A look at some small-cap stocks making news - or about to
Canada’s S&P/TSX Small Cap IndexTXTW-Ireached a record high of 1,120.58 on Friday and is up by about 35 per cent over the past 52 weeks as of Thursday’s close. The Russell 2000 in the U.S. also hit a record of 2,497.36 in Friday trading and is up 12 per cent over the past 52 weeks.
Small-cap spotlight
Richelieu Hardware Ltd. (RCH-T) shareholders will be looking for impacts from tariffs and a slowdown in Canada’s housing market when the Montreal-based company reports its third-quarter earnings next week.
Richelieu, which manufactures and distributes specialty hardware and a wide range of other products in Canada and the United States, is expected to report sales of $496.2-million for its third quarter ended Aug. 31, according to S&P Capital IQ estimates. That would be up from sales of $467.7-million for the same period last year, but below second-quarter sales of $512.2-million. Earnings per share are expected to remain unchanged year-over-year at 41 cents.
CIBC analyst Hamir Patel has a “neutral” (hold) and $37 target on the stock. He lowered his target from $38 in July, stating that a weak housing backdrop will likely weigh on organic growth in the short term. Still, he noted the company continues to expand its network, carry out mergers and acquisitions (M&A), and has raised prices to pass through tariff costs on associated products.
“While RCH trades higher than its Canadian peers (which generally have more volatile businesses), we believe the premium is justified given RCH’s dominant market share in Canada, healthy M&A pipeline and track record of returning cash to shareholders,” he wrote in a Sept. 26 note.
Richelieu chief executive officer Richard Lord and chief financial officer Antoine Auclair spoke at a CIBC’s Eastern Investor Conference in Montreal on Sept. 25, where Mr. Patel said the executives discussed their plan to keep pursuing M&A opportunities to maintain a target of acquiring about US$150-milion of annual sales.
“The company is on track to complete additional acquisitions over H2/25,” Mr. Patel wrote, adding that the company also sees potential to expand into new categories, such as acoustic products for schools, hospitals, hotels, airports and restaurants.
“Geographic expansion also remains a key pillar of the company’s growth strategy,” he wrote in summarizing the event.
Mr. Patel says organic growth is expected to remain in a range of 3-to-4 per cent in the second half of the year despite tariff challenges.
“CEO Lord noted that, while the macroeconomic environment remains soft, demand from affluent customers continues to drive high-end renovation projects, including cabinets, closets and bathrooms. That being said, regionally, British Columbia and Ontario remain weaker.”
Mr. Patel also noted that management “emphasized that project delays have become more frequent as a result of ongoing tariff uncertainty.”
He stated that the company has implemented price increases to offset tariff costs and preserve margins, noting that additional mid-to-single-digit price increases are anticipated in 2026.
Mr. Patel wrote that Richelieu expects to end fiscal 2025 with EBITDA margins of about 11 per cent, but as the market improves and volumes increase, those numbers could increase to about 13 per cent.
“RCH views its private label and exclusive products ([roughly] 40 per cent of sales), which generate 5-10 per cent higher gross margins than other products, as a key lever to maintaining strong margins,” he wrote.
The stock is down 15 per cent over the past year and has traded between a high of $43.20 and a low of $31.81. The company pays a dividend that currently yields 1.8 per cent.
Small-cap summary
Other small caps making news this week
Richards Packaging Income Fund (RPI-UN-T) announced after the market closed on Thursday that it intends to convert from a trust to a corporation and rename itself Richards Group Inc.
“The principal considerations in favour of converting the fund to a corporation are to expand the Richards Group investor base, simplify the capital structure to one that is more generally accepted and understood by global investors, and remove inherent limits on capital deployment created by the fund’s income fund structure,” it stated in a release, adding that the plan is in the best interests of the fund and fair to the unitholders.
The plan requires approval of two-thirds of unitholders who attend in person or by proxy a special meeting for the vote.
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Canada Packers Inc. (CPKR-T) shares closed down 12 per cent in their first day of trading on the Toronto Stock Exchange on Thursday.
The company, a spin-off of Maple Leaf Foods Inc.’s (MFI-I) pork business, is being led by Dennis Organ, who joined Maple Leaf Foods in February, 2023.
Maple Leaf Foods is keeping a 16 per cent stake in Canada Packers and the two companies have entered into an evergreen supply agreement. It will also be an anchor customer for Canada Packers, which will supply pork for its prepared meats business.
