Apparently Stella Jones is dirt cheap at 11 times earnings Stella-Jones (SJ TSX)
Looking for high-quality earnings at a dirt-cheap price? Stella Jones is the leading North American producer of railway ties and utility poles. Most of their sales are re-occurring from the replacement of wooden ties and poles, although there is strong growth in utility poles from expanding the power grid and new fire-resistant poles. They also have a residential lumber business (roughly 30 per cent of revenue) through Home Depot, which boomed during the pandemic as people stayed home and spent on home renovations. The balance sheet is very strong, allowing more acquisitions in infrastructure-related products and returns ranging from $500 million to $600 million for shareholders over the next few years through aggressive share buy-backs and annual dividend hikes. The stock is down nearly 30 per cent, and is being treated as an “unwinding of the COVID trade,” even though the lumber business continues to grow above pre-pandemic levels. The stock is a high quality name trading at a dirt cheap valuation of around 11X earnings.