While the broader markets are trading near all-time highs, investors can still identify undervalued stocks priced at a discount to their intrinsic value.
Valued at a market cap of $3.3 billion, TerraVest Industries (TSX:TVK) is one such TSX stock that should be part of your shortlist right now.
TerraVest Industries manufactures and sells specialized equipment in four segments. These include heating, ventilation, and air conditioning equipment (fuel tanks, furnaces, boilers), compressed gas equipment (storage vessels, trailers for propane, natural gas, ammonia), processing equipment (wellhead equipment, biogas production, water treatment), and service equipment (water management, environmental services).
The company serves diverse markets, including agriculture, energy, utilities, and transportation, in Canada, the U.S., and internationally. TVK stock went public in 2004 and has since returned 13,500% to shareholders after adjusting for dividend reinvestments. It means a $500 investment in the TSX stock soon after it went public would be worth close to $68,000 today.
Let’s see why TerraVest remains well-positioned to deliver outsized gains to shareholders in 2025 and beyond.
Is this TSX stock still a good buy?
In the fiscal first quarter (Q1) of 2025 (ended in December), TerraVest Industries demonstrated stable performance with modest growth in key metrics despite mixed market conditions.
It reported sales of $234.6 million in Q1, up 3% year over year. This growth was driven by the contributions from recent acquisitions, including Advance Engineered Products (acquired in April 2024) and Highland Tank Holdings (acquired in November 2023).
Net income rose by 58% to $30.4 million, up from $19.3 million in Q1 fiscal 2024. This substantial increase was attributed to positive contributions from acquisitions, a favourable foreign exchange gain on U.S. dollar-denominated receivables, and reduced financing costs. The earnings per share jumped to $1.42 diluted, compared to $0.94 diluted in the prior year.
Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) remained nearly unchanged at $48.9 million, while cash available for distribution improved by 5% to $24.7 million, supporting the quarterly dividend of $0.175 per share.
TerraVest’s base portfolio (excluding acquisitions) saw a 13% decline in sales to $171.0 million due to lower revenues in the processing equipment and compressed gas equipment segments, particularly for oil and gas processing equipment, transportation equipment, and domestic tanks.
Despite recent tariff uncertainties in North America’s manufacturing sector, TerraVest’s management expressed confidence in its positioning. TerraVest explained that its businesses predominantly serve domestic markets, limiting potential tariff impacts.
The company also highlighted its strong financial position following a new credit facility in October 2023 and a recent equity offering, enabling it to pursue further acquisition opportunities while targeting investments to improve manufacturing efficiency and expand product lines.
Is this TSX stock undervalued?
Analysts tracking TerraVest expect revenue to rise from $912 million in fiscal 2024 (ended in September) to $2.15 billion in fiscal 2027. Comparatively, adjusted earnings are forecast to expand from $3.29 per share to $8.71 per share in this period.
Today, the TSX stock trades at 30 times forward earnings, which is reasonable given the company’s growth estimates. If TerraVest maintains a similar multiple, it will trade around $260 per share in early 2027, indicating an upside potential of over 50% in the next two years.
Given consensus price targets, analysts remain bullish and expect the TSX stock to gain 8% over the next 12 months.
