Inside the Market’s roundup of some of today’s key analyst actions
Cargojet Inc. (CJT-T) is trading at a 10-year low valuation despite enjoying a monopoly-like position in time sensitive overnight air cargo in Canada, said Stifel analyst Daryl Young.
The company’s stock has been hit by macro volatility, including the elimination de minimis loophole, which allowed packages worth less than US$800 to enter the U.S. duty free.
Cargojet’s higher mix of international cargo has also weighed on its valuation, which has sunk to around 6.6 times next year’s forecasted earnings before interest, taxes, depreciation and amortization.
“We view Cargojet’s domestic network as an “infrastructure-like” asset that benefits from structural barriers to entry, strong cost pass-throughs, CPI+ price escalators and secular e-commerce growth tailwinds,” Mr. Young said.
Its valuation should improve as trade tensions ease and tariffs come down, and a cyclical recovery in global freight materializes.
Beyond that, more meaningful upside will probably require a higher return on invested capital and greater free cash flow generation on a sustained basis, Mr. Young said.
Over the last decade, Cargojet has generated an average ROIC of around 7.5 per cent, compared to 10 per cent for the rails and 12 per cent for trucking.
Its return profile has been lower than we might have anticipated given the strong headline EBITDA margins of 33 per cent and monopoly dynamics in Canada,” Mr. Young said.
He initiated coverage of Cargojet with a “buy” recommendation and a $125 price target, which would represent 27-per-cent upside to Wednesday’s close.
Dollarama Inc. (DOL-T) is a “paragon of quality and growth” with a valuation to match, said CIBC analyst Mark Petrie.
On Wednesday, the company released first-quarter financials, which beat expectations across several metrics.
Same store sales growth of 4.9 per cent was well ahead of forecast, with a strong April and Easter season driving the gains.
First quarter earnings per share, meanwhile, beat expectations by 14 per cent.
On a call with analysts, management expressed caution over “fragile” consumer behaviour amid trade uncertainty.
“We believe DOL is well positioned to resonate with consumers – and exceed its own outlook – even in a slower demand environment,” Mr. Petrie said.
The company’s majority stake in Dollarcity is also proving a positive for growth, with the Latin American retailer’s earnings growing by 82 per in the quarter. “With the first Mexico stores set to open in the coming weeks, the outlook for Dollarcity is taking on greater importance,” Mr. Petrie said.
He raised his target on Dollarama to $204 from $174 while maintaining a “neutral” rating. “Though DOL is hardly the only quality consumer stock to be trading at well above historical levels, we have difficulty envisioning multiple expansion from here.”
WSP Global Inc. (WSP-T) continues to showcase its strength as a “best-in-class compounder” with its latest acquisition, Stifel analyst Ian Gillies said.
On Thursday, the Canadian engineering firm said it has struck a deal to buy British transport and energy consulting firm Ricardo PLC for roughly $670-million, at current exchange rates.
Ricardo had been under pressure from an activist investor unhappy with the company’s performance. “We believe the business has the potential to deliver margins close to WSP once the underperforming segments are divested,” Mr. Gillies said.
The divisions that could be slated for divestiture include the automotive and industrial as well as the performance products units. Ricardo’s rail as well as the environmental and energy segments appear to be much stronger. Combined they are expected to generate 53 per cent of Ricardo’s revenue and 65 per cent of operating profit in the current fiscal year.
Mr. Gillies raised his target on WSP to $305 per share from $300 while maintaining a “buy” rating.
“The company’s valuation is expensive (for a reason), but we continue to like the stock given its defensive qualities and its leading M&A platform.”
Several temporary pressures, like Canadian wildfires, are overshadowing what has been strong execution for The North West Company Inc. (NWC-T), CIBC analyst Ty Collin said.
The company, which operates stores across Northern Canada and Alaska, reported first-quarter results on Tuesday, showing progress across key initiatives around labour efficiency and inventory management.
But wildfires and evacuations are heavily weighing on sales in affected communities, which account for about 10 per cent of NWC’s footprint.
“While the near-term outlook is noisy, we see this as a lull ahead of more material upcoming catalysts, and view the weakness in shares as a buying opportunity ahead of this,” Mr. Collin said.
One of those catalysts is the $23-billion settlement approved in Federal Court in 2023 to compensate more than 300,000 First Nations children and their families over underfunding of on-reserve child-welfare services.
Claims for the settlement, which could provide $40,000 per person, opened in March.
“North West is uniquely positioned to benefit from an unprecedented flow of money into First Nations communities,” Mr. Collin said. “The company expects payments to begin flowing early 2026, though we continue to factor them into our estimates for late-2025.”
He lowered his target on the stock to $59 from $60 while reiterating an “outperformer” rating.
A game-changing acquisition will turn Definity Financial Corp. (DFY-T) into the fourth-largest property and casualty insurer in Canada, said Raymond James analyst Stephen Boland.
Last month, Definity announced a $3.3-billion deal to acquire Travelers’ Canadian operations, which would result in a combined $6-billion of gross premiums.
“We believe there is little chance the deal does not proceed after speaking to the company,” Mr. Boland said.
The announcement caps off years of speculation about how Definity would deploy a large excess capital position.
“While we suspect a large carrier acquisition has been management’s preferred choice for some time, such assets are uncommon in Canada, and even more rarely do they become available for sale,” Mr. Boland said.
“As such, DFY appears to have found a relatively scarce opportunity to meaningfully increase its scale and presence across the Canadian market, at a time when size is quickly becoming a prerequisite for running a successful P&C insurer.”
He raised his target on the stock to $74 from $65 while maintaining a “market perform” rating.