Topic: Value Stocks

Sales across Canada lift this industrial equipment supplier

This company supplies cranes, forklifts and other equipment to a range of Canadian industries.

In the latest quarter, revenue was up across the country—and for several of the company’s segments, including the mining industry. Earnings were up by more than 50%. The stock continues to benefit from ongoing restructuring efforts and a sound balance sheet. Meanwhile, the shares trade at a low 11.6 times 2018 forecast earnings and the dividend yields 3.6%.

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WAJAX CORP. (symbol WJX on Toronto; sells and services cranes, forklifts and other heavy equipment. It also provides related parts and systems such as ball bearings, hoses, diesel engines and transmissions. Founded in 1858, it is Canada’s longest-standing industrial product supply and service firms.

Wajax’s customers are spread across the resource industry, in mining, forestry and oil sands, and in the construction, manufacturing and transportation industries.

In the three months ended June 30, 2018, the company’s revenue jumped 17.4%, to $382.7 million from $325.9 million a year earlier. Revenue was up 28% in eastern Canada, 16% in central Canada and 10% in the West. Those gains occurred in a range of service categories, including construction, material handling, industrial parts, power generation and mining. In particular, ball bearing sales and revenue from the mining industry were up for all regions.

Wajax made $12.1 million, or $0.62 a share, in the latest quarter. That’s up 56.9% from $7.7 million, or $0.40.

Value Stocks: Order backlog has increased by $51 million in the latest quarter

In addition to the higher revenue, the company’s ongoing restructuring efforts contributed to the profit jump. As part of that plan, Wajax cut its workforce by 10%. In the three months ended June 30, 2018, working capital stood at $335.9 million, an increase of $23.7 million from the previous quarter ended March 31, 2018.

The company’s order backlog as of June 30, 2018 stood at $256.9 million, an increase of $51.5 million, or 25%, from the quarter ended March 31, 2018. That rise was primarily due to increases in mining, material handling and forestry orders. Year over year, the backlog increased $97 million, or 61%, from the second quarter of 2017, due to gains in construction, mining, power generation and repair services.

The company’s balance sheet is sound: long-term debt of $168.8 million is a reasonable 31% of its market cap.

Savings from the restructuring should also lift 2018 earnings to $2.33 a share. The stock trades at 11.6 times that forecast. The company pays a quarterly dividend of $0.25 and the payment appears sustainable. The annual rate of $1.00 yields 3.6%.

Recommendation in Stock Pickers DigestWajax Corp. is still a buy.

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