Sometimes Boring Is Good

You shouldn’t overlook companies such as Cascades Inc. (TSX:CAS) just because they are boring.

| More on:

With Easter around the corner, some of you might partake in family dinners, where you will have to endure your brother-in-law raving about cryptocurrencies and marijuana stocks. Personally, I like to keep it simple when it comes to investing. I try to ignore trends that often vanish as quickly as they appeared. Some might even call my approach to investing boring.

Peter Lynch, one of the greatest investors of all time, actively sought boring. Here is what he said on the subject: “The perfect stock would be attached to the perfect company, and the perfect company has to be engaged in a perfectly simple business, and the perfectly simple business ought to have a perfectly boring name. The more boring it is, the better.

Today, let’s look at a boring company and determine if it is worthy of a spot in your portfolio.

Cascades Inc. (TSX:CAS)

I can’t think of a more boring company than Cascades. It has been around since 1964 and produces, converts, and markets packaging and tissue products that are composed mainly of recycled fibres. The company employs 11,000 people who work in close to 90 production facilities located in North America and Europe. Yet, despite being boring, it has been on a nice growth trajectory over the last few years.

The company recently capped off another great year, as sales were up 11% compared to 2016. It also laid out its 2017-2022 strategic plan, and it appears to include measures that should be beneficial to the company’s growth going forward. These include growing its presence in the United States, increasing their profitability margin from 10% to 15%, and continuing to invest heavily in innovation.

In terms of valuation, Cascades trades at approximately three times trailing earnings. We have to keep in mind, however, that the ratio is affected by unusually high earnings posted by the company due to the sale of its stake in Boralex Inc. A more reliable ratio not distorted by fluctuating earnings is the price-to-book ratio, and good news: Cascades currently trades at book value!

Cascades provides great geographic diversification, as it derives 39% of its sales in both Canada and the United States, and the remaining 22% come from Europe and other regions. If you are environmentally conscious, you would be pleased to know that the company takes the environment to heart. It established a sustainable development plan, and 80% of its products are made with recycled fibres.

Cascades also pays out a steady dividend, which has been uninterrupted since 2003. However, the company has not rewarded shareholders with dividend increases during that period, and the current yield stands at a meagre 1.14%. Hopefully, the company will consider increasing the dividend over time as it continues to mature.

Foolish bottom line

Cascades might not get the same attention in conversations in cocktail parties as cryptocurrencies or marijuana stocks, but it’s a lot more stable and is a worthy pick for long-term investors. As boring as the company may be, its 354% return over the last five years is anything but boring.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Patrick Giroux has no position in Cascades.

More on Investing

Target. Stand out from the crowd
Dividend Stocks

The Best Stocks to Buy With $1,000 Right Now

Canadian Natural Resources stock and another reliable dividend stock could be best buys for high investment return right now.

Read more »

oil tank at night
Energy Stocks

The Best Canadian Energy Stocks to Buy for Dividends

Even growth investors will want to have these high-yielding energy stocks on their watch lists.

Read more »

Investing

Buy the Dip: 3 Stocks to Buy Today for a Big Profit in 5 Years

Here are three Canadian stocks you can buy now at a discounted value and hold for the next five years for big…

Read more »

Businessman holding AI cloud
Tech Stocks

Before You Buy NVIDIA, Here’s an AI Stock I’d Buy First

NVIDIA (TSX:NVDA) is a great company, but one TSX AI stock is a better value.

Read more »

Dots over the earth connecting the world
Investing

Canadian Stocks Set to Dominate the Global Market

Here's why I would personally overweight Canadian stocks in my portfolio.

Read more »

stock research, analyze data
Investing

2 Top TSX Stocks I’m Considering Buying in September 2023

Bank of Montreal (TSX:BMO) and Canadian Pacific (TSX:CP) are intriguing TSX stocks worth consideration, even as they recover off their…

Read more »

Technology
Stocks for Beginners

Canadian Investors: 2 Oversold Canadian Stocks to Buy Now

These Canadian stocks continue to trade in oversold territory, creating a prime opportunity for investors to pick them up today.

Read more »

Make a choice, path to success, sign
Investing

2 TSX Stocks to Buy This Month — and 1 to Avoid

Are you interested in buying stocks this month? Here are two you should consider and one you should avoid in…

Read more »