People seem to like when I write about Valeant or when I write about a top pick from Donville. But, even though Jason Donville has talked about most of the great companies in Canada, there's some interesting names about which he never talked. And I've found one of those...
About 10 days ago, I was screening on Google Finance for some businesses with a low beta and high growth. I've found the usual names like Dollarama and Couche-Tard (for me, they're the perfect examples of very low beta/great growth in Canada).
Somewhere among the short list of stocks I got, I found a name I'd never heard of: Hardwoods distribution (HWD.TO)
Looking at the name, you may think: "Oh no. Not a 19th century company that cuts and sells trees."
Well, not exactly. Hardwoods Distribution is a company that works in the whosale distribution of hardwood lumber, plywood and related products to the
woodworking industry. The company has been active for more than 50 years.
If someone is looking for momentum, Hardwoods Distribution seems to be a very good choice (see the numbers below). The good numbers are partly the results of 2 factors: the low exchange rate for canadian dollar and the strength in housing market in the states (about 75% of the sales are in USA and 25% in Canada).
According to Reuters, here's some numbers:
Beta: 0,18 (pretty low)
PE ratio: 15
Forward PE ratio: 13
Dividend yield: 1,2%
Dividend growth rate: Almost tripled over the last 4 years (from 0,02$ in march 2012 to 0,055$ today)
Payout ratio: 17% (pretty low)
EPS growth rate last 5 years: 79%
EPS growth last quarter VS same period last year: 59%
ROE last 5 years: 16
Long term debt: Very low
Number of shares oustanding: Very little dilution over the last 5 years
The numbers look great and the company seems to be very well managed.
The business may be related to natural resources, but to me, it looks a lot like Stella Jones: a company that produces construction materials with primary resources. The biggest difference between the two companies is that Hardwoods Distribution is much less known than Stella Jones and is thus avalaible at a much lower price.
Stella Jones has a similar ROE (very slightly higher than HWD), a similar payout ratio, an impressive growth (but lower than HWD), a low Beta (a little higher than HWD) but a much higher PE ratio and a much higher debt too.
It's not the kind of company in which Jason Donville usually invests. He's much more into technology and healthcare.
But I think that, at the actual price, HWD is a pretty high reward/low risk business.