The growth of Linamar Corp is hard to miss
11.03.2015 • About Linamar Corp (
$LNR) • By InTwits
Linamar Corp is an attractive growth stock in Consumer, Cyclical industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Linamar Corp showed fast growth in the last financial year. The company's revenue surged on 16.0% in FY2014. At the same time Linamar Corp well managed its profitability and showed even faster growth in EBITDA of 28.1% for the same period.
If we look for the longer period Linamar Corp showed fast revenue growth of 13.4% from 2011 to 2014 annually. EBITDA surged on 27.3% from 2011 to 2014 annually.
Linamar Corp ($LNR) financials for the last 5 years
| mln. CAD | 2010 | 2011 | 2012 | 2013 | 2014 |
|---|
| Revenue | 2,229 | 2,861 | 3,222 | 3,595 | 4,172 |
|---|
| Revenue growth, % | | 28.4% | 12.6% | 11.6% | 16.0% |
|---|
| Gross margin, % | 10.7% | 10.2% | 12.0% | 14.1% | 15.9% |
|---|
| SG&A, % | 5.12% | 5.01% | 5.14% | 5.10% | 5.24% |
|---|
| EBITDA | 281 | 335 | 409 | 539 | 690 |
|---|
| EBITDA growth, % | | 19.2% | 22.3% | 31.5% | 28.1% |
|---|
| EBITDA margin, % | 12.6% | 11.7% | 12.7% | 15.0% | 16.5% |
|---|
| Net Income | 91 | 101 | 146 | 230 | 321 |
|---|
| Net Income margin, % | 4.06% | 3.54% | 4.53% | 6.39% | 7.68% |
|---|
| |
| CAPEX | 265 | 349 | 367 | 245 | 264 |
|---|
| CAPEX/Revenue, % | 11.9% | 12.2% | 11.4% | 6.81% | 6.32% |
|---|
| Debt | 422 | 656 | 719 | 544 | 437 |
|---|
| Cash | 79 | 99 | 82 | 130 | 194 |
|---|
| Net Debt/EBITDA | 1.2x | 1.7x | 1.6x | 0.8x | 0.4x |
|---|
| |
| ROIC, % | 10.2% | 10.9% | 12.9% | 17.0% | 21.7% |
|---|
| ROE, % | 10.9% | 11.5% | 14.9% | 19.1% | 21.2% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. The company showed fast EBITDA margin growth of 1.50 pp from 15% to 16.5% in 2014. If we look for the longer period Linamar Corp showed fast EBITDA margin growth of 4.80 pp from 11.7% in 2011 to 16.5% in 2014.
We call Linamar Corp an attractive growth stock as together with the growth it delivers high ROIC at 21.7%. Three years ago it was considerably lower at 10.9%. Average ROIC for the last three years was 17.2%.
The company's Net Income margin surged on 1.30 pp from 6.40% to 7.70% in 2014. If we look for the longer period Net Income margin surged on 4.20 pp from 3.50% in 2011 to 7.70% in 2014.
Linamar Corp operates at ROE of 21.2%. It's average level of ROE for the last three years was 18.4%.
Capital expenditures (CAPEX)
To this fast growth the company had to invest in CAPEX.The company's CAPEX/Revenue was 6.32% in FY2014. The company showed big decline in CAPEX/Revenue of 5.86 pp from 12.2% in 2011 to 6.32% in 2014. It's average CAPEX/Revenue for the last three years was 8.17%.
Leverage (Debt)
Having such a fast growth profile Linamar Corp keeps low debt level at 0.4x Net Debt/EBITDA. In the longer period Linamar Corp showed big decline in leverage of 1.31x from 1.66x in 2011 to 0.35x in 2014.
Valuation vs. comparable companies
The market closed today at 7.4x EV/EBITDA for Linamar Corp which is 54.6% lower than 16.3x Consumer, Cyclical peer group avearge calculated on the basis of 111 companies. At the end of trading day today Linamar Corp traded at 15.2x P/E which is 40.2% lower than 25.4x Consumer, Cyclical peer group avearge calculated on the basis of 32 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 12.0x EV/(EBITDA-CAPEX) which is not surprisingly 203% higher than 4.0x Consumer, Cyclical industry avearge calculated based on 32 companies.
Management team
Linamar Corp is run by Linda S Hasenfratz as a CEO and by Dale Schneider as a CFO. Linda S Hasenfratz is a longstanding CEO having spent 12.4 years with the company. Dale Schneider's tenure is 3.2 years as a CFO.
