The reopening of economies this year has given the Industrial Goods sector a boost, as evidenced by the Dow Jones Industrial Average’s 13 per cent year-to-date return so far. And Canadian industrials companies with a technology bent are on the minds of a number of analysts, too. With that in mind, at Cantech we’re here to give you the goods, and so in no particular order:
We start with EnWave Corp (Enwave Stock Quote, Charts, News, Analysts, Financials TSXV:ENW), an applied tech name that’s currently under water for 2021 but shows lots of growth potential, according to iA Capital Markets analyst Neil Linsdell.
EnWave, which makes commercial-scale dehydration platforms for the food, pharma and cannabis sectors and has a dried food subsidiary NutraDried, recently held virtual investor meetings with iA Capital, where management spoke of the company’s solid pipeline going into 2022. There, the company aims to sell ten large and 15 smaller versions of its REV (Radiant Energy Vacuum Dehydration) technology units including in the cannabis space where US growers have expressed interest in REV.
For Linsdell, the growth areas to watch over the next 12 months are in cannabis and in EnWave’s relationship with Dole, which will involve multiple projects in snack production and ingredients for the food giant.
“We see more institutional investors taking notice of EnWave as it has successfully navigated a difficult environment and as we anticipate further contract announcements, partnerships and return to solid profitability,” Linsdell wrote in a September 16 update to clients.
Linsdell gave ENW a reiterated “Buy” rating and maintained his $1.85 target price in his update, which translated to a one-year return of 73 per cent. (All returns are listed at the time of publication of the analysts’ respective reports.)
Next up is good natured products (good natured products Stock Quote, Charts, News, Analysts, Financials TSXV:GDNP), another name from the TSX junior board and one which caught the market’s attention late last year as the company ramps up production of its plant-based and renewable food packaging and consumer products offerings.
For those of us smart (or lucky) enough to have climbed aboard early, GDNP went from about 15 cents this time last year to as high as $1.80 by February. The stock has pulled back since and is currently at around $0.85 per share, but Beacon Securities analyst Ahmad Shaath sees lots of upside from here as demand for good natured’s packaging products should continue to be strong over the second half of 2021. Shaath also believes the stock to be trading at attractive levels compared to its industry peers — the analyst has GDNP at 2.8x 2022 EV/Sales versus its peer average at 6.6x.
“The company recently launched a slew of plant-based flexible packaging products (bin bags, zipper bags) as well as retail-packed compostable tableware (plates, bowls, hot cups and cutlery). In anticipation of stronger 2H/FY21E, the company continued to build its inventory levels and increased its staffing levels,” said Shaath in an August 26 update to clients.
With his update, Shaath maintained his “Buy” rating and $2.15 target, which represented a projected return of 126 per cent.
ATS Automation (ATS Automation Stock Quote, Charts, News, Analysts, Financials TSX:ATA) is one stock that has definitely been on the up-swing, currently reaching almost a double for its year-to-date return.
ATS, which makes custom automation and integration solutions and services, has fared well in an economic environment where companies are facing rising costs and tighter labour markets, pushing them to turn to automation to create efficiencies. That’s the take from Stifel GMP analyst Justin Keywood, who sees more good times ahead for shareholders, reiterating a “Buy” rating and upping his target from $51.50 to $54.50 in an update to clients on September 9.
Keywood the market currently doesn’t seem to have factored in ATS’ M&A opportunities in the months and years ahead, where the company has an active pipeline of about 30 targets and a potential $600 million warchest to draw upon.
“We see the potential for an additional $7-$10/share in value if ATS deploys its current balance sheet and add $3 to our target price (now $54.50) to conservatively account for the opportunity,” said Keywood.
Last up is polyethylene film company Imaflex (Imaflex Stock Quote, Charts, News, Analysts, Financials TSXV:IFX), which according to Shaath continues to execute superbly. In an August 25 report, Shaath said Imaflex’s latest quarterly results beat his estimates on both revenue and profitability for now the fifth quarter in a row.
“Profitability wise, IFX continues to show discipline on the SG&A line and continues to be successful with its printed products in the US. Return of B2B demand for some of its products in Canada following economic reopening is also positive,” Shaath wrote in his update.
“With continued strength in cash flow generation, exceptional balance sheet strength and low-leverage, IFX is in exceptional position to pursue further growth initiatives (organically and/or M&A),” he said.
With the update, Shaath maintained his “Buy” rating and $1.75 target for a projected return of 25 per cent. Year-to-date, IFX is currently up about 32 per cent.