Undervalued Microcap with Strong Insider Buying
4.77x earnings. 2.49 EV/EBITDA.
Key Metrics:
4.77x earnings
2.49 EV/EBITDA
Share buybacks
CFO actively buying shares
A few weeks ago, I came across this company.
When I first looked at it, it looked dirt cheap, trading at just 3.6x earnings and 1.9x EV/EBITDA.
Naturally, that caught my attention.
The chart looked equally interesting.
After peaking in 2024, the stock had dropped around 70%. Yet despite the sharp decline, the underlying business was still improving. Revenues were growing, margins were expanding, and operations seemed to be running smoothly.
I also liked the industry itself: stable, boring, nothing trendy or overly cyclical.
Even better, the CFO had been actively buying shares in the open market, and management had already repurchased roughly 10% of the outstanding shares through buybacks.
Everything looked good so far.
So why was this stock trading at such a valuation?
Of course, at under $200 million market cap, a small discount is somewhat justified. But 1.9x EV/EBITDA?
That felt too extreme. The stock isn’t even that illiquid. Unlike some other microcaps, there are no days without any trading at all.
So I started digging to figure out what had caused the sell-off.
Turns out, it really came down to two main concerns. Neither of which were driven by poor operating performance. The business itself kept executing well throughout this period.
The first issue was more of a knee-jerk market reaction, something that looked scary on the surface but quickly lost its bite after a closer look.
The second concern involved tariffs. Since this is a Canadian company with a lot of U.S. revenue exposure, Trump’s tariff threats had spooked investors.
Interestingly, just a few days ago, on June 10th, the company held its latest earnings call and addressed exactly these issues.
I intentionally waited for this update before publishing my write-up, as I wanted to hear management's take and make sure nothing material had changed.
And what they said was quite encouraging.
They made it very clear that tariffs are not a real threat. Thanks to the way their production is structured and where they source their raw materials, most of their exports qualify for tariff exemptions under USMCA rules. That essentially wipes out the biggest uncertainty in this whole story.
The market liked what it heard as well, with shares jumping on the news and now being up around 15%.
Although it would have been lucky to open a position before this news, it would have been just that:
Lucky.
I prefer waiting for clarity instead of guessing. And now that we have that clarity, the thesis looks even stronger.
We’re looking at a stock that was heavily sold off due to fear and misunderstanding. The first concern gets dismissed with a bit of research. The second, the tariff issue, is no longer relevant.
Even after the recent bounce, the stock still trades at just 4.77x earnings and 2.68x EV/EBITDA. It is still down more than 60% from past highs. And with the major risks now off the table, the forward outlook looks much brighter.
Let’s dive in.