The MoneyLetter recently surveyed equity analysts’ reports on technology stocks and found an interesting Canadian three-pack including a blue chip global information technology stock trading on both the Toronto and New York exchanges and two innovative junior technology stocks on Toronto’s venture exchange.
Montreal-based CGI Group Inc. (TSX—GIB.A; NYSE—GIB) capped off 2017 with, among other things, an acquisition south of the border. In early December, the Montreal-based global information technology and business process services company announced the acquisition of Paragon Solutions, a high-end commercial business consultancy.
With the acquisition, CGI strengthened its position in the key metropolitan growth region encompassing the Greater New York City, New Jersey and Philadelphia metro markets.
The company then proceeded to kick off the new year on a high note, with solid results for the first quarter. Revenue of $2.8 billion was 5.3 per cent higher year-over-year, while adjusted earnings before interest and taxes (EBIT) was $406.3 million, or 14.4 per cent of revenue, versus $396.7 million, or 14.8 per cent a year ago.
“The execution of our strategy is producing results that are in line with our 2018 operational plan to increase shareholder returns,” said George D. Schindler, president and chief executive officer, in a statement accompanying the quarterly results announcement. “I’m particularly pleased by our team’s performance to meet client demand for digital, a trend we expect to continue for years to come and one that is clearly generating opportunities to both build and buy.”
Odlum Brown equity analyst Steven Zicherman is also impressed by the company’s results for the first quarter—so much so that he not only keeps his ‘buy’ recommendation, but increases his 12-month target share price to $78 as well. “CGI Group reported excellent quarterly results, including earnings growth of 10 per cent year-over-year,” says Mr. Zicherman. “Fiscal first-quarter highlights include: strong client demand for IT services driven by a positive macroeconomic environment; double-digit revenue growth in Northern Europe, Canada, France and the United States.”
Hazardous waste treatment and disposal technology stock
Acumen Capital analyst Trevor Reynolds is initiating coverage of Calgary-based clean tech stock Questor Technology Inc. (TSXV—QST) with a ‘buy’ rating and $4.85 target share price.
The analyst notes: “As climate change and air quality concerns continue to grow, and Colorado continues to thrive, the market for Questor’s technology is expected to expand through legislation in other jurisdictions. The company’s incinerators have a 99.9 per cent combustion rate, with a natural air draw that automatically regulates the burner, eliminating the need for an external power source, which provides an advantage over the competition based on ease of use and costs.
“Questor’s incinerator technology, which is protected by patent until 2019, is considered to be best-in-class based on the unit’s technology that creates a vortex from air which is naturally drawn in at the bottom of the unit, and premixed with fuel and waste gas before ignition.
“Key potential catalysts moving forward revolve around Questor’s ability to target US states where oil and gas operations are prevalent, and similar aggressive air quality legislation is enacted. Wyoming recently followed suit with regulations similar to Colorado, while Ohio and Pennsylvania are also looking to implement similar legislation over the coming years. Texas would be the crown jewel.
“However, a different strategy is believed to be needed, and legislation is likely still two to three years away. Questor believes the clean technology market will grow to around $3 trillion by 2020, and become the third-largest industrial sector.”
Questor specializes in the design and manufacturing of highly efficient waste gas incinerators for sale and rental. Further upside potential is provided by Questor’s waste heat power generation and water-vaporization technology.
Radiant Energy Vacuum to dehydrate organic materials
Vancouver-based EnWave Corporation (TSXV—ENW) provides a microwave and vacuum-based alternative technology to freeze drying, and other processes that enable more nutritious and flavourful, longer-lasting foods. The technology has additional applications in the pharmaceutical and cannabis industries.
Neil Linsdell, head of research at Industrial Alliance Securities, gives the stock a ‘buy’ rating and $1.50 target share price.
“In addition to developing, building and selling the REV [radiant energy vacuum] units, in 2013 EnWave entered into a joint venture with NutraDried Creations [ND Creations, LLP] and started selling all-natural, dried-cheese snacks using EnWave’s 100kW nutraREV machine. Today, Moon Cheese is sold in over 20,000 retail locations in cheddar, gouda, mozzarella, and pepper jack flavours across Canada and the US, most notably through Starbucks, which currently represents approximately one-third of NutraDried sales, although a new trial (announced in October 2017, with shipments that began in December) in 70 Costco locations in the US Midwest could open up longer-term opportunities throughout Costco’s global 741-store network.
“EnWave’s REV technology provides material operational benefits and cost advantages to licensed cannabis producers by offering the fastest, most controllable process to dry and decontaminate cannabis in its natural state without any additives. As such, it also eliminates the costs and time needed to transport medical cannabis to specialized off-site decontamination processing facilities. Finally, this highly scalable option helps reduce capital costs by eliminating the need for secure, in-house air-drying rooms.”
EnWave is an applied technology company that licenses, builds, and installs commercial-scale dehydration platforms for manufacturing companies primarily serving the food, pharmaceutical, and cannabis sectors.
This is an edited version of an article that was originally published for subscribers in the February 2018/Second Report of The MoneyLetter. You can profit from the award-winning advice subscribers receive regularly in The MoneyLetter.
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