Canada’s Ten Most Valuable Tech Stocks

Under CEO Craig Muhlhauser, Celstica's top and bottom lines have improved.

Under CEO Craig Muhlhauser, Celestica's top and bottom lines have improved.

At its peak, in 2000, Nortel had a market value of $350 billion. The Ottawa company represented 36% of the entire value of the Toronto Stock Exchange and employed nearly a hundred-thousand people.

Today, after a more than decade long bull market in commodities, the influence of technology on the overall market in Canada seems to belong to another generation. Much of the current reason for that is, of course, the troubles of Research in Motion. RIM has fallen from $148 midway through 2008 to under $12 today. This means a healthy chunk of techs weighting on the TSX has been removed. If the BlackBerry maker, as some speculate, is sold to another larger non-Canadian tech, where will that leave technology stocks in Canada?

The recent prices of many of our innovators have proved to be tempting for acquirers. The result is that Canada has lost billions in valuation via the exit of companies such as Zarlink, MOSAID, RuggedCom and Gennum. If another sea change is upon is in the sector, Canada will be need to see dozens of IPOs sourced from the hundreds of up and coming tech companies for whom listing publicly was not an appealing option in the past. In the meantime, RIM has fallen from its perch as Canada’s most valuable tech company and, thanks to the Fortune Magazine’s 2011 fastest growing company, is in danger of falling to third. From the TSX technology, life sciences and cleantech sector, we count down Canada’s ten largest tech stocks, by market capitalization.

1. Valeant Pharmaceuticals (TSX:VRX)
Market Cap: $16-billion

The acquisition of the business (and name) of Valeant instantly made Biovail Canada’s largest publicly traded drug manufacturer, and with the recent troubles of Research in Motion, its biggest overall tech company by market cap. Achieved mainly through acquisition, Valeant’s overall revenue has more than tripled since 2008, from $757-million to just under $2.5-billion. But it is nowhere near Research in Motion’s topline of $18.4-billion, providing some insight into just how devalued RIM’s future has become in the eyes of the market.

2. Research in Motion (TSX:RIM)
Market Cap: $6.26-billion

How the mighty have fallen. Despite a book value of $19, RIM’s market cap hit an iceberg in past twelve months, falling from nearly $30-billion since last spring. The company’s revenue, meanwhile, has pulled back only modestly, from $19.9-billion in fiscal 2011 to $18.4 in 2012. RIM’s valuation suggest many are predicting a Palm-like ending for the Waterloo stalwart, but new CEO Thorsten Heins insists the company’s new BlackBerry 10 devices, which do not yet have a launch date, will vault it back to relevance.

This story is brought to you by Agrimarine (TSXV:FSH). Not all salmon farms are the same. Click here to learn how Agrimarine is meeting consumer demand for sustainable aquaculture.

_

3. SXC Health (TSX:SXC)
Market Cap: $5.81-billion

We’ll forgive you if haven’t yet heard their name. After all, as late as 2004 this Milton, Ontario company was plodding along more than a decade after it was founded with just $33 million in revenue. There was no big, splashy Bay Street IPO; the company went public in a reverse takeover of a publicly listed shell, allowing it to raise a relatively meager $10 million in 1997. In February, however, SXC Health reported its fiscal 2011 results and the numbers surprised even its most ardent supporters. SXC’s revenue grew a whopping 155% to $5 billion, from $1.9 billion in 2010. Earnings were up too, increasing 45% to $166.4 million. Although it’s not a household name in a consumer market space like RIM, results like these mean SXC Health, which moved its head office to Chicago after listing on the NASDAQ in 2006, will continue to get noticed. The company has already taken home top spot in Fortune Magazine’s 2011 100 fastest-growing companies list, an honor RIM took home in 2009. Cantech Letter’s Nick Waddell’s recently chatted with SXC Health CEO Mark Thierer.

4. CGI Group (TSX:GIB.A)
Market Cap: $5.5-billion

CGI was founded in Montreal in that city’s Olympic Year of 1976, and has since grown to more than $4.2-billion in revenue. The Company’s name is an acronym for Consultants to Government and Industry. Midway through 2010, CGI completed the largest acquisition in its history, picking up Stanley, an Arlington, Virginia based systems integrator for a billion dollars. Since that time, CGI’s focus on the government part of its namesake has sharpened in the US, with US government vertical growing nearly 60%. after Stanley was fully integrated.

Former Rackable President and CEO Mark Barrenechea became CEO of Open Text last December. Open Text recently became the second Kitchener-Waterloo tech stock to top a billion dollars in revenue.

