With the NASDAQ trading near record levels and the NYSE, S&P 500, and Dow Jones Industrial Average at record highs, it’s getting increasingly difficult for investors to find undervalued equities. With the U.S. dollar trading strongly against the Canadian dollar, investors might want to consider some of the top Canadian penny stocks to watch in 2015.
Weak Canadian Economy and the Best Canadian Penny Stocks to Watch in 2015
Based on market capitalization, the Toronto Stock Exchange (TSX) is the eighth-largest exchange in the world. It has the greatest number of security listings in North America, making it the second largest in the world.
Of those stocks traded on the TSX, roughly 60% are in mining, 18% are gold related, and 10% are in the oil and gas sectors. The TSX is also home to the world’s first exchange-traded fund (ETF).
That said, in this economic climate, it’s more important than ever to do exhaustive due diligence, especially when it comes to any penny stocks in Canada list. What was a good investing opportunity a year ago may not be on the radar this time around.
Case in point: there are currently 1,485 publicly traded mining companies on the TSX. Of that number, 589 (40%) do not meet continuous listing requirements of $50,000 in working capital. That might be the kind of information you want handy before you invest in a mining company. (Source: Visual Capitalist, March 27, 2015.)
The TSX might also be the top destination for oil and gas listings, but even there, investors need to conduct stringent due diligence. That’s because oil prices have tanked and a large number of those listings are penny stocks.
In fact, the entire Canadian economy is looking really weak right now. Stephen Poloz, head of the Bank of Canada, warned that the country’s economy could miss scaled-back expectations, saying, “the first quarter of 2015 will look atrocious, because the oil shock is a big deal for us.” (Source: Financial Times, March 30, 2015.)
Those risk-averse investors looking for the best Canadian penny stocks in 2015 may want to consider penny stocks that operate outside of volatile sectors like energy and mining. And look for Canadian penny stocks that derive a lot of their revenues outside of Canada.
For the sake of this article, a penny stock refers to any listing trading under $10.00.
Top Canadian Penny Stocks to Watch in 2015
Canadian Penny Stock #1: UrtheCast Corp. (TSX/UR)
UrtheCast (pronounced “Earth Cast”) is a technology company that has developed a high-definition video feed of Earth from the International Space Station. Its cameras will provide HD video and still imagery (displayed on the UrtheCast web platform or distributed to partners) that can be used for the monitoring of the environment, humanitarian relief, social events, agricultural land, and so on. The company has a market cap of $132 million, $11.04 million in cash, and no long-term debt.
On March 23, the company reported a fourth-quarter profit of CAD$0.09 per share on revenue of CAD$3.9 million; this represents the first quarter that the company has reported revenue. (Source: UrtheCast Corp., March 23, 2015.)
On March 11, the company announced it signed its first branded partnership with PepsiCo, Inc. to provide the world’s first full-color, ultra-high-definition video footage of Earth captured from space for the brand’s 2015 global program, the Pepsi Challenge. (Source: UrtheCast Corp., March 11, 2015.)
Canadian Penny Stock #2: DHX Media Ltd. (TSX/DHX)
DHX Media is a key player internationally in the creation of content for families and children. Its library of more than 11,000 half-hours of entertainment programming includes Yo Gabba Gabba!, Caillou, Teletubbies, In the Night Garden, Inspector Gadget, Johnny Test, Slugterra, and the Degrassi franchise. DHX Media is the owner of Family Channel, the most-viewed children’s television channel in Canada, as well as the channels Disney Junior (English and French) and Disney XD in Canada. DHX Media has offices in Toronto, Vancouver, Halifax, Los Angeles, London, Paris, Barcelona, Milan, Munich, and Amsterdam.
On February 17, the company announced that second-quarter revenue (ended December 31, 2014) increased 111% to $64.25 million, while net income increased 97% to $5.53 million, or $0.05 per share. (Source: DHX Media Ltd., February 17, 2015.)
Canadian Penny Stock #3: Redknee Solutions Inc. (TSX/RKN)
Redknee Solutions Inc. provides real-time monetization software to some of the world’s largest communications service providers. Today, the company’s software delivers converged billing, charging, customer care, and payment solutions for more than 200 service providers in 90 countries. The company has a market cap of $485 million, $46.0 million in debt, and $100 million in cash.
On February 4, Redknee announced that first-quarter revenue increased four percent year-over-year to $62.6 million. Net income totaled $2.0 million, or $0.02 per share, versus a net loss of $3.1 million, or a $0.03 loss per share. The company also announced its order backlog grew three percent to $171 million. (Source: Redknee Solutions Inc., February 4, 2015.)
Canadian Penny Stock #4: Savaria Corporation (TSX/SIS)
Thanks to the aging population, there will be an increased need for mobility products in all forms: elevators, lifts, vehicles, etc. Savaria operates in the accessibility industry in Canada, the United States, Australia, South America, and Europe. The company’s products include stair lifts, vertical and inclined platform lifts, and elevators for home and commercial use. It also manufactures lowered-floor minivans to accommodate wheelchairs, home elevators, commercial elevators, and the like.
The company has a market cap of $161 million, total cash of $16.8 million, long-term debt of $15.35 million, and operating cash flow of $9.21 million.
On March 26, Savaria announced record fourth-quarter and full-year results. Fourth-quarter revenue increased 12.4% to $21.5 million, while net income climbed 52% year-over-year to $1.71 million, or $0.06 per share. For the full year, revenue was up 9.5% at $82.9 million, while net income was up 20.6% at $6.3 million, or $0.23 per share. (Source: Savaria Corporation, March 26, 2015.)
Canadian Penny Stock #5: DIRTT Environmental Solutions Ltd. (TSX/DRT)
DIRTT Environmental Solutions designs, manufactures, and installs customized prefabricated interiors. DIRTT (Doing It Right This Time) creates customizable, sustainable architectural interiors that are environmentally sustainable, flexible, and highly productive. It serves small owner-managed businesses and large multinational corporations in various industries, including healthcare, education, financial services, government and military, manufacturing, non-profit, oil and gas, professional services, retail, and technology.
The company has a market cap of $500 million, total cash of approximately $40.0 million, total debt of around $10.0 million, and operating cash flow of $13.8 million.
In early March, DIRTT announced record results for the fourth quarter and year ended December 31, 2014. Fourth-quarter revenue increased 69.4% year-over-year to $57.9 million, and DIRTT announced fourth-quarter income of $6.5 million, or $0.05 per share. During the fourth quarter of 2013, the company posted a loss of $10.1 million, or a $0.25 per share. (Source: DIRTT Environmental Solutions Ltd., March 4, 2015.)
Full-year revenue was up 34% at $187.3 million, while net income for the period came in at $5.9 million, or $0.08 per share. In 2013, DIRTT reported a loss of $16.5 million, or a $0.42 loss per share.
As I mentioned earlier, the Canadian economy is weak at this time, affected largely by weak oil and gas prices and low precious metals prices. As a result, this penny stocks in Canada list is meant as an example of what investors may look for in Canadian penny stocks at this time. As always, due diligence is key.