An increasingly common, yet somehow strange-sounding question is emerging with the nascent return of the Canadian technology sector.
Many investors are looking for a stock that “hasn’t had a run yet” or “hasn’t taken off”. While the innovation sectors have paced the TSX for the better part of two years, a real excitement formed over the sector this past summer and hasn’t lifted. Many stocks have formed hockey stick-like charts, including familiar names such as Redknee, Mitel Networks and Sierra Wireless.
But there are a couple of important things to add to the above query. First, many of the stocks that have posted strong returns had suffered in the shadows for more than a decade. Their performance and persistence means they were more than due.
Second, it’s still very early days in this sector rotation. Difference Capital CEO Neil Johnson, a capital markets veteran who has seen more than his share of booms and busts, estimates that were are currently about 10% of the way into a $200-billion injection in to the Canadian tech sector.
That’s good news for investors looking for exposure to the tech sector. Another piece of good news is that there are almost certainly gems to be found in the bargain bin. We count down ten profitable Canadian tech stocks currently trading under a dollar. Any stock listed on the TSX or TSX Venture Technology Sector was eligible and the data is based on the the most recent full fiscal year the company reported. We then ranked them according to revenue.
1. Firan Technology Group (TSX:FTG)
Price on January 24, 2014: $0.455
Founded in 1983, Toronto-based Firan supplies aerospace and defense electronic products, specializing in quick turn around production runs. The company’s clients include Bombardier, Rockwell Collins and Bell Helicopter. The company’s most recent full fiscal year results, posted nearly a year ago on January 31st, showed that the company earned $928,000, or $0.05 a share on revenue $55.64-million. CEO Brad Bourne is among those who think the stock is undervalued; he recently made several purchases in the open market.
2. CriticalControl Solutions Corp (TSE:CCZ)
Price on January 24, 2014: $0.48
Calgary-based CriticalControl Solutions was founded in 1999 by current CEO Alykhan Mamdani. The company supplies data management and enterprise content management tools to half the provincial ministries of the Alberta government, but the bulk of its revenue comes from sales to oil and gas companies. Higher fuel prices means more demand for CriticalControl’s gas composition management, gas chart integration and field device control technologies, particularly in the United States energy service sector, where the company has looked to expand. CriticalControl had grown its revenue from just $23-million in 2007 to nearly $50-million in fiscal 2011 before falling back in fiscal 2012, which it reported in March. Still, the company was able to earn $300,000 on revenue of $46.8 million.
3. Norsat (TSX:NII)
Price on January 24, 2014: $0.51
It wasn’t a blow-the-doors off beat, but Norsat came through with a very solid year in fiscal 2012, which they reported last March. The company earned $5.1-million, or $0.09 a share on revenue of $42.4-million, a topline that was up 12% over fiscal 2011. CEO Amiee Chan said the company’s recent diversification was key to surviving a downturn in its Satellite Solutions segment brought on by reduced U.S. military budgets.
4. Dynex Power (TSXV:DNX)
Price on January 24, 2014: $0.19
Semiconductor player Dynex Power earned $1.62-million or $0.01 per share on revenue of $39.6 million in its fiscal 2012, which it reported in April. The topline represented up 10% growth over the year prior. But CEO Paul Taylor says the year could have been much better, citing delays in Chinese high-speed rail projects. “The past year has been the most challenging during my tenure, he said. “We achieved 10% revenue growth over 2011 but the trend was not as good as we would have wanted and, as a result, annual revenue was below the level that the business is now positioned to deliver.”
5. Serenic (TSXV:SER)
Price on January 24, 2014: $0.23
With a current market cap of just over $3-million (but revenue of more than $12-million) Edmonton’s Serenic is a small player that is tackling a very large market. Serenic makes software that solves the tangle of fund accounting for global NGOs, nonprofits and public sector users such as Medair. A cloud-based version of the company’s highly regarded flagship accounting solution, Navigator, is hosted on Microsoft Windows Azure and offers a solution that can be accessed anywhere, anytime, and on any device, important when the field work of many organizations can be spread across dozens of countries. Serenic has incurred losses in its current fiscal year, but the company earned $39,110 on revenue of $12.07-million in fiscal 2013, reported in June of last year.
6. In-Touch Survey Systems (CVE:INX)
Price on January 24, 2014: $0.28
It was a revenue up, earnings down type of year for Ottawa-based In-Touch Survey Systems in fiscal 2012. The company’s earnings declined 7% to $1,032,218 compared to 2011, while its revenue climbed to 20% to $10.7-million. CEO Michael Gaffney said the company’s margins were impacted by increased investment in product development and marketing.
7. Bluedrop Performance Learning (TSXV:BPL)
Price on January 24, 2014: $0.125
St. John’s Newfoundland-based Bluedrop Performance Learning enjoyed a banner year in fiscal 2012, reported last February. The company earned $244,000 on revenue of $10.47-million, up 53% from the from $6.85-million the company posted in 2011. Founded a decade ago, Bluedrop provides workplace training for the military and public sector employees.
8. Photon Control (TSXV:PHO)
Price on January 24, 2014: $0.305
Burnaby-based Photon Control, which designs and manufactures optical sensors used in the oil and gas, semiconductor and life sciences industries, is consistently profitable and consistently overlooked. The company’s fiscal 2012, reported last March, was a return to bottom line form even as its revenue fell by 10%, to $10.4-million. Photon earned $1.7 million in 2012, up $700,000 in fiscal 2011.
9. Route1 Inc. (CVE:ROI)
Price on January 24, 2014: $0.045
The quarterly reports haven’t been easy since, but last April Route 1, a Toronto-based provider of security and identity management, posted earnings of $2.15-million on revenue of $9.1-million, up from $5.5-million in 2011.
10. ZoomMed (TSXV:ZMD)
Price on January 24, 2014: $0.035
Brossard, Quebec’s ZoomMed zoomed to new highs, yet its stock continues to languish. In fiscal 2013, the company Earned $1.42-million on revenue of $7.85-million, tripling 2012’s topline of $2.61-million. ZoomMed develops and markets a range of of computer applications designed for healthcare professionals. The company’s ZRx Prescriber is a web app that allows doctors physicians to use a mobile device to write and deliver prescriptions.
At publication date, Cantech Editor Nick Waddell owns shares of Serenic and his company, Cantech Communications, is engaged to provide investor relations services to the company. Serenic is a sponsor of Cantech Letter.
Cantech Letter has published this article for information purposes only. The information contained herein does not constitute investment advice or advocate the purchase or sale of any of the securities mentioned.
Firan-FTG lost money every quarter this year
Dynex Power (TSXV:DNX) big loss this year
Serenic (TSXV:SER) also lost money every quarter this year
Bluedrop Performance Learning (TSXV:BPL) also lost money every quarter this year
Route1 Inc. (CVE:ROI) also money every quarter this year
ZoomMed (TSXV:ZMD) lost a million last quarter
Photon Control (TSXV:PHO) is a keeper
NTG Clarity (TSXV NCI) should be on this list. Amazing financials
Flipper, we weighed just taking the last quarter but decided that the most recently reported fiscal year would provide a longer, more accurate view. In some cases, the companies have had losing quarters since….
Too bad TransGaming did not make the cut. They posted a profit in their last quarter and they are under a dollar…
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