Have you overlooked investment in commercial services? From roadworks to industrial accommodation, this sector can offer investors a route to a diversified spread of assets that are essential to the Canadian economy.
Depending on one’s sentiment toward the country’s economic outlook, the following three stocks represent some of the best avenues for exposure to this interconnected industry, with a surprising amount of growth potentially balancing out some high market ratios.
Horizon North Logistics (TSX:HNL)
Horizon North is one of the leading providers of industrial, commercial, and residential services in Canada, working with a variety of sectors, including energy, mining, forestry, and construction. Investors interested in infrastructure and commercial services should take a look at this stock, as its array of services and products represents a diversified play on Canadian industry as a whole.
Down 4.46% in the last five days, Horizon North Logistics is experiencing some interesting price fluctuations at the moment, having come through an exceptionally rough week on the TSX. The consensus is that this is an outperforming buy at the lower price: while its year-on-year revenue growth of 17.31% may not be significantly high, there is the potential for this ticker to weather a volatile market.
A forward P/E of 23.8 times earnings and P/B of 0.9 times book suggests mixed valuation, leaving value investors to decide which metric they put the most faith in. However, a meaty dividend yield of 4.91%, an estimated earnings growth rate of 75% by the end of 2020, and an average analyst rating of a moderate to strong buy make for a sound choice.
Badger Daylighting (TSX:BAD)
Despite strong Q1 results, including a 22% boost in revenue since the last quarter and a resolution to grow its business in the U.S., Badger Daylighting isn’t being rewarded by investors at the moment. Down 3.48% in the last five days, this is a tempting play for growth; indeed, a projected earnings growth rate by the end of 2020 of 36.2% suggests that this is a top pick in the construction space.
While an average analyst rating gives Badger Daylighting a fairly resounding hold signal, investors may want to consider the stock’s sound track record, potential for growth and small dividend. Year-on-year returns of 61.5% illustrate an outperforming asset, and though a P/B of five times book denotes overvaluation, the prospect of growth plus a small dividend yield of 1.15% make for a canny investment.
Waste Connections (TSX:WCN)(NYSE:WCN)
A minimal dividend yield of 0.48% counts this one out a TFSA or retirement fund option, but the potential for growth means that the long-range capital gains investor may have enough to get excited about here. Waste Connections’ returns of 27.9% beat the Canadian commercial services average, while its low five-year beta of 0.75 relative to the TSX index denotes a fairly well-insulated share price.
The bottom line
With a moderate-to-strong buy signal from market analysts and the potential to reward investors with upside, Waste Connections is one of the best stocks in the commercial services space, with an estimated one-to-three year’ earnings growth rate of 13.7% . The company has managed to grow its earnings by 35.1% over the last five years, which, while trailing the industry average of 46% for the same period, suggests a solid track record.
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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 Victoria Hetherington has no position in any of the stocks mentioned. Badger Daylighting is a recommendation of Stock Advisor Canada.