Hi there,
I haven't been a fan of CJR.B for a number of years. In fact, I've been warning investors on the fact it had all the characteristics of a falling knife and value trap. I also warned against a dividend cut which inevitably came. For some reason, Corus has been an investor 'darling' for years and investors seem attracted to the stock.
I suspect it has to do with low valuations. Since the company's Shaw acquisition it has been mired in a steady downtrend and is now trading at a fraction of the price it was trading at but a few years ago. Its share price has lost 83% of its value over the past three years.
The pandemic hasn't helped, and it is down 53% thus far in 2020. Is it doomed for failure? Quite possibly. There are however a few brightspots. For starters, it still generates decent free cash flow pf approximately $300 million annually. Considering the company has a market value of only $518 million it certainly looks cheap. In fact, on almost ever metric, forward P/E, P/B, P/S the company looks like it is trading at depressed valuations.
The problem with Corus is that the is no clear path the growth. It has been generating near flat cash flow, revenue and earnings since the Shaw acquisition. Without meaningful growth, stocks aren't attractive. This is further compounded by the fact that Corus is also facing negative sentiment. It is fighting an uphill battle as investors have been spurned on their investment. They were fooled once, but it will take some meaningful changes for them to have renewed confidence in the stock.
WIll the company go belly-up? Not likely, it still has a strong foundation and as mentioned, generates strong FCF. However, without meaningful growth the company is likely to continue struggling. Can it bounce from these lows? Potentially, as there is no discounting the company's cheap valuations. The question is, do you want to wait for the company to bounce or is it best to cut your losses, and invest your money elsewhere. Remember, a 50% loss will require a 100% rebound to recoup those losses. An 80% loss? Requires a 500% return moving forward.
Mat