Investors have hammered Research In Motion Ltd. in recent weeks as the company slashed its earnings forecasts and underwhelmed with the launch of its BlackBerry PlayBook tablet. As shareholders abandon the Canadian technology darling amid growing analyst opinion that things will not soon get better for the Waterloo, Ont.-based company, other Canadian tech stocks could serve as safe harbours.
With earnings multiples ranging from the mid-teens to the low twenties, some are more expensive than others, though they may be no more risky than RIM at this point. But considering the combined market capitalization of every non-RIM technology outfit in Canada is perhaps still less than the US$25-billion in market value still commanded by the BlackBerry maker, those safe harbours might not be so easy to find.
Financial Post tech reporter Jameson Berkow managed to unearth five such companies that are managing to make money despite not making headlines. All EPS figures are diluted/trailing 12 months for F2010 as most have yet to report first quarter 2011 earnings.
Open Text Corp. (OTEX/TSX)
TECSYS Inc. (TCS/TSX)
Bridgewater Systems Inc. (BWC/TSX)
Mosaid Technologies Inc. (MSD/TSX)
VendTek Systems Inc. (VSI/TSX-V)
Vancouver-based prepaid telephone and electronic transaction processing software provider VenTek Systems is not listed in the above chart for one reason: trading of their stock was halted for the better part of the 2010 fiscal year.
Although a prolonged trading halt is often enough to make investors turn tail on a company, Tom Liston of Versant Partners in Toronto argues the stoppage “wasn’t crazy material.”
“It was just the processes for reporting were not quite in place and they had to go through and correct a number of items,” he said. “I don’t ultimately think it drastically changed the inputs.”
Since the stock resumed trading on the TSX Venture Exchange last April — which by its very nature garners an increased risk — it has nearly doubled in value. That is mostly due to a change in strategy whereby VendTek is now simply licensing its eFresh software as opposed to distributing it.
“So what they’ll do now is just clip a couple of cents per transaction, but it is zero cost to them so the margin is basically 100%,” explained Mr. Liston.
“That is the complete opposite of their previous model.”
So far, the change in strategy combined with an increased focused on emerging prepaid markets such as Brazil — where Mr. Liston estimates close to 95% of cellular service is prepaid — appears to be working. VendTek stock has been trading at or near a 52-week high for the past several weeks.