Canadian private equity and asset management firm Onex Corporation (TSX: ONEX) is an intriguing company to look at for a number of reasons.
The company, which owns 75% of WestJet (after selling a 25% stake to a consortium of buyers in May), has been on a bumpy ride of late. And despite declining considerably alongside many stocks during the April tariff-related selloff, this is a stock that’s rebounded nicely and is now hovering around flat for the year.
Thus, for investors who were thinking about buying Onex at the end of last year, the entry price one was afforded then is still available today. Let’s dive into whether Onex looks like a buy in such an environment right now.
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Recent performance
In terms of Onex’s recent operating performance, there are some mixed results for investors to digest.
The company recently reported its first-quarter (Q1) earnings, which came in lower on a year-over-year basis. That said, investing capital per share grew 3% over the past quarter, and the company has maintained a relatively strong liquidity position. Currently, Onex has more than $1.6 billion in cash on hand, suggesting future buybacks and investments are within the realm of possibility.
Onex’s recent stock performance has been bumpy due to the diversified nature of the private equity giant’s investments. In addition to its airline holdings, the company also owns considerable stakes in companies in the healthcare and financial sectors, which have been moving in opposite directions of late.
What to make of Onex’s valuation?
From a valuation perspective, the company does look relatively attractive. Currently trading at around 13 times trailing earnings with a small dividend yield of 0.4%, there’s a lot to like for long-term investors looking for a low-volatility way to play the private equity space.
Yes, there is a range of new products out there offering investors exposure to private markets. But the private equity space is one that tends to produce outsized returns in bull markets. So, for those who think this bull market can continue for some time, Onex may look attractive here.
That said, I think Wall Street and Bay Street analysts who have pegged the stock’s upside at around 13% from current levels are probably close to being on the money with this one. I think Onex is a stock that can deliver relatively stable and consistent returns, though they may not be eye-popping.
So, for the right investor, this stock may make sense. Personally, I think there are a few better options out there, but this is a company I think is worth at least doing some homework on.
