the trailing twelve month period.
1. Constellation Software (TSX:CSU) EPS: $7.28
Formed in 1995, Toronto’s Constellation Software, which makes software for the public and private sector, is clear about its strategy. The company grows through acquisition, looking to acquire best of breed companies across different verticals. Constellation is involved in various niches on the public and private side from software for housing authorities, transportation agencies, and software for large home builders. On the strength of this strategy, the company has grown its revenue from just $243 million in fiscal 2007, to nearly $634 million in fiscal 2010. In their recently reported Q2, Constellation earned $58.5 million.
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2. Research in Motion (TSX:RIM) EPS: $6.30
Because of what many see as a tenuous hold on it market share, RIM has taken it on the chin from the financial media. But the company is still a wildly profitable enterprise. While the Blackberry Playbook will have to overcome a slow start, the tablet may be slowly gaining a foothold in its traditionally strong enterprise market. Last month, for instance, Playbook became the first tablet certified for deployment in Australian government departments. And those who think RIM’s glass might, in fact, be half full are pinning a lot of hope on the company’s new QNX operating system, which at least one critic thinks will be “amazing”.
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3. Macdonald Dettwiler (TSX:MDA) EPS: $2.47
Since 1969, when John MacDonald and Werner Dettwiler formed their eponymous venture, MacDonald Dettwiler (TSX:MDA) has been a part of the fabric of Canadian technology. MDA’s CanadaArm, a robotic space arm developed in the 1970′s to repair and service NASA space shuttles, is iconic. But with the Canadarm set to literally, become history in the Canada Aviation and Space Museum in Ottawa, MDA has been forced on the rocky road of reinvention. MDA’s fiscal 2010 revenue of $689 million pales compared to the $1.2 billion the company did just three years prior, in 2007. But the company is rebounding on newfound success generating revenue on large satellite contracts. Q1 2011 was boosted by the $819 million sale of the company’s property information business, and MDA has put the cash to use with recent dividends and share buybacks. In their recently reported Q2, Macdonald Dettwiler earned $29 million, or seventy cents per share. In May, Cantech Letter caught up with MacDonald Dettwiler’s CFO Anil Wirasekera.
4. Paladin Labs (TSX:PLB) EPS: $2.42
Montreal’s Paladin, which manufactures drugs such as Tridural, a treatment for chronic pain, has been a steady and dependable success story in Canada’s biotech world. The company has more than doubled its revenue since 2007, from just under $63 million in 2007, to $128 million in fiscal 2010. Lately, the company has been rumoured to be applying its sizable war chest towards acquisitions, ColdFX maker Afexa Life Sciences and the beleagured Labophram are recent targets. Those moves, however, took a backseat to more recent concerns. Shareholders of Paladin were shocked recently when it was reported that CEO Johnathan Goodman was seriously injured in a cycling accident.
5. Open Text (TSX:OTC) EPS: $2.16
Waterloo’s OpenText is widely regarded as a worldwide leader in Enterprise Content Management. The company grew out of a collaboration between the University of Waterloo and the New Oxford English Dictionary, the project was a collaboration with the Oxford University Press to computerize the OED. This engineers on this project realized that it required developing search technologies that could be used to quickly index and retrieve information. The search technology developed for this project, which incorporated full-text indexing and string-search technology, was recognized as being useful for other electronic applications. In 1991, at about the same time the Internet was emerging, the results of this project were commercialized by a private spin-off called OpenText Corporation. While Open Text has played second fiddle to Research in Motion for years in the Canada’s tech triangle, the company is clearly in overdrive; Open Text’s fiscal 2011 numbers, which were reported on August 10th, were a record $285 million top line. Earlier this year, Cantech Letter’s Nick Waddell talked to Open Text CEO John Shackleton.
6. CGI Group (TSX:GIB.A) EPS: $1.66
Midway through 2010, Canada’s largest IT stock, CGI Group (TSX:GIB.A), completed the largest acquisition in its history, insisting that the price for Stanley, an Arlington, Virginia based systems integrator, was right. Thus far 2011 has provided a lot of supporting evidence suggests the acquisition may have been perfectly timed, too. CGI was founded in Montreal in that city’s Olympic Year of 1976, and has since grown to nearly $4 billion in revenue. The Company’s name is an acronym for Consultants to Government and Industry. The acquisition of Stanley, which is located just across the Potomac from the US Capital and counts the U.S. Army, U.S. Marine Corps, U.S. Navy, Department of State, and Department of Homeland Security as its largest clients, is a clear bet on the former. CGI’s recently reported Q3 showed that Net earnings were $118.4-million, a 37.9 leap over the $85.9-million the company reported in last year’s Q3.
7. Aastra Technologies (TSX:AAH) EPS: $1.50
Shares of Concord, Ontario’s Aastra, which makes telecommunications equipment , rallied for most of 2009; from under $8 to over $34 on the back of a tremendous year. But 2010 was tougher, and the stock settled back to its current level near the $15 mark. Aastra, however, has been kind to its supporters in other ways. The company has repeatedly increased its dividend. This past Friday, shareholders of record received a kicker of twenty cents per share, which it had raised from $.15 in February.