Colabor Group Inc. (TSX:GCL) is a food distribution company that debuted on the Toronto Stock Exchange in 2005 as an income trust.
More than a decade and several acquisitions later, the company has expanded to be a true powerhouse in Eastern Canada. It distributes more than 50,000 products to some 25,000 institutions and businesses in Quebec, Ontario, and Atlantic Canada.
Colabor has been an impressive growth story. In 2006, the company did just over $41 million in revenue. A decade later, it generated $1.4 billion in sales.
The problem, at least lately, is those sales haven’t really translated into profits. In 2016, the company eked out a tiny $0.01 per share profit after losing $1.23 per share in 2015 and $2.48 per share in 2014.
The food distribution business is competitive with small margins, and the company’s bloated balance sheet didn’t help matters. Shares sank as low at $0.68 each in October.
But things have started looking up. Management issued 75 million new shares and used the proceeds to pay down debt. Before that, the company delivered nice quarterly profits in both Q2 and Q3, 2016.
And the company has been consistently free-cash-flow positive from 2014 to 2016.
Once Colabor convinces the market its debt problem has truly gone away, investors will start to focus on the company’s impressive cash flow generating ability, which should push shares much higher.
Remember, the company generated $32 million in free cash flow in 2016; it has a current market cap of $125 million. You won’t find many companies cheaper than that.