TD Cowen analyst Michael Van Aelst thinks Canada Packers "offers modest long-term revenue growth, solid FCF in normal markets (positive throughout a normal cycle) and an attractive dividend yield."
"As part of MFI, [the] pork business was labeled as volatile and scorned. But past extreme margin moves are explained by highly unusual events and behind it, and fundamentals are now healthy," said Mr. Van Aelst, who initiated coverage with a $20 price target.
“Early trading is expected to be volatile, though once the initial selling is over, we think CPKR should trade at 5.0-5.5 times EV/EBITDA (at least until it has a longer track record) as this would place it slightly below its peer group average,” he wrote.
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Algoma Steel Group Inc. (ASTL-T) shares closed down 5.5 per cent on Thursday – to their lowest level since re-entering the public markets in 2021 - after the company said it expects to post an earnings loss in its third quarter due to falling steel shipments.
In a release late Wednesday, the company said it expects to lose $80-million to $90-million in adjusted EBITDA in the third quarter, below the consensus projection of a loss of $76-million, due to the ongoing tariff environment and an oversupply of sheet in Canada.
RBC Dominion Securities analyst James McGarragle said in a note that government loans and an increase to its asset-based revolving credit facility would ease liquidity concerns in the medium term.
Algoma announced this week it’s pivoting early to a full rollout of its electric arc furnace (EAF) technology after securing a crucial $500-million government financing.
“We view the decision to fast-track the EAF transition as a strategic move to control costs, despite an incremental $70-million increase in project costs, and flag production will likely decrease due to the lower shipments to the U.S. Collectively, these recent measures should position Algoma for improved financial resilience and long-term operational stability,” Mr. McGarragle wrote. He cut his target to $6 from $8 following the reductions to his 2026 and 2027 forecasts and maintained his “sector perform” rating for Algoma shares.
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Skeena Resources Ltd. (SKE-T) shares closed down 5 per cent on Thursday after the exploration company announced a $125-million bought deal offering to support development of its Eskay Creek gold-silver project in British Columbia.
The company stated that it has an agreement with a syndicate of underwriters, led by BMO Capital Markets, to purchase 5.2 million shares at $24 each.
“While the government permitting process is advancing, an unanticipated delay is now expected as a result of the current B.C. government employee strike, the company stated in a release after markets closed on Wednesday. ”Negotiations with the Tahltan Central Government regarding the Impact Benefits Agreement are progressing, and while the vote to ratify the agreement was expected to take place in the coming weeks, the ultimate date for that approval remains to be scheduled upon completion of the negotiations."
The company said the offering, combined other sources of funding, “should ensure sufficient liquidity to complete permitting, which is a condition precedent to access the balance of the US$750-million financing package with Orion Resource Partners.”
Added executive chair Walter Coles: “This funding provides flexibility to pursue less expensive financing alternatives compared to the existing undrawn senior secured loan facility and represents approximately 4.5 per cent dilution to the company’s total market capitalization.”
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Calian Group Ltd. (CGY-T) shares closed up 3 per cent on Thursday after the defence technology company announced the acquisition of InField Scientific Inc., a Quebec-based engineering company.
“Effective immediately, this small, strategic acquisition expands Calian’s defence portfolio, enabling the company to deliver end-to-end electromagnetic solutions to expand into new markets, strengthen defence customer impact and support future growth,” it stated in a release.
InField is a specialist in electromagnetic environmental effects (E3), a broad term that encompasses all electromagnetic energy disciplines, according to the company.
Earlier in the week, the company and Telesat Corp. (TSAT-T) announced they would work together to develop the operational data platform for the Telesat Lightspeed Low Earth Orbit (LEO) network.
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Dye & Durham Ltd. (DND-T) shares closed up 4 per cent on Thursday after a co-founder and former CFO announced he’s seeking to nominate a new board of directors at the company as part of a plan that would see it put up for sale.
Ronnie Wahi issued a release late Wednesday stating that he wants to reconstitute the board at the company’s annual meeting.
Activist investor Engine Capital successfully pushed for a shakeup at the company last year. Engine Capital’s slate of nominees was appointed after the previous board resigned ahead of a shareholder vote. Wahi says he has tried to engage with the new board.
Dye & Durham announced a review of strategic alternatives to maximize shareholder value earlier this year, which it said may include a sale of the company, asset sales, recapitalizations or potential mergers.
