Small caps to watch: Roots, Major Drilling, Stingray, North West Company and more

Globe and Mail

20 hours ago

A weekly look at some small-cap stocks making news - or about to.
Canada's S&P/TSX Small Cap Index hit a record 911.27 in early Friday trading and is up 20 per cent over the past 52 weeks. The Russell 2000 in the U.S. is up about 4 per cent over the past 52 weeks.
Roots Inc. (ROOT-T) shares rose in early Friday trading after the Canadian retailer reported higher sales and trimmed its loss for its first quarter ended May 3.
Before markets opened on Friday, the company reported sales of $40-million for the quarter, up 6.7 per cent from $37.5-million a year earlier. Direct-to-consumer (DTC) sales, which include corporate retail store and e-commerce sales, totalled $34.6-million, up from $31.4-million a year earlier and was ahead of expectations of $37.3-million. DTC comparable sales growth was 14.1 per cent year over year, the company said.
Its net loss came in at $7.9-million or 20 cents per share, an improvement from a loss of $8.9-million or 22 cents for the same quarter last year. The result was slightly better than expectations of a loss of 19 cents.
Adjusted EBITDA was a loss of $7.1-million compared to a loss of $8-million a year earlier.
'Our first-quarter results, marking the third consecutive quarter of year-over-year growth in sales, gross margin, and adjusted EBITDA, speaks to the growing resonance of the Roots brand and the discipline with which we are executing our strategic priorities,' CEO Meghan Roach said in a release.
'From elevated marketing to improved product availability and AI-operational enhancements, we drove meaningful gains across key performance metrics. As we begin 2025, I am proud of how our team continues to innovate and deliver value, while navigating consumer preferences and the evolving retail landscape.'
In a call with analysts on Friday, Ms. Roach said the company hasn't seen a pullback in consumer spending so far in the second quarter.
'We've seen a continuation of the strong momentum from Q1 [into Q2],' she said.
She also said the company plans to spend more on marketing to highlight its products, but may adjust spending based on market conditions.
'We continue to believe that invest behind that marketing spend is important for the brand, and we are seeing some good returns,' she said.
In an interview on BNN on Friday, Ms. Roach said the 'buy Canada' movement that began earlier this year after the Trump administration-driven tariff war has helped the business, but said the company's sales momentum started before then.
In a May 23 preview note, TD Securities analysts Brian Morrison and Andrew Lopez, who have a 'buy' rating, increased their target slightly to $3.50 from $3.25, writing that they believe Roots' core products 'are resonating.'
The analysts said this, combined with the company's 'sound financial position,' attractive free cash flow outlook, and a reactivated share buyback program, 'support our view that an improving earnings profile lay ahead.'
The analysts said they're 'cautiously optimistic in Roots' ability to outperform the industry' in fiscal 2025, despite economic uncertainty weighing on consumer confidence.
In the past 52 weeks, the stock has traded between a high of $3.31 and a low of $1.80. The stock is up 45 per cent so far this year, as of Thursday's close.
Other small caps making news this week:
Major Drilling Group International Inc. (MDI-T) shares closed up 14 per cent to a 52-week high on Thursday after the Moncton, N.B.-based company said activity is ramping up after being delayed by economic uncertainty.
'Given the sharp increase in activity, we expect revenue in the first quarter of 2026 to increase by approximately 20 per cent when compared to what was just reported in Q4 [the fourth quarter],' CEO Denis Larocque said in a call with analysts on Thursday.
'While we don't plan to give quarterly guidance of this nature going forward, we thought it was important to quantify in this one instance given the magnitude of the anticipated revenue increase,' he added, according to a transcript of the call.
He also said the company expects margins to improve from the fourth quarter and said year-over-year increases in exploration budgets among several senior mining companies 'should lead to a strong fiscal 2026.'
After markets closed on Wednesday, the company reported revenue of $187.5-million, up 12 per cent from $168-million for the same quarter last year. The expectation was for revenue of $181.3-million.
