We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

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No one’s getting any younger. According to Statistics Canada, as of July 2023, almost 19% of the Canadian population was 65 years or older, while the median age was 40.6 years old. One top TSX stock that benefits from an aging population is Savaria (TSX:SIS).

What does Savaria do?

Savaria is a global leader in the accessibility industry. It designs, manufactures, distributes, and installs accessibility equipment, such as stairlifts for straight and curved stairs, vertical and inclined wheelchair lifts, and elevators for home and commercial use.

Futhermore, it manufactures and markets a selection of pressure management products for the medical market, medical beds for the long-term care market, and medical equipment and solutions for the safe handling of patients, including ceiling lifts and slings.

A small-cap stock with growth potential

Notably, Savaria is a small-cap stock that has used acquisitions to help grow its business. So, investors can expect higher predictability in the stock. The stock price chart below is an example that illustrates the volatility of the stock.

For example, during the pandemic, Savaria stock hit a low of $8 and change per share, which was a fall of more than 40% from its 2019 peak of over $15 per share. The more recent market correction dragged the stock to $12 and change in 2023, which was a decline of close to 30% from the peak of $17 and change that occurred earlier in the same year. After rising more than 40% from the low of $12 and change per share, the stock has recovered to the $17 level.

Since 2005, Savaria has made eight key acquisitions. And it has integrated and improved the businesses along the way.

A glimpse of what an investment in Savaria stock could be like

In the last 10 years, the Canadian stock market doubled investors’ money, while Savaria stock grew investors’ money by six times, but with lots of ups and downs in between. In the period, it also increased its dividend at a high compound annual growth rate of 15.8%. Notably, recent dividend growth has slowed, but if the company experienced another leg of growth, it could translate to strong returns and double-digit dividend growth again.

XIU Total Return Level Chart

XIU Total Return Level data by YCharts

Recent results and outlook

In the trailing 12 months, Savaria generated revenue of $766.5 million, operating income of $74.4 million, and earnings before interest, taxes, depreciation, and amortization (EBITDA) of $123.6 million, equating to an EBITDA margin of 16.1%.

By 2025, management targets revenue of about $1 billion and an EBITDA margin of approximately 20%. The market is expecting high growth from Savaria.

Valuation and upside potential

The six analysts that cover the stock have a general “strong buy” rating on the stock with a 12-month consensus price target of $22.42. This target represents near-term upside potential of over 25%.

At $17.86 per share at writing, the industrials stock is not cheap. It trades at a blended price-to-earnings ratio of almost 26, as it is expected to experience high, double-digit earnings growth over the next few years. If high growth materializes, it would be reasonable for the stock to hit the $22 target over the next 12 months.

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 Kay Ng has positions in Savaria. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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