Analyst names this small Canadian stock a “Top Pick”

Paradigm Capital analyst Alexandra Ricci maintained a “Buy” rating on Tornado Infrastructure Equipment (Tornado Infrastructure Equipment Stock Quote, Chart, News, Analysts, Financials TSX:TGH) in a Sept. 2 report, raising her target price to $3.05 from $2.80 after better-than-expected second-quarter results and continued expansion in North America.

Calgary-based Tornado designs, manufactures and sells hydrovac trucks used for safe excavation around critical infrastructure.

Following a rebrand earlier this year and the $28-million acquisition of Custom Vacuum Services in May, the company is expanding its Red Deer, Alberta, plant, boosting production capacity from over 300 to more than 400 trucks annually, equal to roughly 25% of new annual truck demand in North America.

Ricci said second-quarter revenue was $45-million, up 31% year-over-year and ahead of her $38.9-million forecast and the $40.5-million consensus. EBITDA came in at $4.75-million, up 28%, compared with her $4.3-million estimate and the Street at $4.7-million.

Margins were 10.6%, down 20 basis points from last year due to higher SG&A tied to the CVS integration. The company sold 96 units in the quarter, including nine from CustomVac, versus 82 a year earlier.

“Macro tailwinds are accelerating demand for safe digging equipment, including vacuum trucks, supported by government regulations and mandates,” Ricci said, pointing to Department of Transportation rules in the U.S. requiring non-mechanical excavation near utilities.

She added that a recent global review suggests industrial demand will drive about two-fifths of the hydrovac market, expected to reach US$2.7-billion by 2031 with a 6.5% CAGR.

Ricci reiterated Tornado as a top pick for the second half of 2025, citing strong market share and long-term visibility from a new four-year private-label agreement with Ascend Hydrovacs.

“TGH controls 25 per cent of annual North American demand for hydrovac trucks and we believe its strong position in the market deserves a higher multiple,” she said.

Ricci said Tornado should generate $23.4-million in Adjusted EBITDA on revenue of $191.8-million in fiscal 2025. She expects those figures will improve to $39.4-million on $242.3-million in fiscal 2026, compared with her prior forecast of $39.1-million and $241.8-million.

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