Net earnings of $1-million or a penny per share compared to net earnings of $9.9-million or 12 cents a year ago. The expectation was for earnings of 6 cents per share.
'Market hesitation due to tariff-related economic uncertainty impacted performance during the quarter as several project startups were delayed. These programs ramped up through March and accelerated into April, resulting in some training, mobilization, and startup costs impacting our margins in fiscal Q4,' Mr. Larocque said in a release.
In the past 52 weeks, the stock has traded between a high of $9.90 and a low of $6.51. The stock is up 18 per cent so far this year, as of Thursday's close.
Transat AT Inc. (TRZ-T) shares closed down 11 per cent on Thursday and dropped again on Friday after the travel company warned of the impact of economic uncertainty on its business in the months ahead. The decrease comes despite Transat reporting higher second-quarter revenues and a narrower loss for its second quarter ended April 30.
Before markets opened on Thursday, the company behind Air Transat reported revenue of $1.03-billion, up 5.9 per cent from $973.2-million for the same quarter last year. Consensus was for revenue to come in at $1.01-billion.
Its net loss of $22.9-million or 58 cents per share compared to a net loss of $54.4-million or $1.40 per share last year. Adjusted earnings came in at $4.7-million or 12 cents per share versus a loss of $46.9-million or $1.21 a year ago. Adjusted EBITDA of $98.4-million compared to $30.2-million last year.
In a conference call with analysts on Thursday, CEO Annick Guerard said the company is being careful when talking about the outlook because of last-minute bookings.
'But so far, looking at the past weeks, we can say that bookings have been soft on Europe,' he said, according to a call transcript. 'With the uncertainty in the market, the economic environment, this is a little bit what we were expecting, and this is why we are going to be careful looking at the 18 upcoming months.'
In the earnings release, the company said that load factors for the summer period, which includes its third and fourth quarters, are 1.2 percentage points lower compared to the same date in fiscal 2024, while airline unit revenues, expressed as yield, are 1.7 per cent higher than they were at this time last year.
For fiscal year 2025, the company said it expects an available capacity increase of 1 per cent, measured in available seat-miles, compared to 2024.
Last week, Transat announced a deal to reduce its total debt with a federal Crown corporation by more than half to $334-million. Most of that reduction is due to about $380-million of debt forgiven under the agreement in principle.
National Bank Financial analyst Cameron Doerksen maintained his 'underperform' (sell) rating on Transat shares but increased his target to $2.25 from $1.75 after the earnings report.
'We are encouraged by the solid Q2 results and the positive yield trends that Transat is seeing for the summer, along with the continued progress of its operational improvement program,' he wrote in a note. 'We also view the recently announced restructuring deal as a clear positive, but note that the company still has work to do to improve its leverage and profitability.'
In the past 52 weeks, the stock has traded between a high of $3 and a low of $1.41. The stock is up more than 30 per cent so far this year, as of Thursday's close.
Currency Exchange International Corp. (CXI-T) reported lower revenue but higher adjusted earnings for its second quarter ended April 30.
After markets closed on Wednesday, the Toronto-based foreign exchange technology and processing services company reported revenue of US$15.9-million, down from US$16.4-million a year ago.
Adjusted net income increased 18 per cent to US$2.3-million or 36 cents US per share from US$1.9-million or 29 cents US a year ago.
Acumen Capital analyst Jim Byrne maintained his 'buy' rating but lowered his target to $28 from $30, citing slightly lower estimates.
'Going forward, we think the company is better positioned for profitable growth in its U.S. business, partially offset by the concerns over international travel this summer as consumers shift their travel patterns,' he wrote in a note. 'Travel to the U.S., particularly from Canada, has been down [year over year] and we expect the reduced tourist traffic could present a risk to the outlook.'
In the past 52 weeks, the stock has traded between a high of $26.75 and a low of $19.85. The stock is down 11 per cent so far this year, as of Thursday's close.