Peers in Consumer, Cyclical
Below you can find Linamar Corp benchmarking vs. other companies in Consumer, Cyclical industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Boyuan Construction Group Inc ($BOY) | | 26.3% | 1.7% | 10.5% | 31.6% |
| Hudson's Bay Co ($HBC) | | 2.7% | 3.5% | 5.9% | 28.1% |
| D-BOX Technologies Inc ($DBO) | | 47.2% | 32.1% | 61.4% | 23.4% |
| DHX Media Ltd ($DHX.A) | | 36.9% | 31.1% | 33.9% | 19.4% |
| Leon's Furniture Ltd ($LNF) | | -3.9% | -0.1% | 148.4% | 18.5% |
| |
|---|
| Median (46 companies) | | 7.7% | 4.6% | 3.7% | 5.4% |
|---|
| Linamar Corp ($LNR) | | 28.4% | 12.6% | 11.6% | 16.0% |
Top companies by Gross margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Restaurant Brands International Inc ($QSR) | | | | 69.7% | 87.0% |
| Imvescor Restaurant Group Inc ($IRG) | 95.5% | 96.2% | 94.2% | 89.7% | 84.9% |
| Cineplex Inc ($CGX) | 62.3% | 63.9% | 63.4% | 64.1% | 65.1% |
| Air Canada ($AC) | 66.5% | 62.3% | 62.4% | 63.5% | 64.0% |
| Sportscene Group Inc ($SPS.A) | | 69.5% | 70.6% | 65.0% | 63.3% |
| |
|---|
| Median (42 companies) | 31.5% | 37.0% | 37.6% | 36.5% | 36.6% |
|---|
| Linamar Corp ($LNR) | 10.7% | 10.2% | 12.0% | 14.1% | 15.9% |
Top companies by EBITDA margin, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Westshore Terminals Investment Corp ($WTE) | | | 49.7% | 65.9% | 60.9% |
| Great Canadian Gaming Corp ($GC) | 20.6% | 34.1% | 16.8% | 41.1% | 40.1% |
| MTY Food Group Inc ($MTY) | 38.6% | 32.2% | 36.3% | 38.7% | 37.0% |
| Whistler Blackcomb Holdings Inc ($WB) | 27.3% | 34.8% | 36.0% | 35.9% | 36.4% |
| Imvescor Restaurant Group Inc ($IRG) | 28.2% | 26.5% | 27.9% | 27.3% | 25.5% |
| |
|---|
| Median (44 companies) | 10.6% | 10.2% | 9.7% | 10.2% | 9.8% |
|---|
| Linamar Corp ($LNR) | 12.6% | 11.7% | 12.7% | 15.0% | 16.5% |
Top companies by CAPEX/Revenue, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| WestJet Airlines Ltd ($WJA) | 1.9% | 3.9% | 7.9% | 19.5% | 18.6% |
| Exchange Income Corp ($EIF) | 23.9% | 8.2% | 7.9% | 15.8% | 15.5% |
| Gildan Activewear Inc ($GIL) | 9.7% | 9.0% | 3.7% | 7.4% | 12.1% |
| Whistler Blackcomb Holdings Inc ($WB) | 3.3% | 3.7% | 4.5% | 10.2% | 12.0% |
| Air Canada ($AC) | 1.7% | 1.9% | 3.7% | 7.8% | 11.3% |
| |
|---|
| Median (46 companies) | 2.2% | 3.0% | 2.7% | 2.8% | 2.2% |
|---|
| Linamar Corp ($LNR) | 11.9% | 12.2% | 11.4% | 6.8% | 6.3% |
Top companies by ROIC, %
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Westshore Terminals Investment Corp ($WTE) | | | 24.0% | 37.8% | 35.0% |
| Iplayco Corp Ltd ($IPC) | -11.7% | -35.4% | 23.0% | 58.5% | 33.6% |
| BRP Inc/CA ($DOO) | | | 29.8% | 26.8% | 32.3% |
| Jean Coutu Group PJC Inc/The ($PJC.A) | 32.8% | 33.5% | 34.4% | 29.8% | 29.2% |
| Dollarama Inc ($DOL) | 14.2% | 17.7% | 21.6% | 24.7% | 26.5% |
| |
|---|
| Median (46 companies) | 13.7% | 11.1% | 11.0% | 12.4% | 10.0% |
|---|
| Linamar Corp ($LNR) | 10.2% | 10.9% | 12.9% | 17.0% | 21.7% |
Top companies by Net Debt / EBITDA
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Top 5 |
|---|
| Restaurant Brands International Inc ($QSR) | | | | 3.8x | 33.6x |
| Hudson's Bay Co ($HBC) | 0.0x | 8.7x | 3.8x | 3.6x | 19.1x |
| Performance Sports Group Ltd ($PSG) | | | 2.6x | 3.5x | 12.2x |
| Taiga Building Products Ltd ($TBL) | 2.8x | 7.5x | 7.7x | 7.2x | 8.6x |
| Discovery Air Inc ($DA.A) | 4.8x | 3.2x | 2.8x | 3.8x | 7.5x |
| |
|---|
| Median (39 companies) | 0.5x | 0.9x | 0.7x | 1.6x | 1.6x |
|---|
| Linamar Corp ($LNR) | 1.2x | 1.7x | 1.6x | 0.8x | 0.4x |