CIBC analyst Erin Kyle downgraded the stock to “neutral” and her price target to $8.50 from $16.
“While we acknowledge that the strategic review process is ongoing and there is upside potential if management executes its strategic plans, the heightened uncertainty surrounding a potential sale, the ongoing renewal cycle, and the possibility of another activism campaign and board turnover lead us to move to the sidelines and await further clarity on the company’s strategy,” the analyst wrote in an Oct. 2 note.
Related: Tyler Proud, brother of former Dye & Durham CEO, calls for chairman to step down
Once targeted by activist investors, Matt Proud is now a formidable shareholder gadfly himself
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U.S. President Donald Trump‘s administration has wrestled an equity stake in Lithium Americas Corp. (LAC-T) and an ownership stake in its U.S. lithium mine, as part of a renegotiation of a financing package previously agreed upon with the Biden administration.
Late last year, Lithium Americas announced it had secured US$2.26-billion in loans from the Biden administration to build Thacker Pass. But in recent months, as the company was attempting to draw on that loan, the Trump administration took a second look and ultimately obtained both a 5-per-cent equity position in the company and a 5-per-cent stake in the mine itself.
U.S. Energy Secretary Chris Wright said in a release that the government’s stake in Lithium Americas “helps reduce our dependence on foreign adversaries for critical minerals by strengthening domestic supply chains and ensures better stewardship of American taxpayer dollars.”
Read the Globe’s full story here
National Bank Financial analyst Mohamed Sidibé said the agreement as well as a separate 5-per-cent stake in the company’s Thacker Pass joint venture with General Motors “reinforces the strategic nature of the project” and increases its “overall financial and offtake flexibility.”
Keeping his “sector perform” rating for Lithium America’s TSX-listed shares, the analyst doubled his target to a Street-high of $10 (from $5).
Canaccord Genuity’s Katie Lachapelle downgraded Lithium Americas to “sell” from “speculative buy” with a $6.25 target.
“While, on the surface, the U.S. government taking a greater financial interest in a domestic critical minerals project may be perceived as a positive, we believe that the recent run-up in the stock price is overdone and does not accurately reflect the valuation implications of the revised deal with the DOE,” she wrote.
The stock has more than doubled since news reports on Sept. 23 that the Trump administration was seeking an equity stake in Lithium Americas.
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Goeasy Ltd. (GSY-T) appointed Felix Wu as interim chief financial officer on Tuesday, effective immediately. The news comes about two weeks after current CFO Hal Khouri said he would be leaving after the company reported its third-quarter earnings in November.
The appointment was announced days after the company was the subject of a short-seller report alleging it is underreporting credit losses. The Mississauga, Ont.-based company responded by calling the report a “false and malicious short attack.”
Related: Alternative lender Goeasy denies short-seller report that alleged hidden losses
Upcoming small-cap earnings:
Oct. 9: Velan Inc. (VLN-T), Tilray Brands Inc. (TLRY-T), Richelieu Hardware Ltd. (RCH-T)
Oct. 10: MTY Food Group Inc. (MTY-T)
Oct. 22: Precision Drilling Corp. (PD-T)
Oct. 27: Morguard North American Residential REIT (MRG-UN-T)
Oct. 29: Aecon Group Inc. (ARE-T), Morguard REIT (MRT-UN-T), Allied Properties REIT (AP-UN-T)
Oct. 30: Secure Waste Infrastructure Corp. (SES-T), Black Diamond Group Ltd. (BDI-T),
Nov. 4: Minto Apartment Real Estate Investment Trust (MI-UN-T), Parex Resources Inc. (PXT-T), Cargojet Inc. (CJT-T)
Nov. 5: Curaleaf Holdings Inc.(CURA-T), BSR REIT (HOM-U-T), Killam Apartment REIT (KMP-UN-T), Canada Packers Inc. (CPKR-T),
Nov. 6: Dentalcorp Holdings Ltd. (DNTL-T), Canfor Corp. (CFP-T), Canfor Pulp Products Inc. (CFX-T), Cascades Inc. (CAS-T), Pason Systems Inc. (PSI-T)
Nov. 13: Superior Plus Corp. (SPB-T)
Nov. 14: Conifex Timber Inc. (CFF-T)
-with files from Dave Leeder and The Canadian Press