Andrew Peller Ltd. (ADW-A-T) reported lower revenue and an improved net loss for its fourth quarter ended March 31.
After markets closed on Wednesday, the wine and craft beverage maker reported revenue of $75.5-million for the quarter, compared with revenue of $85-million for the same period in 2024.
Its net loss improved to $747,000 or 2 cents per Class A share, compared to a loss of $6.9-million or 17 cents a year ago.
Canaccord Genuity analyst Luke Hannan maintained his 'buy' rating and increased his target to $13 from $10 after the report.
He said EBITDA for the quarter of $13.5-million was well above his $4.4-million estimate and the consensus forecast of $4.6-million, driven by the Ontario government's recent implementation of the Ontario Grape Support Program (OGSP), which amounted to $9.8-million of incremental gross profit dollars for the quarter.
'In our view, APL's leading positioning in the Canadian wine market, combined with its opportunities for portfolio expansion, volume growth through wine clubs/estate traffic normalization, the Ontario retail modernization, and the implementation of financial support programs, all point towards APL capturing market share and expanding margins,' he wrote. 'When considering the stock's deep discount to book value, which understates the true value of its assets, we believe APL shares have a compelling risk-reward profile.'
In the past 52 weeks, the Class A shares have traded between a high of $5.28 and a low of $3.75. The stock is up 14 per cent so far this year, as of Thursday's close.
Haivision Systems Inc. (HAI-T) shares closed down 6 per cent on Thursday after the company swung to a loss in the second quarter.
After markets closed on Wednesday, the video streaming technology company reported a net loss of $2.4-million or 8 cents per share compared to net income of $900,000 or 3 cents per share a year ago. The expectation was for earnings of 2 cents in the latest quarter.
Adjusted EBITDA was $1.7-million compared to $5.1-million for the same prior year period and below expectations of $2.9-million.
Revenue of $34.2-million was in line with the year-ago quarter and beat expectations of $30.7-million.
Acumen Capital analyst Nick Corcoran maintained his 'hold' rating after the earnings report, but increased his price target to $5 from $4.
'Management indicated the two-year strategic plan is on track,' he said in a note. 'Revenue and EBITDA [are] expected to recover through the balance of the year. This outlook is supported by the U.S. Navy Program and a strong sales pipeline.'
Canaccord Genuity analyst Robert Young said the company is still withholding guidance given the uncertainty around tariffs.
'With manifold near-term risks and challenges spanning tariffs, the impact of U.S. trade policy and potential budget scrutiny, the impact of business model changes, and higher forecast risk, we remain 'hold' rated,' Mr. Young wrote in a note. He also maintained his $4.50 price target.
In the past 52 weeks, the stock has traded between a high of $7 and a low of $3.67. The stock is down by nearly 20 per cent so far this year, as of Thursday's close.
Blackline Safety Corp. (BLN-T) shares fell this week after the company reported second-quarter earnings that missed expectations. Still, some analysts raised their price targets based on a stronger outlook.
Before markets opened on Wednesday, the Calgary-based company reported revenue of $35.9-million for the quarter ended April 30, a 14 per cent increase from the same quarter last year, driven by demand for its connected software services. The result was below expectations of $37.6-million.
Its net loss was $3.7-million or 4 cents per share compared to a loss of $4.3-million or 6 cents a year ago. The expectation was for a loss of 2 cents per share in the latest quarter.
Adjusted EBITDA for the quarter was $1-million compared to a loss of $2-million in the year-ago quarter.
Ventum Capital Markets analyst Amr Ezzat reiterated his 'buy' rating after the earnings report and increased his target to $8.75 from $8.25.
"We expect the company to grow its sales by [about] 49 per cent by F2026 [fiscal 2026] and post an EBITDA positive F2025 [fiscal 2025]," he wrote.
National Bank analyst John Shao increased his target to $9 from $7.50 and kept his 'outperform' (buy) rating after the report, which he described as 'mixed.'
