The Motley Fool

Soar High With This Growth Stock

The advent of e-commerce has benefited Cargojet Inc. (TSX:CJT). In the last year, the shares outperformed by appreciating 58%. I was surprised that the stock even beat, Inc. (NASDAQ:AMZN) by 136% in the last five years based solely on share price appreciation. On top of its growth, Cargojet also offers a dividend which yields about 1.7% currently.

What does Cargojet do?

Cargojet has a dominant position in providing time-sensitive overnight air cargo services with over 90% of the market share in Canada. It consolidates cargo received from customers and transports it to the appropriate destination in a safe and timely manner. A few of Cargojet’s customers include Canada Post, Purolator, and Amazon.

Cargojet operates a co-load network between 14 major Canadian cities, including Vancouver, Edmonton, and Ottawa. Since 2016, it has also started operating flights between Canada and Mexico, Canada and Colombia and Peru, and Canada and Germany.

Cargojet primarily operates its overnight air cargo service from Monday to Thursday and typically operates 197-199 days a year.

Additionally, Cargojet provides specialty charter services across North America, to the Caribbean, and to Europe.

plane on a field at night

Recent results

In 2016, Cargojet increased its revenues by 14.5% to $331 million. It also swung from a loss in 2015 to positive earnings in 2016. That said, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) was positive in both years. Specifically, its 2016 EBITDA was $75.8 million, which increased 119% from 2015.

Notably, its gross margins expanded from 13.3% in 2015 to 25.9% in 2016, which was due to the company improving the efficiency of its operations and lowering the cost in the process.

The company generated adjusted free cash flow of $49.9 million in 2016, which was nearly 281% higher than the year before. The company will pay out less than 5% of that amount as dividends this year based on its current quarterly dividend.

Dividend growth

With Cargojet’s strong cash flow generation, it’s no wonder that management was confident enough to boost its dividend twice in the past year. Projecting an annual payout of $0.77 per share in 2017 based on the current quarterly dividend, this year’s dividend would be 18.8% higher than last year.

Investor takeaway

Cargojet seems like a nice growth stock with room to grow. First, management expects to continue growing its revenues from all its businesses.

Second, the company continues to improve efficiencies in its operations, so it could further expand its margins.

Lastly, it has the capacity to grow its dividend, and we shall see if its dividend growth will turn out to be a trend.

Cargojet is not particularly overpriced as it trades at a forward multiple of about 21.2 at $45.65 per share, but it’ll be more attractive on any pullbacks.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

Fool contributor Kay Ng owns shares of Amazon. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.