Hey Kenneth,
Calian Group has been an outperformer over the past few years. The company is a tech company which operates in four niche areas:
- Advanced Tech - satellite components and ground systems
- Health - runs clinics for the DND and Loblaws
- Learning - Training programs for DND and other public sector
- IT - consulting services in ERP and cloud.
It is worth noting, that these four segments were recently introduced to help investors better understand the company. I for one, appreciate the change.
It is a well diversified tech company has emerged as a leader in these areas. It's not flashy but what it does, it has proven to do very, very well.
It is also a small cap which can be both an advantage and disadvantage. A good thing because it flies under the radar, a bad thing because it can be prone to significant volatility. That being said, it has held up extraordinary well amid the current market volatility. Over the past week, the TSX is down by 9.7% while CGY has held at only a 3.5% loss. That is quite impressive.
The company has a solid balance sheet. It has little debt and has consistently grown earnings and revenue over the past handful of years. It pays a modest dividend (2.51% yield) which is well covered by cash flows. The company hasn't raised dividends, but that is ok. In 2016 it shifted its focus and it prefers instead to re-invest into growth opportunities - of which there are plenty.
From a valuation perspective, it is trading at a slight discount to its peers, although above its own historical averages.
Company backlog, which is a key indicator of the rate at which it is winning contracts grew by 8.3% in 2019.
The company is expected to grow at a high-single digit clip over the next couple of years. A word of caution however - the company has often missed quarterly estimates. Although slightly concerning, it can be difficult to estimate small caps expected growth rates.
Another risk - the loss of a big client such as the DND. As a small cap, it is vulnerable to the loss of big client. As it grows and expands, the risk subsides, but losing DND would definitely have a big impact on financials. On the bright side, it has a good relationship with the DND and recently re-won the training contract for the DND for the next nine years.
Overall I like what I see. It has posted decent growth, has plenty of opportunity to expand, pays a modest dividend and is trading at decent valuations.