This was a good year, not a great year, for leaders of the TSX tech sector.
For half a decade now, tech has threatened to dazzle while consistently delivering better returns than any other sector. But it never truly shines, or at least it hasn’t yet.
This year, the thunder in the markets was stolen by marijuana stocks and (cough…Dead Cat Bounce…cough) a surprise mining and metals revival.
The 2016 theme in Canadian tech was no theme at all. Most of the names below moved the old-fashioned way, on the back of better numbers.
Meanwhile, with Ottawa’s Shopify serving as a beacon every private Canadian tech that is IPO ready, we await the onslaught of new and exciting pubcos. But cue the Sonny and Cher, this is all starting to feel a little like “Groundhog Day”. With a couple weeks to go, here are the ten best performing TSX technology stocks of 2016.
1. Intrinsyc Technologies (Intrinsyc Technologies Stock Quote, Chart, News: TSX:ITC)
Closing Price on December 31, 2015: $0.89
Closing Price on December 12, 2016: $2.00
Percentage Change +124.7
Shares of Vancouver-based Intrinsyc Technologies rose for the better part of the year on the back of improving numbers. In May, the company annoucned Q1 revenue growth that was 90 per cent better than the year before. The November reported third quarter showed “just” 20 per cent topline growth, but CEO Tracy Rees comments suggested there was more to come.
“The Company enjoyed record order bookings, led by record hardware orders, and ended the quarter with an increased order backlog in both product development services and hardware,” said Rees. “With our increased sales order backlog, strong opportunity pipeline, and several new product development initiatives underway; we are positioned for a strong finish to the year, with a solid foundation for future performance.”
2. NexJ Systems (NexJ Systems Stock Quote, Chart, News: TSX:NXJ)
Closing Price on December 31, 2015: $1.75
Closing Price on December 12, 2016: $3.25
Percentage Change: +85.7
Bill Tatham took NexJ public in 2011. The company’s name was a bold reminder of its founder’s success: Tahtam sold his first baby, Janna, to Siebel Systems for a whopping $1.76 billion. As a pubco, NexJ (the next Janna) had trouble living up to the promise of its own name. But 2016 was the year NexJ shareholders got some sweet relief. The year began with the company spinning off its healthcare business unit to NexJ Health Holdings and is ending strong. In the last days of October, NexJ reported third quarter results that saw its revenue climb by 22 per cent over the same period a year prior.
3. International Road Dynamics (International Road Dynamics Stock Quote, Chart, News: TSX:IRD)
Closing Price on December 31, 2015: $1.45
Closing Price on December 12, 2016: $2.52
Percentage Change: +73.8
Shares of Saskatoon-based International Road Dynamics began rising in May and never looked back. The $2.52 closing price was an ambitious goal in April when Cantor Fitzgerald Canada analyst David Tomljenovic declared IRD a buy with a $2.50 one-year price target, which at the time implied a return of 85 per cent.
“International Road Dynamics provides unique exposure to a significant global issue, traffic congestion, increasing wear on aging and overburdened highway infrastructure, and overall safety,” said Tomljenovic. “The number of drivers and vehicles and the amount of global road-born freight are growing exponentially while additions to the global highway infrastructure have hardly changed. This is a highly unsustainable equation that has a very real cost to the global economy.”
4. Norsat International (Norsat International Stock Quote, Chart, News: TSX:NII)
Closing Price on December 31, 2015: $6.10
Closing Price on December 12, 2016: $10.32
Percentage Change: +69.2
A relatively low-beta stock became a moneymaker this year when the idea that it might be sold was floated. In September, Norsat reported that it has received multiple indications of interest with respect to a strategic transaction, including a cash offer of $8.00 a share from Privet Fund Management LLP. Norsat, which had retained Raymond James as advisor on the matter, said at the time that it had not established a timeline. The market seems to think the price may be right in this range: Norsat has been flat for several months now.
5. D-Box Technologies (D-Box Technologies Stock Quote, Chart, News: TSX:DBO)
Closing Price on December 31, 2015: $.365
Closing Price on December 12, 2016: $.57
Percentage Change: +56.2
In September, Echelon Wealth Partners analyst Rob Goff said D-Box’s recent progress in China was making him feel bullish about the stock.
“D-BOX has now successfully executed on two further steps supporting its disciplined strategic plan that we believe will lead the company to become a significant factor in the Chinese theatre marketplace,” says the analyst. “Through the process, we see the potential for aggressive upside beyond our baseline forecasts and conservative PT of $0.95. Our target DCF at $0.99 reflects baseline forecasts, and discounts the potential upside associated with greater screen penetration in Asia and South America, prospective VR driven opportunities, and the potential for aggressive growth in home theatre applications. Continued strong execution, large contract announcements and/or strategic partnerships could support a positive revaluation.”
