A weekly look at some small-cap stocks making news - or about to.
As of market close on Thursday, April 10, Canada’s S&P/TSX SmallCap Index was down by about 4 per cent over the past 12 months. The Russell 2000 in the U.S. was down by about 10 per cent over the same period.
Small-cap spotlight
Shareholders of Well Health Technologies Corp. (WELL-T) will be looking for more information on an investigation into one of its U.S. subsidiaries when the Vancouver-based company reports its latest earnings on Monday.
The company announced in late March that it had to delay its fourth-quarter and fiscal 2024 results because of an investigation into the billing practices of Circle Medical, a company it bought in late 2020.
In the March 28 announcement, Well said that Circle had contributed a net loss of $1.1-million to its $16.6-million consolidated net income in the 2023 fiscal year and contributed less than 2.7 per cent of its overall adjusted EBITDA. It also said it “continues to seek strategic alternatives for Circle Medical and is committed to carrying out this process in due course.”
Well’s stock fell 17 per cent the first trading day after the announcement and remains down roughly the same amount amid broader market volatility brought on by U.S. President Donald Trump’s tariff war.
In an April 8 note, Raymond James analyst Michael Freeman said the uncertainty around the investigation has put an overhang on the stock, but believes the “material financial impairment or contagion relating to this inquiry is limited.”
His team is forecasting a “conservative” $10-million settlement but plans to review its estimate after the company discloses more information, likely with its upcoming earnings release.
Well said it plans to release its fourth-quarter and fiscal 2024 earnings after markets close on Monday and will host a conference call on Tuesday.
“From here, we watch for Well to actively resolve this matter, remediate deficiencies found, and deliver on its promise of strong underlying fundamentals,” wrote Mr. Freeman, who has an “outperform” (similar to buy) and $11 target on the stock. (The average is $8.39).
“While there remain many unknowns, and our analysis is done with a backdrop of extreme market volatility, we think Well’s risk reward profile is looking more attractive here, particularly given the slate of good news delivered in the meantime,” Mr. Freeman wrote.
He’s expecting a “very strong” fourth quarter based on the company’s recently published patient visit metrics, which showed 32 per cent year-over-year growth in fiscal 2024.
Well’s fourth-quarter revenue is expected to come in at $263.4-million, according to S&P Capital IQ estimates. That would be a 14-per-cent increase from $231.2-million for the fourth quarter of 2023.
Adjusted earnings per share are expected to come in at 6 cents, up from 5 cents a year ago.
Haywood Securities analyst Gianluca Tucci recently lowered his price target on Well to $8.50 from $10 but kept this “buy” rating.
In a March 28 note, he said the company doesn’t expect the investigation to have a material effect on its cash or available resources but believes there’s some risk of a revenue restatement.
“Well continues to deliver growth driven by its accretive consolidation strategy and leading Canadian clinic position,” he wrote. “Backed by strong management and key shareholder support, we continue to view Well as the name to own in Canada for exposure to primary health care digitization.”
In a note released on Friday morning, Paradigm Capital analyst Daniel Rosenberg said the health care business should continue to be a steady performer amid the market uncertainty around tariffs, but the Circle business presents some risk for Well. He said Circle’s revenue has grown and now represents about 10 per cent of Well’s overall revenue.
“We expect risks to be contained financially but sentiment [is] hard to gauge,” he wrote. “Overall, we do not expect large impacts to financials but impacts to investor sentiment around any regulatory issues have the potential to impact shares.”
He noted that, since the March 28th announcement, Well shares are down by about 20 per cent while the S&P/TSX Composite Index is down 9 per cent and the iShares S&P/TSX Capped Information Technology Index is down 11 per cent.
“The risk is arguably priced in,” wrote Mr. Rosenberg, who has a “buy” and $8 target price on the stock.
He said investors will need to wait for the quarter to understand the impacts of the Circle investigation “and see if there is a second shoe to drop.”
In a note released on Friday morning, Paradigm Capital analyst Daniel Rosenberg said the health care business should continue to be a steady performer amid the market uncertainty around tariffs, but the Circle business presents some risk for Well. He said Circle’s revenue has grown and now represents about 10 per cent of Well’s overall revenue.
”We expect risks to be contained financially but sentiment [is] hard to gauge,” he wrote. “Overall, we do not expect large impacts to financials but impacts to investor sentiment around any regulatory issues have the potential to impact shares.”
