Opinions
Andrey Omelchak
Wajax Corp
WJX-T
DON'T BUY
Apr 01, 2025
Stock price when the opinion was issued
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Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Cheap at 11x earnings. A cyclical company that has never reached over 20x multiple. They continued their dividends during the pandemic. Sales missed but EPS beat by 20%. Cash flow is good. The small size presents some risks but it is doing many things right. Unlock Premium - Try 5i Free
Relatively new holding for him. Services industrials, mining, energy. Great parts and service business. Facilities throughout NA. Very well managed, strong balance sheet. Trading at a fairly competitive price. Stock fell on disappointing quarter, which opens up a great opportunity to get in. Attractive yield of 6.4%.
(Analysts’ price target is $23.75)Margins under pressure. Inventory is elevated, which makes it difficult for margins to recover in the short term. Elevated leverage. Doesn't see any great catalyst to unlock value. Intense capital requirements. Might stay in deep value territory for a long time.
Invest somewhere else and do better.
Recently added a small, 2%, position. Likes the dividend yield. Believes the industrial economy will pick up, though Canada may be slower than the US. Exposed to the Canadian industrial economy right across the country. Yield is 6.7%.
His strategy is to ride the stock up. As it does, the yield drops. So if the yield here were to drop, and he found another stock with a better yield, he'd consider switching out.
WJX is a small ($388M market cap) name with a good yield of 7.9%, and a cheap valuation of 7.7X forward earnings, but it is down 15% year-to-date, and 47% over the past year. Analyst estimates have been trending down, forward growth estimates are fairly weak, and it has a high debt load (3.6X net debt to EBITDA). Margins have been softening over the years, and its long-term stock performance has been weak (-33% over 15 years). Largley, we would like to see the name see consistency in its earnings and margins, and a reduction in its debt before becoming interested here.
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Medium-quality, in the competitive industrial space. Not a long-term compounder. Exposed to all kinds of risks including tariffs. Capital intensive; real FCF not as high as it appears.