If you want to invest in a safe, reliable stock with a temptingly good yield and incredible growth potential, then you should consider adding Savaria (TSX:SIS) to your portfolio. If you invest in it today, there is potential for some serious upside over the long term. Although it’s not the most well-known stock on the TSX, this could change in 2020.
A growth aristocrat
Savaria is a company that deals with the designing, engineering, and manufacturing of personal mobility products such as wheelchairs, elevators, and stairlifts for the elderly and physically impaired. The company has a growing distribution network in Canada, the United States, and Europe.
The growth potential of the company lies in the fact that every consecutive year means an expansion in its customer base. The proportion of people 65 and older in both North America and Europe is rapidly growing.
By 2068, the proportion of residents aged 65 and older in Canada will make up nearly 30% of the total population. For the U.S., the figure is 24%, and for Europe, it’s an astonishing 41%. Given that in all three regions, the population is expected to increase, primarily due to immigration, in absolute terms, this represents a tremendous increase.
As an industry leader, Savaria looks set to grow rapidly in the decades ahead. Its net earnings have tripled from FY 2014 to FY 2018. Even its growth projection for the next year looks highly promising. The company expects a 40% growth in both sales and EBITDA in 2020.
The company has also been aggressive in its growth. Just last year, Savaria acquired three businesses: H.E.S. Elevator Services, Visilift, and Garaventa Accessibility for a total of $90 million.
Investors can also take delight in the fact that the company’s stocks could become dividend heavyweights in the near future.
Right now, the yield offered is a modest 3.28%, but it is projected to increase in the years ahead. Savaria has been increasing its dividend yield for the past six consecutive years, and just last September, the company increased its dividend amount by nearly 10%. If this trend continues, you can expect the rates to double every four years.
As a matter of fact, Savaria boasts one of the highest dividend-growth rates among all TSX-listed companies with yields 3% or above.
2019 hasn’t been the best for the company, as it has struggled with integration issues following its latest acquisition.
However, things are expected to return to normal this year, and already, many prominent finance analysts have elevated the company’s stocks to a “buy” status.
Savaria is sitting at a stock price of $14.1 and a P/E ratio of 29.98. Even though the P/E ratio is quite high, the company’s earnings and growth right now are so strong that the company is potentially undervalued.
With its stock price target for the next year to be $17.32, investing in Savaria represents a potential upside of around 23%.
You would be best off holding onto the stocks for the long term and benefit from the projected increases in dividends offered by the company.