Author: Brian Donovan

What are we looking for?

The recent U.S. tariff threats have us asking how we can do a better job to buy Canadian and be self-sufficient. With that in mind, I looked at various parts of Canada’s food supply chain, including fertilizer, equipment and food packaging, for this Number Cruncher. Given the changing nature of these tariff threats, modelling all scenarios is beyond the scope of this column, so I included the percentage of sales to the United States for each of the companies listed.

The screen

We used StockCalc’s screener to select the top 10 listed stocks from this group by market capitalization on the Toronto Stock Exchange. We then used StockCalc’s valuation tools to calculate fundamental (or intrinsic) valuation for each stock to see if it is undervalued or overvalued compared with its price.

Overview of the techniques used:

• Discounted cash flow (DCF value) is a valuation technique in which cash flow projections are discounted back to the present to calculate value per share;
• a price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
• an adjusted book value (ABV) is calculated by multiplying book value per share by a stock’s 10-year average price-to-book ratio;
• if a stock has analyst coverage, we may look at the consensus target price.

More about StockCalc

StockCalc is a fundamental valuation platform with tools to calculate and report on value per share for thousands of public companies listed on major North American stock exchanges. StockCalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to StockCalc using the promo code Globe30, which offers a 30-day free trial and special pricing for the second month.

What we found

Companies in this group are involved in Canada’s food supply chain from fertilizer, to equipment, through to food packaging. Our food supply chain can be greatly impacted, directly and indirectly, by U.S. tariffs, from direct costs on producers, to direct and indirect costs on processing and distribution. Data provided is from best available information at the current time.

Let’s look at a few of these companies

Saputo Inc. SAP-T is a global dairy processor with headquarters in Canada (28 per cent of sales for the 2024 fiscal year ended March 31, 2024) and operations in the U.S. (45 per cent), Europe (6 per cent) and other international markets (21 per cent). It sells cheese, cream, fluid milk and other dairy products.

Saputo president and chief executive officer Carl Colizza says he doesn’t think Canada’s dairy supply management system will be up for negotiation despite the tense trade talks with the U.S. “We believe the Canadian government understands the importance of supply management in the Canadian landscape, and we don’t think it’s going to be a negotiating element as we move forward.” We see from the table that current valuation shows upside to the stock price.

Ag Growth International Inc. AFN-T manufactures portable and stationary grain handling, storage and conditioning equipment, including augers, belt conveyors, grain storage bins, grain handling accessories, grain aeration equipment and grain drying systems. It has manufacturing facilities in Canada, the U.S. and in other countries. The U.S. comprises 40 per cent of sales. Our models show our weighted valuation to be around the current stock price.

Looking at a few other companies on our list to understand them a bit more:

Nutrien Ltd. NTR-T is the world’s largest fertilizer producer by capacity. Nutrien produces the three main crop nutrients – nitrogen, potash and phosphate – although its main focus is potash, in which it is the global leader in installed capacity, with a market share of about 20 per cent.

Ceres Global Ag Corp. CRP-T is headquartered in Golden Valley, Minn., and together with its affiliated companies, operates 11 locations across Saskatchewan, Manitoba and Minnesota. These facilities have an aggregate grain and oilseed storage capacity of approximately 29 million bushels.

Buhler Industries Inc. BUI-T manufactures agricultural equipment, including tractors, bale carriers, grain augers, snow blowers, tillers, finishing mowers, feed processing equipment, tillage equipment and hay and forage equipment.

You can see in the accompanying table the percentage difference between each stock’s recent close price and its intrinsic value. The StockCalc Valuation column is a weighted calculation derived from our models and analyst target data, if that is used.

Investing involves risk. StockCalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.

Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.