The ongoing pullback in the equity markets allows Canadian investors with a long-term horizon to buy quality stocks at a lower multiple and benefit from outsized gains when sentiment recovers.
In this article, I have one such TSX stock that Canadian investors can buy with $1,000 right now. Let’s see why.
Is this Canadian stock a good buy today?
Valued at a market cap of $485 million, Dexterra Group (TSX:DXT) provides infrastructure support services across Canada. It has two primary business segments:
- Support Services (operation, maintenance, and hospitality solutions)
- Asset-Based Services (workforce accommodation, access solutions, and modular space rentals)
Dexterra serves diverse clients, including remote operations, governments, and natural resources sectors. The company has increased its sales from $477.8 million in 2020 to $1 billion in 2024.
In the last five years, the TSX stock has returned 377% to shareholders. After adjusting for dividend reinvestments, cumulative returns are closer to 520%. Despite these market-thumping gains, the Canadian stock also offers you a tasty dividend yield of 4.5%.
In 2024, Dexterra Group reported record revenue from continuing operations of $1 billion and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $107 million as it completes its transformation into a North American support services leader.
In recent years, Dexterra divested its Modular Solutions business and acquired CMI Management to streamline operations and provide investors with a clear strategic direction.
“We delivered a return on equity in 2024 of 13.3% from continuing operations and returned $30 million or about 40% of our free cash flow to shareholders through dividends and share buybacks,” said Chief Executive Officer Mark Becker during the earnings call.
In the fourth quarter (Q4), the Support Services segment posted 18% revenue growth and improved adjusted EBITDA margins to 8.8%, compared to 7% in the same period last year.
Asset-Based Services saw expected decreases in revenue compared to 2023 due to a return to normalized wildfire activity. Despite lower volumes, the segment maintained high equipment utilization rates above 90%.
Dexterra ended 2024 with a net debt of $68 million, indicating a debt-to-EBITDA ratio of 0.68 times. A low leverage ratio provides the company with financial flexibility for future acquisitions and share repurchases. Dexterra bought back 1.2 million shares for $8 million in 2024 and plans to remain opportunistic with buybacks in 2025.
Is the TSX stock undervalued?
Looking ahead, management expects 5-7% organic growth in Support Services and 2-5% growth in Asset-Based Services for 2025, with a target return on equity of 15%.
Dexterra is well-positioned to manage potential tariff impacts, as the majority of its materials are sourced domestically, and inflation adjustment mechanisms are built into its contracts.
Analysts tracking the TSX dividend stock expect it to grow EPS from $0.58 in 2024 to $0.85 in 2026. Priced at 9.1 times forward earnings, DXT stock is relatively cheap, given that it also pays shareholders an attractive annual dividend.
Analysts remain bullish on Dexterra stock and expect it to gain 39.4% over the next 12 months, given consensus price targets. If we include its dividends, cumulative returns could be closer to 43%.