He noted that, since the March 28th announcement, Well shares are down by about 20 per cent while the S&P/TSX Composite Index is down 9 per cent and the iShares S&P/TSX Capped Information Technology Index is down 11 per cent.
”The risk is arguably priced in,” wrote Mr. Rosenberg, who has a “buy” and $8 target price on the stock. He said investors will need to wait for the quarter to understand the impacts of the Circle investigation “and see if there is a second shoe to drop.”
Small-cap summary:
Other small caps making news this week:
MTY Food Group Inc. (MTY-T) reported higher first-quarter revenue that was ahead of expectations and a drop in same-store sales growth year-over-year.
Before markets opened on Friday, the Montreal-baesd company behind fast-food chains such as Mr. Sub and Thai Express reported revenue of $284.8-million for the quarter ended Feb. 28, up from $278.6-million for the same quarter a year earlier that ended on Feb. 29. The result was ahead of analysts’ expectations of $276.2-million, according to S&P Capital IQ.
Same-store sales decreased 1.5 per cent year-over-year in the first quarter.
“Our same-store sales held relatively stable, once adjusted for the leap year impact — demonstrating the strength and resilience of our portfolio,” MTY Eric Lefebvre said in a release.
“While adverse weather conditions temporarily pressured performance, particularly in our U.S. frozen treats segment, the start of Q2 signals a return to more normal operating conditions. Canada continues to perform consistently, underscoring the stability of our operations.”
Net income of $1.7-million or 7 cents per share compared to net income of $17.3-million or 71 cents a year earlier. The company said the year-over-year decrease is due mainly to foreign exchange losses of $21.5-million taken primarily on intercompany loans.
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Corus Entertainment Inc. (CJR-B-T) reported a wider loss and a drop in revenue for its second quarter ended Feb. 28.
Before markets opened on Friday, the TV and radio broadcaster said revenue fell 10 per cent to $270.4-million in the second quarter compared to $299.5-million a year earlier. The result was slightly below expectations of $270.9-million, according to S&P Capital IQ.
Its loss attributable to shareholders was $55.9-million or 21 cents per share compared with a loss of $9.8-million or 3 cents per share in the same period a year earlier. The expectation was for a loss of 12 cents.
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Richelieu Hardware Ltd. (RCH-T) reported higher-than-expected sales for its first quarter that ended Feb. 28, while earnings per share were below estimates.
During market hours on Thursday, the company reported sales of $441.7-million, up from $406.9-million for the first quarter of 2024. The result was above expectations of $439.2-million, according to S&P Capital IQ.
Net earnings attributable to shareholders were $13.9-million, which the company said was down 8.6 per cent from the year-ago period. Earnings per share came in 25 cents, down 7.4 per cent year-over-year. The expectation was for earnings of 33 cents.
National Bank Financial analyst Zachary Evershed said in a note that EBITDA came in at $42.4-million on 9.6 per cent margins, which was below his team’s call for 10.2 per cent, and down 30 basis points year-over-year.
“Lower margin contributions from recent acquisitions and higher marketing costs to support new product lines in retail channels dragged on profitability,” he wrote.
He also noted that the company disclosed that less than 20 per cent of its products are imported from China to the U.S., and it can source products from other countries.
“We believe [about] 25 per cent of all products, including Canadian sales, are imported from Asia (primarily China); given the higher proportion of Asian imports to service the retail channel, and the much larger size of sales to retailer in Canada ($46.3-million in Q1/25) vs. the U.S. ($7.3-million), it would make sense to see a greater percentage of RCH’s imports from China into Canada than into the United States,” he wrote.
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Reitmans (Canada) Ltd. (RET-X) reported lower revenue and swung to a loss in its fourth quarter ended Feb. 1.
After markets closed on Thursday, the retailer said its revenue came in at $204.8-million, down 7.3 per cent from the same quarter a year ago. The company said the drop was primarily due to an extra week in the fourth quarter a year earlier and a lower store count year-over-year.
It said comparable sales, which include e-commerce net revenues, were flat due to unseasonably warm weather in the first half of the quarter, which it said delayed sales of winter apparel.
Its loss was $4.2-million or 8 cents per share compared to nil in the fourth quarter of the prior year.
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Sucro Ltd. (SUGR-X) reported a big jump in revenue and trimmed its losses in the fourth quarter compared to the same period a year earlier.
Before markets opened on Thursday, the Florida-based company reported revenue of US$160.4-million, up 40 per cent from US$114.6-million in the year-earlier quarter.
