Whereas a number of tech shares proceed to commerce at lofty multiples, it’s nonetheless attainable to seek out firms throughout a number of sectors priced at a reduction to their intrinsic worth. On this article, I’ve recognized one undervalued TSX inventory that’s positioned to ship outsized positive factors to shareholders in 2024 and past. Let’s see why.

An outline of TerraVest Industries inventory

Valued at a market cap of $2.2 billion, TerraVest Industries (TSX:TVK) manufactures and sells items and providers to power, agriculture, mining, and transportation markets in North America. It has three major enterprise segments:

• Gasoline Containment: It manufactures liquified petroleum fuel (LPG) transport trailers, service vehicles, storage tanks, dispensers, furnaces, and boilers. These merchandise are offered to finish customers, together with gasoline distributors, transportation firms, and different business prospects.  
• Processing Gear: It manufactures and sells wellhead processing tools and tanks, pure fuel liquids (NGL) and LPG storage tanks, transport trailers, and different personalized processing tools.
• Companies: The section offers nicely servicing to the oil and fuel sector.

TerraVest inventory has crushed the broader market returns, returning 1,810% prior to now decade. If we modify for dividend reinvestments, cumulative returns are increased at 2,560%. Regardless of its market-thumping positive factors, the TSX inventory trades at an affordable a number of and stays a prime funding alternative in the present day.

TerraVest Industries has elevated its gross sales from $306 million in fiscal 2019 (led to September) to $678.4 million in fiscal 2023. Within the final 12 months, its income has surged by 28.2% yr over yr to $855.1 million.

Whereas TerraVest is a part of a low-margin business, it has improved its gross margins to twenty-eight.5% within the final 4 quarters, up from 24.5% in 2023 and 21.6% in 2022. Its working margins have additionally widened to 13.9% this yr, up from 8.9% in 2022.

The undervalued TSX inventory is a purchase

Within the fiscal third quarter (Q3) of 2024, TerraVest reported income of $238.12 million, indicating an distinctive annual progress charge of 58%. Its bettering profitability allowed the corporate to report an working money circulate of $45.3 million in Q3, up from $18.4 million within the year-ago interval. TerraVest continues to put money into capital expenditures, which totalled $5.95 million in Q3, up from $4 million final yr.

Its free money circulate of $32 million in Q3 signifies a margin of just about 15%, permitting it to pay shareholders an annual dividend of $0.60 per share, which interprets to a yield of 0.55%.

Within the final three quarters, its dividend payout ratio stood at 10%, offering it with sufficient flexibility to reinvest in acquisitions and decrease steadiness sheet debt.

Within the final 12 months, TerraVest has acquired the next:

• AEPL: A Canadian producer and repair supplier within the tank trailer business.
• HT: A producer of gasoline and chemical storage tanks, wastewater storage, therapy tanks, LPG vessels, and different metal storage merchandise.
• LV: It offers waste administration and associated providers to Canadian power firms.

TerraVest has utilized its free money circulate to cut back its long-term debt by greater than $50 million within the final two years. It ended fiscal Q3 with a long-term debt of $175 million.

Analysts monitoring the TSX inventory anticipate adjusted earnings to increase from $3.35 per share in 2024 to $4.17 in 2025. Priced at 27.8 occasions ahead earnings, TVK inventory is fairly valued and needs to be a part of your fairness portfolio in the present day.