A weekly look at some small-cap stocks making news - or about to
As of midday trading on Thursday, Canada’s S&P/TSX SmallCap Index was up about 18 per cent over the past 12 months. The Russell 2000 in the U.S. was up about 16 per cent over the same period.
Small-cap spotlight
Here’s one small cap in Canada that investors may want to put on their radar screen.
Shares of Kits Eyecare Ltd. (KITS-T) rose by as much as 11 per cent this week after the company said its fourth-quarter results appear to be stronger than expected.
The Vancouver-based company, which sells eyeglasses and contact lenses, on Monday reported preliminary revenue of $44.8-million, up 42 per cent from the year-ago period. It said glasses revenue alone rose 60 per cent year-over-year.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased year-over-year to exceed 6 per cent of revenue, the company said, adding that its cash position remains strong at $19.3-million. The company said it expects to report its final fourth quarter and full-year results in early March. (No specific date was provided).
The preliminary results are at the high end of management’s guidance range of $43-milllion to $45-million. Adjusted EBITDA exceeded its guidance of a rise of 3 to 5 per cent, Canaccord Genuity analyst Luke Hannan said in a note.
He said the growth in glasses revenue was driven by add-ons such as premium lenses and lens coatings during the quarter. He noted the company expects full-year revenue of about $159.3-million, representing year-over-year growth of 32 per cent.
Mr. Hannan, who has a “buy” and $14.50 target on the stock, said the preliminary results are positive across the board.
“The company’s ability to execute during what’s typically a promotion-heavy quarter (given Black Friday/Cyber Monday and Boxing Day/Week sale periods) has led to both top-line growth acceleration and a step up in margins, which we believe speaks to how scalable the Kits model is,” he wrote, adding he expects the company will continue to generate “robust, profitable growth.”
Ventum Capital Markets analyst Devin Schilling, who has a “buy” and $15 target on the stock, wrote that Kits is at the “forefront of transforming the eyecare industry through innovation and personalized customer experiences.”
Kits Eyecare went public in January, 2021 at an initial public offering price of $8.50 per share and hit a high of $11.75 in August, 2024. The stock is up nearly 40 per cent over the past year. The stock was trading around $8.60 as of midday Thursday). The consensus target price is $15.50, according to Refinitiv Eikon data. All seven analysts that cover the stock have a “buy” recommendation.
The company was co-founded in 2018 by entrepreneur and financier Roger Hardy, who previously co-founded Coastal Contacts, another online retailer of eyewear sold to Essilor International SA for $430-million in 2014.
Small-cap summary
Other small caps making news this week:
Birchcliff Energy Ltd. (BIR-T) shares were up 8 per cent in early trading on Thursday after the company announced that it would cut its annual dividend to 12 cents from 40 cents, a move it said would strengthen its balance sheet.
The announcement, released after markets closed Wednesday, came alongside news about its capital allocation strategy for 2025 to 2029.
“Our updated five-year plan allocates capital towards fully utilizing our existing infrastructure and firm transportation capacity to reach production of 87,500 boe/d [barrels of oil equivalent per day] in the second half of 2027, achieving production growth of approximately 14% over the next three years,” stated CEO Chris Carlsen. “This plan will allow us to improve our operating margins and netbacks and enhance the free funds flow generated by our business.”
The company also said its debt will be reduced to approximately $175-million by the end of 2029, “significantly reducing our interest costs and enhancing our flexibility to pursue other opportunities to create additional per share value.”
Two analysts upgraded their ratings on the stock Thursday. Both National Bank Financial and TD Cowen raised their ratings to the equivalent of a buy.
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Currency Exchange International Corp. (CXI-T) said its fourth-quarter revenue increased 1 per cent to US$23.1-million compared to US$22.8-million a year earlier. The expectation was for revenue of US$24.2-million, according to S&P Capital IQ.
Its net loss was US$2.8-million or 45 cents US per share, compared to net income of US$2.3-million or 36 cents US for the year-ago period, which it said was due to several non-recurring charges in Canada. Adjusted net income came in at US$2.8-million or 44 cents US per share versus US$2.3-million or 34 cents US in the prior year’s quarter.