Its net loss was US$6.9-million or 29 cents US per share compared to a loss of US$10.4-million or 45 cents US a year earlier.
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VitalHub Corp. (VHI-T) announced a deal to buy software company Induction Healthcare Group PLC through a court-sanctioned arrangement. It said each Induction shareholder will be entitled to receive £0.10 in cash for each Induction share held, valuing Induction at approximately £9.7 million.
“VitalHub views Induction’s product set, in particular the Zesty platform, as highly complementary to its existing asset portfolio,” the company stated in a release before markets opened on Thursday, adding that it will broaden VitalHub’s product offering, create group-wide efficiencies and improve end-user experience leading to improved patient outcomes.
“The acquisition also brings the opportunity to offer additional products in the U.K., European, Canadian, Middle Eastern, and Australian markets,” it stated.
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The North West Company Inc. (NWC-T) reported higher sales and profits for its fourth quarter ended Jan. 31, which were also above expectations.
After markets closed on Wednesday, the Winnipeg-based retail company reported sales of $674.9-million, up 4.9 per cent from $643.1-million a year earlier and ahead of expectations of $667.8-million, according to S&P Capital IQ.
Net earnings of $41.1-million or 85 cents up 18.9 per cent compared to $34.5-million or 71 cents per share a year earlier. The expectation was for earnings of 80 cents in the latest quarter.
Same-store sales were up 5.4 per cent compared to the fourth quarter last year, the company stated. Gross profit increased 9.4 per cent, which the company said was due to sales gains and a 141 basis point increase in gross profit rate compared to last year.
BMO Capital Markets analyst Stephen MacLeod kept his “outperform” rating (similar to buy) and increased his target price to $60 from $58 following the beat, driven by higher-than-expected same-store sales growth and gross margin.
We believe the company has an attractive retail franchise with a high proportion of stores in defensive markets (Northern Canada, Alaska),” he wrote.
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Theratechnologies Inc. (TH-T) said it swung to a profit and reported higher revenue for its first quarter ended Feb. 28.
Before markets opened on Wednesday, the Montreal-based biopharmaceutical company reported revenue of US$19-million, up 17.2 per cent from US$16.2-million a year earlier.
The company reported a profit of US$117,000, or zero cents per share, compared to a loss of US$4.5-million or 10 cents US a year earlier.
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Cogeco Communications Inc. (CCA-T) reported second-quarter earnings that were above expectations.
After markets closed on Wednesday, the Montreal-based telecom company reported revenue of $732.4-million for the quarter ended Feb. 28, up from $730.5-million during the same quarter a year earlier. The result was ahead of expectations of $719.9-million, according to S&P Capital IQ.
Profit of $74.7-million or $1.76 per share was down 20 per cent from $93.7-million or $2.20 a year ago. Adjusted earnings came in at $1.90 per share, which was ahead of expectations of $1.65 per share and compared to $2.21 a year earlier.
Adjusted EBITDA increased by 2.7 per cent to $356.5-million.
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AGF Management Ltd. (AGF-B-T) reported first-quarter earnings that were above expectations.
Before markets opened on Tuesday, the company reported adjusted net income of $32.1-million or 48 cents per share compared to adjusted net income of $33.7-million or 51 cents per share a year earlier. The result was ahead of expectations of 41 cents, according to S&P Capital IQ.
Adjusted revenue of $111..5-million was up from $103-million a year earlier.
Adjusted EBITDA was $47.9-million compared to $49.5-million for the same quarter a year ago.
Scotiabank analyst Phil Hardie, who has a “sector perform” (similar to hold) on the stock, lowered his target to $11.50 from $12
“An uncertain market outlook keeps us on the sidelines despite a discounted valuation,” he wrote in a note. “Given AGF’s high exposure to global equities, we see downside risk given a further market sell-off, but also believe the stock will lead other financials through an eventual market recovery phase.”
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Tilray Brands Inc. (TLRY-T) reported lower revenue and swung to a loss its third quarter ended Feb. 28. It also lowered its full-year guidance.
Before markets opened on Tuesday, the cannabis company reported revenue of US$185.8-million compared to US$188.3-million in the prior-year quarter. The result was below expectations of US$209.8-million, according to S&P Capital IQ.
Its net loss was US$793.5-million, which the company said was due largely to US$700-million of non-cash impairment due to “macroeconomic conditions and declines in market capitalization” and foreign exchange loss as well as restructuring charges, among other costs.
Its adjusted net loss was US$2.9-million compared to a profit of US$900,000 a year earlier.