Former Rackable boss Mark Barrenechea became CEO of Open Text last December. Open Text recently became the second Kitchener-Waterloo tech stock to top a billion dollars in revenue.

5. Open Text (TSX:OTC)
Market Cap: $2.92-billion

Last August, Open Text which has become a leader in the Enterprise Content Management space, going head to head with the likes of Oracle and Microsoft, joined Research in Motion in the Waterloo billion dollar club, reporting fiscal 2011 revenues of $1.03 billion. Open Text grew out of a collaboration between the University of Waterloo and the New Oxford English Dictionary, the project was a partnership with the Oxford University Press to computerize the Oxford English Dictionary. 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 they developed, 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.

6. CAE (TSX:CAE)
Market Cap: $2.61-billion

CAE Inc., which was founded in 1947 in Saint-Hubert, Quebec has built a billion dollar business on the back of flight simulators. The company is the gold standard in the industry, having sold their simulators to over a hundred different airlines. The company now trains more than 75,000 crew members each year, many at its at 426,000 square foot facility at the Dallas/Fort Worth International Airport, which is largest business aviation training facility in the world.

7. Northland Power (TSX:NPI)
Market Cap: $2.2-billion

Until the first day of 2011, Toronto’s Northland Power wasn’t a stock at all, but an income fund. When it converted to a Canadian public corporation on January 1st of this year it became part of the TSX Cleantech Index, and one of the country’s largest tech stocks. Northland’s solar, wind biomass and run-of-river projects concern, generate near a thousand megawatts of generating capacity, or enough to power all but the largest of cities in Canada.

The Canadarm, immortalized by the Canadian Mint in 2006, featured contributions from CAE and SPAR Aeropspace, which was acquired by MacDonald Dettwiler.

The Canadarm, immortalized by the Canadian Mint in 2006, featured contributions from CAE and SPAR Aeropspace, which was acquired by MacDonald Dettwiler.

8. Constellation Software (TSX:CSU)
Market Cap: $1.93-billion

Toronto-based Constellation was formed by current CEO Mark Leonard, who left the world of venture capital in 1995 to form the company, which has since become one of the most profitable and successful in the recent history of Canadian tech. Constellation, 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 more than $773-million in 2011.

9. Celestica (TSX:CLS)
Market Cap: $1.73-billion

Last summer we noticed that, despite earnings and revenue growth, the street was not buying what Celestica was selling. The short position on the stock was enormous, second only to Manulife Financial on the entire exchange, growing to 38.2 million shares by May 31st of last year. More than nine months later, Celestica has delivered solid growth. Fiscal 2011′s revenue was $7.2-billion, up 11% from prior year, and the company’s earnings, long a source of consternation in Celestica’s notoriously low-margin manufacturing business, were up too; adjusted net EPS (non-IFRS) was $1.11 per share in 2011, up 29% from 2010. Celestica then followed it up with a strong Q1, 2012. CEO Craig Mulhauser, a former exec with Ford and GE who joined Celestica in May 2005, says he has worked hard to make the Toronto-based company competitive in higher margin businesses, transitioning it from contract manufacturing to what he says will ultimately be a supply chain solutions company.

10. MacDonald Dettwiler (TSX:MDA)
Market Cap: $1.4-billion

Since 1969, when John MacDonald and Werner Dettwiler formed their eponymous venture, MacDonald Dettwiler has been a part of the fabric of Canadian technology. The Richmond, BC based aerospace giant’s Canadarm, a robotic space arm developed in the 1970′s to repair and service NASA space shuttles, is iconic. With the Canadarm literally set to become history in the Canada Aviation and Space Museum in Ottawa, however, MDA has, in more recent times, been forced on the rocky road of reinvention. 2010′s revenue of $688 million was barely half of 2007′s. But last year, 2011 MDA began to get back to its aerospace roots. The company sold its real-estate information business, which sold property information to insurance companies, lenders, and legal professionals to US private equity firm TGP Capital. The sale of the unit, which was once thought to be a key to the company’s growth gave MDA an $819 million shot in the arm it quickly put to use with dividends and share buybacks. 2011 revenue climbed back to $760 million, as the company’s stock rallied. Last year, Cantech Letter’s Nick Waddell spoke with MacDonald Dettwiler CFO Anil Wirasekara.

Related: Terry Matthews: Nortel is Gone, Here’s How we Get Over It

_________________________________________________________________________________________________________________

_________________________________________________________________________________________________________________