'Outside the volatile product business, the rest of the business performed well with annual recurring revenue growth, net dollar retention, and gross margin remaining at robust levels. This performance provided us with confidence in a challenging and evolving environment,' he wrote. 'If anything, we believe the company's ability to adapt to this changing environment has been underappreciated.'
Canaccord Genuity analyst Doug Taylor maintained his 'buy' rating and $8.50 target price after the earnings report.
'Our positive thesis remains unchanged following a mixed FQ2 as we believe Blackline's competitive positioning, at the vanguard of a trend towards connected safety monitoring devices, remains unchallenged and is likely to be further reinforced by upcoming product initiatives,' he wrote. 'Tariff-related concerns are fading quickly, and while the impact of recent macroeconomic uncertainty is present in the near term, the secular growth trend is intact and should continue to power share performance.'
In the past 52 weeks, the stock has traded between a high of $7.96 and a low of $4.10. The stock is up by about 8 per cent so far this year, as of Thursday's close.
The North West Company Inc. (NWC-T) shares fell by about 8 per cent this week after the company warned of lower near-term sales due to wildfires in some of the northern Canadian communities it serves. The drop was despite the company reporting higher sales and earnings for its first quarter ended April 30.
After markets closed on Tuesday, the company reported sales increased 3.9 per cent to $641.4-million for its first quarter compared to $617.5-million for the year-ago quarter.
Net earnings attributable to shareholders were $25.8-million or 53 cents per share compared to $25.5-million or 53 cents per share last year.
EBITDA of $70.1-million compared to $67.9-million a year ago.
CIBC analyst Ty Collin maintained his 'outperformer' (buy) rating but lowered his target to $59 from $60, partly citing wildfires that are affecting about 10 per cent of the company's Canadian footprint, or about 14 communities.
'While the near-term outlook is noisy, we see this as a lull ahead of more material upcoming catalysts,' he wrote, adding that the weakness in shares is 'a buying opportunity.'
One of the catalysts he cited was money from a $23-billion child welfare settlement, which he noted will provide minimum payments of $40,000 per person to about 300,000 First Nations people in Canada, who he notes are a core customer group for North West Co.
'Claims for the settlement opened on March 10, and while there have been no material updates since then, management struck an optimistic tone around the transparency of the process and local advertising efforts,' he wrote. 'The company expects payments to begin flowing early 2026, though we continue to factor them into our estimates for late 2025.'
BMO Capital Markets analyst Stephen MacLeod kept his 'outperform' rating but lowered his price target to $59 from $60.
'We believe the company has an attractive retail franchise with a high proportion of stores in defensive markets (Northern Canada, Alaska). Despite near-term headwinds, the longer-term outlook is on-balance positive in light of expected settlement and community-support programs, as well as the potential margin benefits from the company's Next 100 initiative,' he wrote.
In the past 52 weeks, the stock has traded between a high of $57.95 and a low of $40.42. The stock is up 2 per cent so far this year.
D2L Inc. (DTOL-T) shares were up this week after the company reported higher revenue and swung to a profit in its first quarter ended April 30.
After markets closed on Tuesday, the educational technology company reported revenue of US$52.8-million for the period, up 9 per cent from the same quarter last year. The result was slightly below expectations of US$53.1-million.
Net income of US$6-million or 6 cents US per share compared to a loss of US$223,424 a year ago. Adjusted EBITDA increased to US$9.3-million, up from US$4-million a year ago and beat expectations of US$7-million.
The company also maintained its guidance for its fiscal year ended Jan. 31, 2026 including revenue growth of 7 to 8 per cent.
National Bank Financial analyst John Shao maintained his 'outperform' (buy) and $20 price target after the report.
'D2L reported reassuring results following a tough FQ4 [fourth quarter] when macro uncertainties sank the stock by as much as 20 per cent,' he wrote in a note.
'Going into FQ1 [fiscal first quarter], we believe much of that pullback reflected the expectation of a sudden slowdown in sales activities and, as a result, negative operating leverage,' he added, but noted that it didn't happen based on recent results.
