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High Liner Foods (HLF TSX)
High Liner is one of North America’s leading suppliers of frozen seafood to both food retailers and to the food service sector. High Liner is the number one player in Canada in the retail sector and the number one player in the U.S. in the food service sector. The seafood industry has good growth potential due to the increasing emphasis on healthier eating habits and still very low per capita consumption of seafood in North America. High Liner’s sales have stalled recently due to slower demand for higher-priced protein as consumers have traded down in a higher interest rate environment, although we expect this to reverse soon as consumer confidence increases. Strong free cash flow has allowed HLF to raise the dividend by 30 per cent in the past 18 months, pay down debt, and buy back massive amounts of shares including a large block two days ago at $13.30. This is a classic value stock trading at a cheap valuation of under six times EBITDA and a seven times P/E. Insiders own 40 per cent of the company, so have plenty of skin in the game. We expect the company to eventually be sold to a larger food company for a price somewhere in the $20’s.
Value. Leaders in frozen seafood in Canadian retail and US institutional. PE of 7x. Buying back stock, paying down debt. Increased dividend by 30% last year. Yield is 4.51%.
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