Adjusted EBITDA came in at US$9-million compared to $10.2-million in the prior-year quarter and was slightly below expectations of US$9.5-million.
The company also revised its fiscal year 2025 guidance for net revenue to US$850-million to US$900 million, down from previous guidance of US$950-million to US$1-billion.
“Adjustments for constant currency and the impacts of the strategic initiatives and SKU rationalization, which total approximately US$50-million, would have resulted in expected net revenue of US$900 million to US$950 million,” the company stated.
Canaccord Genuity analyst Matt Bottomley kept his “buy” recommendation but lowered his target to US$2.50 from US$3 post-earnings.
“Although we believe the company remains on track with its previously outlined strategic initiatives, FQ3 was a bit behind our forecasts given lower-margin SKU rationalization and the decision to allocate cannabis inventory into higher-margin international channels next quarter, forgoing domestic sales in FQ3,” he wrote in a note.
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New Gold Inc. (NGD-T) announced an agreement with Ontario Teachers’ Pension Plan to acquire the remaining 19.9 per cent free cash flow interest in the company’s New Afton Mine for $300-million in cash.
Before markets opened on Monday, New Gold said it plans to pay for the transaction using cash on hand, borrowings from its existing revolving credit facility and a gold prepayment financing.
“This transaction allows us to grow in an exceptional location with no diligence or integration risk, and with no equity dilution to our shareholders”, CEO Patrick Godin stated in a release.
Canaccord Genuity analyst Jeremy Hoy, who has a “buy” and $5.50 target on the stock, said in a note that the buyback is positive for New Gold.
“In our view, it removes a modest overhang on the stock and simplifies the narrative, which is strong FCF [free cash flow] generation from two Canadian mines, coupled with recent execution on operations and projects and incremental growth potential,” he wrote in a note.
Upcoming small-cap earnings:
April 14: Well Health Technologies Corp. (WELL-T)
April 23: Cargojet Inc. (CJT-T), Precision Drilling Corp. (PD-T), Aecon Group Inc. (ARE-T), Mullen Group Ltd. (MTL-T)
April 24: Winpak Ltd. (WPK-T)
April 29: Morguard North American REIT (MRG-UN-T), Badger Infrastructure Solutions Ltd. (BDGI-T)
April 30: Morguard Real Estate Investment Trust (MRT-UN-T), Spin Master Corp. (TOY-T), Exco Technologies Limited (XTC-T)
May 1: Capital Power Corp. (CPX-T), Pason Systems Inc. (PSI-T), Andlauer Healthcare Group Inc. (AND-T)
May 5: Ero Copper Corp. (ERO-T), BTB Real Estate Investment Trust (BTB-UN-T), Gibson Energy Inc. (GEI-T)
May 6: Western Forest Products Inc. (WEF-T), Minto Apartment Real Estate Investment Trust (MI-UN-T), Boardwalk Real Estate Investment Trust (BEI-UN-T), Extendicare Inc. (EXE-T), Thinkific Labs Inc. (THNC-T), Pet Valu Holdings Ltd. (PET-T), Centerra Gold Inc. (CG-T)
May 7: Killam Apartment REIT (KMP-UN-T), Green Thumb Industries Inc. (GTII-CN), Chorus Aviation Inc. (CHR-T), Crombie Real Estate Investment Trust (CRR-UN-T), SmartCentres Real Estate Investment Trust (SRU-UN-T), First Capital REIT (FCR-UN-T), Trulieve Cannabis Corp. (TRUL-CN), Pollard Banknote Ltd. (PBL-T)
May 8: Alaris Equity Partners Income Trust (AD-UN-T), TerrAscend Corp. (TSND-T), Cascades Inc. (CAS-T), NFI Group Inc. (NFI-T), Curaleaf Holdings Inc.(CURA-T), Cascades Inc. (CAS-T), Maple Leaf Foods Inc. (MFI-I), Interfor Corp. (IFP-T), Hut 8 Corp. (HUT-T), Altus Group Ltd. (AIF-T), Canfor Corp. (CFP-T), Canfor Pulp Products Inc. (CFX-T)
May 9: Cineplex Inc. (CGX-T)
May 12: K92 Mining Inc. (KNT-T),
May 13: Grown Rogue International Inc. (GRIN-CN), Wesdome Gold Mines Ltd. (WDO-T)
May 14: Automotive Properties Real Estate Investment Trust (APR-UN-T)
May 22: Lightspeed Commerce Inc. (LSPD-T)