Exploring Undervalued Small Caps With Insider Insights In Canada July 2024

Amidst a backdrop of fluctuating interest rates and shifting market leadership, Canada's small-cap stocks have demonstrated resilience, highlighted by a sharp rally as broader indices experienced mixed results. This environment underscores the potential for undervalued small-cap companies in Canada to offer intriguing opportunities for investors looking to diversify their portfolios in line with current economic conditions.

Top 10 Undervalued Small Caps With Insider Buying In Canada

Name	PE	PS	Discount to Fair Value	Value Rating
Dundee Precious Metals	8.5x	2.9x	33.56%	★★★★★★
First National Financial	8.6x	2.9x	49.31%	★★★★★☆
Calfrac Well Services	2.3x	0.2x	27.56%	★★★★★☆
Bragg Gaming Group	NA	1.4x	23.44%	★★★★★☆
Nexus Industrial REIT	2.8x	3.4x	13.93%	★★★★☆☆
Russel Metals	9.6x	0.5x	29.38%	★★★★☆☆
Guardian Capital Group	10.4x	4.0x	31.63%	★★★★☆☆
Sagicor Financial	1.1x	0.3x	-79.79%	★★★★☆☆
Primaris Real Estate Investment Trust	11.8x	3.1x	34.03%	★★★★☆☆
AutoCanada	11.2x	0.1x	-96.40%	★★★☆☆☆

Click here to see the full list of 32 stocks from our Undervalued TSX Small Caps With Insider Buying screener.

Let's take a closer look at a couple of our picks from the screened companies.

Nexus Industrial REIT (TSX:NXR.UN)

Simply Wall St Value Rating: ★★★★☆☆

Overview: Nexus Industrial REIT is a real estate investment trust focused on acquiring, owning, and managing industrial properties across Canada, with a market capitalization of approximately CA$1.62 billion.

Operations: The entity generates a gross profit margin of 71.61% as of the latest reporting period, reflecting a steady increase from earlier margins such as 64.47% in early 2018. This trend showcases an improving efficiency in managing cost of goods sold relative to revenue, which has grown to CA$161.97 million in the same timeframe.

PE: 2.8x

Nexus Industrial REIT, a notable player in the industrial real estate sector, recently showcased a robust financial performance with Q1 sales rising to CA$41.6 million from CA$37.48 million year-over-year and net income surging to CA$43.67 million from CA$3.72 million in the same period. This growth coincides with strategic divestitures aimed at honing its industrial focus, targeting around CA$200 million from non-core asset sales expected to close later this year, thereby strengthening its balance sheet by reducing debt. Amid these developments, insider confidence is evident as they have recently purchased shares, signaling strong belief in the company's trajectory despite forecasts suggesting a potential earnings decline over the next three years. Additionally, consistent dividend payments further affirm its financial health and commitment to shareholder returns.

• Unlock comprehensive insights into our analysis of Nexus Industrial REIT stock in this valuation report.

• Gain insights into Nexus Industrial REIT's historical performance by reviewing our past performance report.

Russel Metals (TSX:RUS)

Simply Wall St Value Rating: ★★★★☆☆

Overview: Russel Metals is a metal distribution and processing company with operations primarily in metals service centers, energy field stores, and steel distribution, boasting a market capitalization of approximately CA$1.44 billion.

Operations: The company generates its revenue primarily from Metals Service Centers, contributing CA$2.95 billion, followed by Energy Field Stores and Steel Distributors with revenues of CA$982.20 million and CA$429 million respectively. Over the observed periods, it has experienced a gross profit margin ranging between 15% to 28%, reflecting variability in cost management and pricing strategies across different market conditions.

PE: 9.6x

Recently, Russel Metals demonstrated insider confidence with substantial share purchases, reflecting a positive outlook from those within. In the first quarter of 2024, despite a dip in net income and sales compared to the previous year, they declared a dividend increase and actively repurchased shares worth CAD 15 million. The company's strategic acquisition of seven service centers from Samuel is set to close in Q3 2024, potentially enhancing its market position. This move, coupled with consistent shareholder returns despite funding risks solely through external borrowing, underscores its resilience and potential for growth.

• Delve into the full analysis valuation report here for a deeper understanding of Russel Metals.

• Gain insights into Russel Metals' past trends and performance with our Past report.

Softchoice (TSX:SFTC)

Simply Wall St Value Rating: ★★★★☆☆

Overview: Softchoice is a technology company specializing in IT solutions and services, with a market capitalization of approximately $1.27 billion.

Operations: Direct Marketing generated $777.35 million in revenue, with a notable increase in gross profit margin to 41.82% by mid-2024, reflecting improved cost management relative to sales. Over recent years, the company has consistently increased its net income margin, reaching 5.21% by July 2024 despite fluctuations in operating expenses and non-operating costs.

PE: 18.6x

Recently, Softchoice demonstrated insider confidence with significant share purchases, reflecting a strong belief in the company's prospects despite its recent financial results showing a dip in sales to US$169.76 million and a net loss of US$1.03 million for Q1 2024. This move aligns with the anticipation of earnings growth projected at 17.66% annually. Their commitment is further underscored by an increased quarterly dividend to CAD 0.13, signaling potential for enhanced shareholder value ahead.

• Dive into the specifics of Softchoice here with our thorough valuation report.

• Evaluate Softchoice's historical performance by accessing our past performance report.

Make It Happen

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Curious About Other Options?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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