6. Shopify (Shopify Stock Quote, Chart, News: TSX:SHOP)
Closing Price on December 31, 2015: $35.60
Closing Price on December 12, 2016: $55.38
Percentage Change: +55.6
If Shopify keeps it up, the Ottawa-based company might actually convince some of those companies sitting on the IPO fence to come to the public markets. Maybe. We hope. Okay, fine. We have no idea.
Shopify has had a great run since its IPO, but Mackie Research Capital analyst Nikhil Thadani thinks there is still upside from here. In late November, Thadani initiated coverage of Shopify with a “Buy” rating and a one-year price target of (U.S.) $60.00, implying a return of 41 per cent at the time of publication.
“As investors start looking to 2018, we believe SHOP will begin to appear more attractive owing to the company’s rapid revenue growth,” said Thadani. “On a 2018 basis, Shopify trades at ~5x EV/Sales, in-line with US and Canadian SaaS companies. Shopify’s relative EV/Sales valuation appears inexpensive compared to US & Canadian SaaS stocks, when taking revenue growth into account (2018 expected 30% vs. peers’ 20%).”
7. Tucows (Tucows Stock Quote, Chart, News: TSX:TC)
Closing Price on December 31, 2015: $29.96
Closing Price on December 12, 2016: $46.55
Percentage Change +55.4
A glance at Tucows history reveals some old-school street cred. The company’s name is an acronym for The Ultimate Collection of Winsock Software. Talk of Windows Sockets may bring to mind Milli Vanilli or MC Hammer, but Tucows is a 90’s kid that graduated. Today, the company is a domain registrar and is dabbling successfully with mobile phone service and fixed internet access. Most importantly, Tucows is making money. The company’s third quarter results, noted CEO Elliot Noss, were a record on both the top and bottom line.
8. Firan Technology Group (Firan Technology Group Stock Quote, Chart, News: TSX:FTG)
Closing Price on December 31, 2015: $2.37
Closing Price on December 12, 2016: $3.65
Percentage Change: +54
In April, with its stock trading nearly forty per cent lower than it is today, Paradigm Capital analyst Daniel Kim, was beating the drum for Firan Technology Group. The news that rolled out as the year progressed showed that the analyst’s was prescient.
“FTG’s outlook is well supported on multiple fronts: 1) All key customers (particularly Airbus and Boeing) are bullish on platforms and volumes, coupled with increasing FTG content per airframe; 2) There is a geographical shift to Asia (up 25% y/y) as momentum grows with Chinese-based customers; 3) growing pipe of higher-margin control panel programs (especially with Photo Etch),” said Kim. “FTG is trading at 3.9x EV/EBITDA versus its peers at 6.8x.”
9. Calian Group (Calian Group Stock Quote, Chart, News: TSX:CGY)
Closing Price on December 31, 2015: $16.16
Closing Price on December 12, 2016: $24.79
Percentage Change: +53.4
A stock that value guys have been talking about for years (Don’t believe us? Check out this Cantech Letter article from 2011) finally had its day in the sun in 2016. Calian’s strong fourth quarter, reported in Mid-November, pushed the -based company to its best year ever, with a topline of $275-million.
“I am very proud of our team’s accomplishments, both in the fourth quarter and in the full year, ” said CEO Kevin Ford. “Our fourth quarter saw the achievement of strong financial results, key re-wins of long term contracts and continued success in the diversification of new customers. Our total contract signings for the quarter was $171 million which has increased our backlog to $488 million and provides a solid foundation for future years.”
10. Exfo (Exfo Stock Quote, Chart, News: TSX:EXF)
Closing Price on December 31, 2015: $3.85
Closing Price on December 12, 2016 $5.51
Percentage Change +43.1
Shares of Quebec City-based Exfo began to take off in August and were bolstered by the company’s $8.25 million acquisition of California-based Absolute Analysis.
“Mobile network operators are transforming their architectures and deploying fiber deeper into radio access networks to add new services and much-needed capacity, while preparing for 5G mobility and [internet of things],” said CEO Germain Lamonde of the pickup. “This small, synergistic and strategic acquisition allows EXFO to strengthen its leadership position with a unique, all-in-one optical, Ethernet and RF test solution to help MNOs greatly enhance their productivity and network reliability.”