Short-term inflection, long-term compounder?

5x EV/EBITDA, a record backlog, and an investor now steering capital allocation

So far this year, I have covered names from mainly two industries: oil-related (esp. downstream and midstream) and aerospace. While I am a bottom-up investor, I do like companies with industry tailwinds. We will stay in the aerospace industry for this write-up. But while the last names have been companies with >US$150M in revenue, it’s time for a proper microcap again, with revenue well below that (Disclaimer: It is an illiquid stock).

Here is what I like about the set-up:

• Short-term profit inflection with a strong backlog and better profit mix.

• Cheap valuation with a clean, debt-free balance sheet. Shares are trading at roughly 5x EV/EBITDA.

• Long runway for growth, driven by a change in capital allocation that will unfold over the next few years, in an industry with tailwinds.

• The capital allocation will be orchestrated by a recently appointed board member, who has already proven he can drive shareholder value at a different Canadian microcap.