'If anything, the high-quality EBITDA beat and the associated operating efficiency improvements position D2L to make strategic investments to capture long-term growth opportunities.'
In the past 52 weeks, the stock has traded between a high of $21.11 and a low of $10.40 on the TSX. The stock is down more than 20 per cent so far this year, as of Thursday's close.
Stingray Group Inc. (RAY-A-T) shares hit a seven-year high this week after the music and media company reported fourth-quarter earnings that beat expectations.
After markets closed on Tuesday, the Montreal-based company reported revenues of $96-million for the quarter ended March 31, up 15 per cent from a year ago. The result was ahead of expectations of $90.5-million.
Net income came in at $7.7-million or 11 cents per share compared to a net loss of $46.3-million or 67 cents per share a year earlier.
Adjusted net income was $18.6-million or 27 cents per share – ahead of expectations of 24 cents – and compared to $15.4-million or 22 cents a year earlier.
CIBC analyst Scott Fletcher reiterated his 'outperformer' (buy) rating and increased his target to $13.50 from $11.50 after the earnings.
'Stingray continues to impress, with its Free Ad-Supported TV (FAST) business doubling in F2025 and driving consolidated growth and margin expansion,' he wrote in a note. 'Looking forward to F2026, there are plenty of reasons to remain optimistic as FAST looks to have ample runway and leverage has reached a point where well-executed M&A now represents upside.
Canaccord Genuity analyst Aravinda Galappatthige maintained his 'buy' rating and increased his target to $13 from $12.50.
'RAY's Q4 result underline the remarkable consistency of the story, marking seven successive quarters of beating our estimates,' he said in a note. 'Moreover, with a steadily delevering balance sheet, we see the prospect of a further step up in buybacks.'
National Bank Financial analyst Adam Shine maintained his 'outperform' (buy) target and raised his target to $12 from $11.50.
In the past 52 weeks, the stock has traded between a high of $10.05 and a low of $6.76. The stock is up nearly 30 per cent so far this year, as of Thursday's close.
ADF Group Inc. (DRX-T) shares rose more than 20 per cent this week after the company provided a clearer picture of how it will be impacted by U.S. tariffs, and even after it reported a drop in revenues and profit for its first quarter.
Before markets opened on Tuesday, the Quebec maker of steel superstructures reported revenue of $55.5-million, down from $107.4-million in the same quarter last year, 'in line with the uncertainty related to the U.S. tariffs.'
It reported a profit of $8.7-million or 30 cents per share compared to net income of $15.3-million or 47 cents a year earlier.
The company said in a release that its exports comply with the requirements of the Canada-United States-Mexico Agreement (USMCA) and are only subject to the specific steel tariffs, set at 25 per cent by U.S. Government Proclamation 10896.
'These duties only apply if the raw materials used are not smelted and poured in the United States,' the company stated. 'However, ADF generally obtains steel from U.S.-based mills and has done so for several years. Thus, when this condition is met, ADF's exports are exempt from these duties, allowing the Corporation to maintain its competitiveness in the U.S. market.'
It also said that the Canadian government countermeasures surtaxes on steel imports from the U.S. are recoverable upon exports. 'To facilitate the management of these costs for manufacturers, a remission order has been issued, allowing for immediate relief from these surtaxes at the time of import,' it stated.
In the past 52 weeks, the stock has traded between a high of $19.14 and a low of $5. The stock is down 15 per cent so far this year, as of Thursday's close.
June 16: High Tide Inc. (HITI-X)
June 17: Groupe Dynamite Inc. (GRDG-T), Reitmans (Canada) Ltd. (RET-X), DavidsTea Inc. (DTEA-X)
June 18: Aurora Cannabis Inc. (ACB-T)
June 25: AGF Management Ltd. (AGF-B-T)
June 26: Corus Entertainment Inc. (CJR-B-T)