“We view the [fourth-quarter] results as negative given the lower margins relative to our expectations,” wrote Acumen Capital analyst Jim Byrne in a note. He has a “buy” and $32 target on the stock. “The company recently announced a strategic review of its Exchange Bank of Canada as it looks to focus solely on its more profitable U.S. business lines.”
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Goodfood Market Corp. (FOOD-T) reported a 14-per-cent drop in sales for its first quarter ended Dec. 7, compared to the same period last year. Sales came in at $34.7-million, down from $40.5-million a year earlier.
The company said there was a drop in active customers and increased credits and incentives in the quarter compared to the same quarter last year. Goodfood said the decrease was partially offset by an increase in average order volume.
Its net loss was $1.7-million or 2 cents per share compared to a loss of $1.9-million or 3 cents last year. Goodfood said the slight improvement in net loss is mainly due to lower selling, general and administrative expenses, and operational efficiencies, which reduced production and shipping costs. The results were in line with analysts’ expectations, according to S&P Capital IQ estimates.
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Shares of MTY Food Group Inc. (MTY-T) got a boost this week after the company announced on Jan. 22 in the premarket that it’s raising its quarterly dividend by 18 per cent. The stock was up as much as 3 per cent since the announcement, as of midday Thursday.
The franchisor and operator of restaurants such as Jugo Juice, Manchu Wok and Mr. Sub said it will now pay a quarterly dividend of 33 cents per share, up from 28 cents. The new rate will be payable on Feb. 14 to shareholders of record at the end of the business day on Feb. 4.
It’s the 12th increase since the first quarterly dividend in 2010, Acumen Capital analyst Nick Corcoran said in a Jan. 22 note, adding the move “is in line with the capital allocation strategy and confirms the strength of the business model.”
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NFI Group Inc. (NFI-T) announced this week that it has been awarded a “significant contract” from Metrolinx, operator of the GO Transit and UP Express public transportation systems in Ontario, to provide a new fleet of coaches.
The Metrolinx award includes an initial firm order for 80, 45-foot D45 CRT diesel commuter coaches along with a number of options that were added to NFI’s fourth quarter 2024 backlog, the company said.
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Willow Biosciences Inc. (WLLW-T) announced on Monday that it has initiated a formal strategic review process to look for and evaluate a range of potential strategic alternatives, including a potential sale.
“To date, the company has been unsuccessful in procuring any form of financing on terms that are in the best interest of shareholders,” it stated, citing “challenging capital market conditions.” It said the review will be aimed at “maximizing and accelerating” the value of the company’s assets.
Upcoming small-cap earnings:
Jan. 29: High Tide Inc. (HITI-X)
Feb. 4: Canaccord Genuity Group Inc. (CF-T)
Feb. 5: Andrew Peller Ltd. (ADW-A-T; ADW-B-T); Aurora Cannabis Inc. (ACB-T)
Feb. 6: Lightspeed Commerce Inc. (LSPD-T); Rogers Sugar Inc. (RSI-T)
Feb. 7: Canopy Growth Corp. (WEED-T)
Feb. 11: Cineplex Inc. (CGX-T)
Feb. 12: Russel Metals Inc. (RUS-T); Corby Spirit and Wine Ltd. (CSW-A-T, CSW-B-T); First Capital REIT (FCR-UN-T); Precision Drilling Corp. (PD-T); SmartCentres REIT (SRU-UN-T)
Feb. 13: Mullen Group Ltd. (MTL-T)
Feb. 13: West Fraser Timber Co. Ltd. (WFG-T)
Feb. 19: Innergex Renewable Energy Inc. (INE-T); Sienna Senior Living Inc. (SIA-T)
Feb. 19: TFI International Inc. (TFII-T)
Feb. 20: Cascades Inc. (CAS-T); Chorus Aviation (CHR-T): Altus Group Ltd. (AIF-T)
Feb. 24: Spin Master Corp. (TOY-T)
Feb. 26: Element Fleet Management Corp. (EFN-T)
Feb. 27: Pason Systems Inc. (PSI-T);
March 5: Aecon Group Inc. (ARE-T); Thinkific Labs Inc. (THNC-T); BSR Real Estate Investment Trust (HOM-UN-T)
March 5: KP Tissue Inc. (KPT-T)
March 10: Nexus Industrial REIT (NXR-UN-T)