Storage tanks cut ShawCor’s risk

Article Excerpt

SHAWCOR LTD. $3.89 is still a buy, but only for highly aggressive investors. The company (Toronto symbol SCL; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.2 million; Market cap: $273.1 million; Price-to-sales ratio: 0.2; Dividend suspended in March 2020; TSINetwork Rating: Average; www.shawcor.com) makes sealants and coatings that keep oil and gas pipelines from rusting. It also manufactures industrial products such as electrical wire and protective sheaths. Demand for ShawCor’s services are tied to oil prices and the development of new pipelines. As oil prices fell, the stock dropped to $0.64 on March 18, 2020. However, it has since rebounded with oil prices. The company also benefits from its recent purchase of ZCL Composites. That Edmonton-based firm makes fibreglass-reinforced plastic underground tanks that store fuel and wastewater. Expanding by acquisition adds risk, but ZCL is less exposed to oil prices than the pipeline-coating business. In the latest quarter, it supplied 28% of ShawCor’s total revenue. As well, ZCL’s high order backlog bodes well…