A Canadian Cigar-Butt Paying 15% SH Yield
While trading at 0.7x TBV and 6x FCF and producing positive cash-flow for the last decade.
Get a 90% discount off Bloomberg’s No.1 competitor. Learn more here
Today’s business is a cash-machine with a management team obsessed with returning money to shareholders.
It’s also cheap.
This is a powerful combination because it means we get paid nicely to wait for the catalyst to arrive.
Check out the valuation ratios:
TBB Ratio = 0.7
EV/5Y FCF Ratio = 6
P/5Y FCF Ratio = 6
If we compare last year’s FCF figure to the current market cap we get a ratio of 5.5.
In other words, the cash-generation seems fairly consistent and stable.
This supports the case that if you bought the business at today’s price, you’d have your money back in around 6 years.
This is pretty cheap for a business that’s been operating for almost 20 years and has never failed to generate positive cash-flows in the last decade.
The market has also, generally valued it at or above its fair/liquidation values:
I calculate FCF based on OCF minus total Capex.
I also try to strip out anything that distorts the ‘real-world’ owner picture.
For example, sometimes those changes in working capital can simply be restricted cash moving around on the balance sheet.
Or, genuine obligations like lease payments need to be added back because they have gone through the financing section of the cash-flow statement.
Basically, I want to see exactly what I could extract as dividends, without impairing the day-to-day operation of the business, if I owned the entire thing.
On the asset side I also try to strip out as many non-sellable items as possible.
This includes stuff like prepayments or deferred tax assets or capitalised costs etc…
Even with these adjustments, today’s business is trading below liquidation value.
This implies, along with the low FCF multiple, that the operating business is worthless.
Perhaps the biggest counter-argument to that notion is provided by the shareholder yield.
Over the last 5 years the company has paid out dividends and conducted stock buybacks.
Using today’s market cap, and after removing the effects of SBC, this averages out to a yield of almost 18% per year.
Last year’s yield (after accounting for SBC) was almost 15%.
These returns have continued streaming back to owners throughout 2025.
When a business is generating cash from its operations and shovelling cash furiously back to its owners, it’s hard to believe that it’s worth nothing.
Let’s take a look…