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The numbers tell that Stella-Jones Inc's growth is outstanding

24.03.2017 • About Stella-Jones Inc ($SJ) • By InTwits

Stella-Jones Inc is a growth stock in Industrial industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

Stella-Jones Inc showed fast growth in the last financial year. Stella-Jones Inc's revenue surged on 17.9% in FY2016. The growth also happened in EBITDA of 8.81% for the same period.

If we look for the longer period the company showed fast revenue growth of 22.0% from 2013 to 2016 annually. EBITDA surged on 19.5% from 2013 to 2016 annually.

Stella-Jones Inc ($SJ) financials for the last 5 years

mln. CAD 2012 2013 2014 2015 2016
Revenue growth, %40.9%23.6%24.8%17.9%
Gross margin, %21.2%19.5%17.9%19.7%18.2%
SG&A, %5.93%5.65%5.53%5.49%5.17%
EBITDA growth, %28.9%13.7%38.1%8.8%
EBITDA margin, %16.8%15.3%14.1%15.6%14.4%
Net Income7393104141154
Net Income margin, % 10.2%9.15%8.31%9.07%8.37%
CAPEX/Revenue, %2.06%2.59%1.94%2.40%3.44%
Net Debt/EBITDA2.9x2.4x2.5x2.7x2.6x
ROIC, %15.3%14.9%14.3%15.4%13.4%
ROE, %18.3%17.8%16.4%17.6%15.9%

Profitability and return on investment

EBITDA margin declined slightly from 15.6% in FY2015 to 14.4% in FY2016. If we look for the longer period the company showed decline of 0.900 pp from 15.3% in 2013 to 14.4% in 2016.

We call Stella-Jones Inc an attractive growth stock as together with the growth it delivers high ROIC at 13.4%. During the last three years it dropped - it was 14.9% in FY2013. Average ROIC for the last three years was 14.4%.

Stella-Jones Inc showed decline of 0.700 pp from 9.10% to 8.40% in 2016. If we look for the longer period the company's Net Income margin decreased on 0.800 pp from 9.20% in 2013 to 8.40% in 2016.

Stella-Jones Inc operates at ROE of 15.9%. For the last three years the average ROE was 16.6%.

Capital expenditures (CAPEX)

In FY2016 Stella-Jones Inc had CAPEX/Revenue of 3.44%. The company showed fast CAPEX/Revenue growth of 0.852 pp from 2.59% in 2013 to 3.44% in 2016. It's average CAPEX/Revenue for the last three years was 2.59%.

Leverage (Debt)

Stella-Jones Inc has medium debt level at 2.6x Net Debt/EBITDA to maintain high growth. In the last 3 years the company showed leverage growth of 0.23x from 2.38x in 2013 to 2.61x in 2016.

Valuation vs. comparable companies

The market closed today at 12.8x EV/EBITDA for Stella-Jones Inc which is 42.2% lower than 22.1x Industrial peer group avearge calculated on the basis of 168 companies. At the end of trading day today Stella-Jones Inc traded at 17.4x P/E which is 61.2% lower than 45.0x Industrial peer group avearge calculated on the basis of 39 companies.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 16.7x EV/(EBITDA-CAPEX) which is not surprisingly 682% higher than 2.1x Industrial industry avearge calculated based on 28 companies.

Management team

Stella-Jones Inc is headed by Brian Mcmanus as a CEO and by Eric Vachon as a CFO.

Peers in Industrial

Below we provide Stella-Jones Inc benchmarking against other companies in Industrial industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Diversified Royalty Corp ($DIV)503.3%
Electrovaya Inc ($EFL)-71.2%160.5%123.8%17.9%
WSP Global Inc ($WSP)60.3%44.0%108.9%5.2%
CEMATRIX Corp ($CVX)-5.6%7.9%76.5%-37.6%
Lumenpulse Inc ($LMP)33.9%47.0%61.8%44.1%
Median (93 companies)13.8%4.9%9.1%10.3%4.8%
Stella-Jones Inc ($SJ)40.9%23.6%24.8%17.9%

Top companies by Gross margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Pure Technologies Ltd ($PUR)77.9%78.0%77.5%75.6%
WSP Global Inc ($WSP)81.1%83.2%81.0%74.0%76.7%
FLYHT Aerospace Solutions Ltd ($FLY)57.2%59.2%62.9%69.3%
Alarmforce Industries Inc ($AF)75.0%76.5%72.2%69.2%67.4%
Epicore BioNetworks Inc ($EBN)60.8%63.2%64.1%58.1%58.1%
Median (87 companies)23.4%23.4%23.1%23.8%24.0%
Stella-Jones Inc ($SJ)21.2%19.5%17.9%19.7%18.2%

Top companies by EBITDA margin, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Canadian National Railway Co ($CNR)46.5%45.9%46.8%50.9%54.3%
Canadian Pacific Railway Ltd ($CP)26.1%32.4%43.7%48.9%51.6%
Vitreous Glass Inc ($VCI)31.4%32.2%37.8%39.0%39.8%
Photon Control Inc ($PHO)17.6%24.8%29.3%38.3%
Evertz Technologies Ltd ($ET)29.6%29.1%23.0%27.0%27.4%
Median (88 companies)9.2%8.3%7.2%7.7%9.2%
Stella-Jones Inc ($SJ)16.8%15.3%14.1%15.6%14.4%

Top companies by CAPEX/Revenue, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Newalta Corp ($NAL)21.7%34.5%35.1%42.0%9.6%
Cargojet Inc ($CJT.A)7.0%6.3%54.1%41.3%
Algoma Central Corp ($ALC)15.9%7.3%5.0%27.4%58.2%
Canadian Pacific Railway Ltd ($CP)20.2%20.2%21.9%22.7%19.0%
Canadian National Railway Co ($CNR)17.4%18.7%18.9%21.5%22.4%
Median (92 companies)3.1%3.7%3.2%3.4%3.8%
Stella-Jones Inc ($SJ)2.1%2.6%1.9%2.4%3.4%

Top companies by ROIC, %

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Biorem Inc ($BRM)-15.1%32.3%-29.7%54.4%
Vitreous Glass Inc ($VCI)30.5%32.3%48.3%51.0%52.9%
Photon Control Inc ($PHO)21.0%44.4%38.0%40.6%
Pacific Safety Products Inc ($PSP)-1.5%-11.5%3.7%38.2%12.3%
CEMATRIX Corp ($CVX)6.4%-2.4%-6.7%30.4%-15.5%
Median (93 companies)9.3%8.5%8.5%8.3%8.0%
Stella-Jones Inc ($SJ)15.3%14.9%14.3%15.4%13.4%

Top companies by Net Debt / EBITDA

 FY2012 FY2013 FY2014 FY2015 FY2016
Top 5
Conifex Timber Inc ($CFF)2.7x6.1x35.9x3.6x
Ag Growth International Inc ($AFN)2.9x-0.1x2.1x14.1x
Cargojet Inc ($CJT.A)1.5x1.5x31.5x12.9x
Progressive Waste Solutions Ltd ($BIN)4.5x3.3x2.9x10.6x3.8x
Finning International Inc ($FTT)2.3x1.8x1.4x9.4x2.5x
Median (75 companies)1.5x1.4x1.2x1.0x1.6x
Stella-Jones Inc ($SJ)2.9x2.4x2.5x2.7x2.6x