The TSX index dropped over 5% in April which still outperformed much of the rest of the world. This compares to a drop of over 13% for the tech-heavy Nasdaq index, which was exacerbated by a significant loss at month end spurred by disappointing results from Amazon. While 80% of US reporting companies beat estimates, this was not sufficient to overcome concerns over inflation, monetary policy, geopolitical developments, and lockdowns in China. Canada recorded a 4.5% increase (y/y) in its GDP in February; inflation reached 6.5% which leads to the expectation that the BOC further increase interest rates. The energy sector was up over 4% and continued to support the index, aided by Communications and Materials. Information Technology was down over 15%. Volatility was rampant. Canada with its production of needed commodities and high employment appears to be better positioned than many of its global peers which should help bolster the TSX performance going forward. With this background, an analysis of the top and bottom-performing stocks in our universe follows.

Winpak Ltd (WPK)

The top performer in April was Winpak Ltd (WPK) a manufacturer and seller of high-quality packaging materials and a producer of innovative packaging machines. Its shares were up 10.7% on the month and over 16% YTD. This result was triggered by outstanding 1^st quarter results reported on April 26th  due to substantial advancement in gross profit overcoming supply chain disruptions and labour shortages: revenues were up 23% to US$276 million, compared to the same period 1 year ago; net income was up 38% to US$38 million ($0.52 per share). The launch of a new frozen food product line also helped this outcome. WPK is well established in a niche market with strong management. It expects to continue effectively managing a volatile supply chain, inflation, labour shortages, and COVID-19 pandemic and capitalize on solid volume growth anticipated for the rest of 2022. WPK is controlled as to 52% by Wahiri International OY in Finland. 

Spin Master Corp (TOY)

In second place was Spin Master Corp (TOY), a global children’s entertainment company that creates exceptional play experiences through its three creative centres: Toys, Entertainment, and Digital Games. Shares were up 7.34% on the month. The annual report on April 4th showing record revenues and profitability probably helped to boost the stock. The first quarter of 2022 results on May 4^th confirmed the strong revenue and profitability growth led by growth in Toys and Digital games revenue. Announced guidance points to low double-digit growth for the year 2022 with 40% in the first half due to seasonal factors.

Capital Power Corporation (CPX)

In third place was Capital Power Corporation (CPX), an independent power producer with a strategic focus on sustainable energy, whose shares were up 4.3% on the month, and 7% YTD. Year-end results, published in February showed Adjusted Funds From Operations (AFFO) for the year 2021 at $605 million up 15.9% compared to 2020, and adjusted EBITDA at $1124 million was up 17.7%. These results were confirmed in May with 1^st quarter results for AFFO at $200 million, up 25.8%, and adjusted EBITDA at $348, up 14.9%. Company projections call for continuing growth throughout the year and dividend increases of 5% through 2025.

NFI Group Inc, (NFI)

The third worst monthly performer in our coverage group of companies was NFI Group Inc, (NFI) whose shares were down 27.5% for the month and 61% YTD. NFI is primarily a bus manufacturer with an offering that includes zero-emission vehicles (ZMB), charging infrastructure installations, telematics, and full parts and service aftermarket support. Global supply chain and logistic challenges, coupled with another wave of COVID-19, continued to impact NFI’s manufacturing productivity in the final quarter of 2021 and into the first quarter of 2022. As a result, revenues for the quarter ended March 31, 2022, at $459.3 million were down 20% from the corresponding period one year ago. Manufacturing revenue was down 28.9% mainly due to a reduction in deliveries due to global supply and logistics challenges. Adjusted EBITDA was negative $16.9 million compared to positive $54.9 million in the prior period as a result of the factors noted above plus the impact of inflation on supplies and reduced available government subsidies. A net loss of $28.1 million was generated. These supply chain disruptions will continue to negatively impact manufacturing productivity in the short term. NFI's longer-term outlook remains strong based on its backlog and developing market conditions. 

Lightspeed Commerce Inc (LSPD)

The second worst performer was Lightspeed Commerce Inc (LSPD). It offers a cloud-based commerce platform that connects suppliers, merchants, and consumers while enabling omnichannel experiences. Its software platform provides its customers with the critical functions they need to engage with consumers, manage their operations, accept payments, and grow their businesses. Its stock was down 26.6% on the month and 43.8% YTD. Shares tend to move in line with the technology sector. Revenue in the fourth quarter of 2021 was up 165%, but expenses were up more and net income declined to a loss of $65.5 million. The founder moved to executive chairman, but the impact of that move is unknown. The revenue runway seems large, but management’s ability to contain its expenses has yet to be demonstrated. 

Shopify (SHOP)

Last month’s bottom performer was Shopify (SHOP). Down 35% for the month, the stock continued its year-long decline and is down a whopping 68% YTD. SHOP is a leading provider of essential internet infrastructure for commerce, offering tools to start, grow, market, and manage a retail business of any size. It is particularly attractive to small businesses and occupies a nascent software niche that is growing rapidly. On April 11^th SHOP announced the proposed overhaul of their governance structure including a rearrangement of the voting position of the founder, Tobias Lutke, such that he gains an assured 40% of the total votes (arguably in line with his current position). This somewhat complicated procedure will be voted on at the annual meeting in June. On May 5^th SHOP reported first quarter results which revealed revenues at $1.2 billion, up 22% over the prior period, but an operating loss of $98 million compared to a prior year's profit of $119 million. Overall the net loss was $1.5 billion due to other expenses of $1.6 billion primarily due to a write-down of investments in Affirm and Global- E. Market sentiment has been weak for many high valuation, especially names like SHOP which has seen its sales multiple contract from 52x forward sales in mid-2020 to just under 6x forward sales today. We believe there is a wide runway for SHOP and it has lots of cash and that its shares will eventually turn around.

These are just some of the more than 60 Canadian companies we cover at 5i Research. To view their recent reports you can search for their tickers in the Reports section. If you are not a member and would like to gain access to these reports as well as the Q&A service where you can ask and search questions on these companies, you can fill in your information below to sign up for a free trial.

Take Care,

Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.