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Transcontinental Inc (TSX: TCL.A), is a printing company with operations in print, flexible packaging, publishing, and digital media, both in Canada and the United States. Its segments include the Packaging Sector, the Printing Sector, and the Media Sector.
Key highlights
Risk associated with investments
The company might witness a margin pressure due to the higher resin costs and other raw material costs. Furthermore, if expected volumes in both areas fall short of expectations, the company's financial performance might suffer.
Financial overview of Q2 FY2022
Source: Company Filing
Top-10 Shareholders
The top 10 shareholders have been highlighted in the table, which forms around 36.85% of the total shareholding. Jarislowsky Fraser, Ltd. and Caisse de Depot et Placement du Quebec hold the company's maximum interests at 11.01% and 4.92%, respectively. The company's institutional ownership stood at 46.98%. Higher institutional holding boosts the confidence of the retail investors.
Valuation Methodology Illustrative: Price to Cash Flow Based
Stock recommendation
In Q2 2022, the company overcome supply chain challenges and inflationary pressure and reported decent set of financial numbers, where it witnessed 14.8% growth in its revenue to CAD 717.5 million. Supported by 21% YoY growth from Packaging sector and 9% YoY growth from the Printing segments.
The Company is continuously working closely with customers; thus, its presence is increasing along volume, which is appreciable. Furthermore, the business anticipates organic volume increase in fiscal year 2022 as a combination of new contract signings, product introductions, sustained printing volume recovery, and investment in new production equipment. Moreover, on these positive aspects the company foresee an improvement in adjusted operating profits before depreciation and amortization for fiscal year 2022 compared to fiscal year 2021, which is a significant positive.
Sequential improvement in the debt-to-equity ratio and robust dividend yield of more than 4.9% are like other crucial positives. Therefore, based on the above rationales and valuation, we recommend a "Buy" rating on the stock at the at the last closing price of CAD 15.77 as on June 13, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
One-Year Technical Price Chart (as on June 13, 2022). Source: REFINITIV, Analysis by Kalkine Group
*Recommendation is valid on June 14, 2022, price as well.
Technical Analysis Summary
Disclaimer
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