Cogeco Communications (CCA) AI Stock Analysis

• Market Cap: $3.08B
• Dividend Yield: 6.94%
• Average Volume (3M): 43.07K
• Price to Earnings (P/E): 9.4
• Beta (1Y): 0.42
• Revenue Growth: 0.21%
• EPS Growth: -6.81%
• Country: CA
• Employees: 3,854
• Sector: Communication Services
• Sector Strength: 83
• Industry: Telecommunications Services
• EPS (TTM): 1.90
• Shares Outstanding: 30,272,928
• 10 Day Avg. Volume: 49,557
• 30 Day Avg. Volume: 43,071
• PEG Ratio: -1.83
• Price to Book (P/B): 1.01
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 29.76
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $81.50
• Price Target Upside: 11.89% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 8

• Rating: 72 Outperform
• Price Target: C$82.00 ▲(12.58%Upside)

Cogeco Communications' strong financial performance and attractive valuation are key strengths, supported by robust cash flow and a high dividend yield. However, technical indicators suggest the stock may be overbought, and challenges such as revenue declines and decreased earnings per share from the earnings call highlight areas for improvement. The company's transformation initiatives and dividend increase provide a positive outlook, but strategic efforts are needed to address current challenges.

Positive Factors

Canadian Wireless Launch

The Canadian wireless launch seems imminent as customers are now able to pre-register for the service.

Future Free Cash Flow

Cogeco Communications is considered one of the best smidcap ideas due to much higher free cash flow expected in the future and unlocking value through asset sales.

Revenue and EBITDA Performance

Q2 revenue was slightly ahead of expectations while EBITDA beat, largely reflecting FX translation benefits.

Negative Factors

EBITDA Growth

EBITDA growth is expected to slow in Q2.

Seismic Issues

Estimates and target for Cogeco Communications have been lowered to reflect seismic issues.

Subscriber Metrics

Subscriber metrics were slightly below expectations.

Cogeco Communications Business Overview & Revenue Model

Company Description

Cogeco Communications Inc. operates as a communications corporation in North America. It operates in two segments, Canadian Broadband Services and American Broadband Services. The company offers Internet, video, and telephony services to residential and business customers through its two-way broadband fiber networks. It provides Internet services using modems, Wi-Fi gateways, and extenders either on a rental basis or as part of the Internet service package; video services on a subscription basis; home phone services using Internet protocol (IP); local and long-distance calling services; broadband Internet services; and IP based telephony services and other network connectivity services delivered over fiber optic connection to larger businesses. The company serves the primary service units, Internet, video, and telephony service customers. It offers cable operator services under the Cogeco Connexion name in Québec and Ontario, and in the United States under the Atlantic Broadband brand. The company was formerly known as Cogeco Cable Inc. and changed its name to Cogeco Communications Inc. in January 2016. Cogeco Communications Inc. was founded in 1972 and is headquartered in Montreal, Canada. Cogeco Communications Inc. operates as a subsidiary of Cogeco Inc.

How the Company Makes Money

Cogeco Communications generates revenue through a diverse set of channels, primarily driven by its provision of cable television, internet, and telephony services. The company's core revenue streams include subscription fees from residential customers for cable TV packages, high-speed internet plans, and telephony services. Additionally, Cogeco Communications earns revenue from its business services segment, which offers telecommunications services such as internet connectivity, cloud solutions, and managed IT services to commercial clients. The company also benefits from strategic partnerships and investments in network infrastructure, which enhance service offerings and customer reach. These factors collectively contribute to Cogeco Communications' financial performance and market position.

Cogeco Communications Financial Statement Overview

Summary

Cogeco Communications maintains strong profitability and efficient cash flow management, with robust EBITDA margins and cash flow generation. The company faces moderate leverage but has a sound financial structure. However, a slight decline in revenue and free cash flow growth rates suggests a need for strategic focus on capturing market share and managing capital expenditures effectively.

Income Statement

Cogeco Communications demonstrates consistent revenue generation with a slight decrease in TTM revenue compared to the previous year. The gross profit margin remains robust at 69.6% TTM, indicating strong cost management. However, the net profit margin decreased slightly to 11.0% TTM from 11.3%, which might suggest rising costs or competitive pressures. The EBITDA margin improved to 48.6% TTM, reflecting efficient operations. Despite stable EBIT margins, the slight decline in revenue growth indicates a need for strategic focus on capturing market share.

Balance Sheet

The company's balance sheet shows a solid equity position with an equity ratio of 31.3% TTM, indicating a healthy financial structure. The debt-to-equity ratio of 1.59 TTM suggests moderate leverage, which is typical for the telecommunications industry. Return on Equity (ROE) stands at 10.3% TTM, reflecting a reasonable return for shareholders. However, the high level of total debt remains a potential risk factor, underscoring the importance of maintaining strong cash flows to service debt obligations.

Cash Flow

Cogeco Communications has shown a strong operating cash flow of $1.12 billion TTM, highlighting robust cash generation capabilities. The free cash flow to net income ratio is 1.47 TTM, indicating efficient conversion of earnings into cash. However, a slight decline in free cash flow growth rate might signal challenges in capital expenditure management. Overall, the company maintains a strong cash flow position to support its financial obligations and potential investments.

Breakdown	TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement
Total Revenue	2.97B	2.98B	2.98B	2.90B	2.51B	2.38B
Gross Profit	1.54B	2.49B	932.42M	2.11B	1.63B	1.55B
EBITDA	1.44B	1.36B	1.39B	1.36B	1.20B	1.17B
Net Income	327.62M	335.53M	392.27M	423.30M	401.52M	375.17M
Balance Sheet
Total Assets	10.15B	9.68B	9.77B	9.28B	7.35B	6.80B
Cash, Cash Equivalents and Short-Term Investments	136.02M	76.33M	362.92M	370.90M	365.52M	366.50M
Total Debt	5.06B	4.82B	5.04B	4.68B	3.28B	3.12B
Total Liabilities	6.43B	6.20B	6.33B	6.09B	4.55B	4.16B
Stockholders Equity	3.18B	2.98B	2.96B	2.75B	2.42B	2.27B
Cash Flow
Free Cash Flow	480.40M	516.13M	100.08M	259.55M	426.86M	433.83M
Operating Cash Flow	1.12B	1.18B	962.90M	1.24B	1.02B	917.82M
Investing Cash Flow	-786.03M	-916.61M	-954.47M	-2.41B	-984.83M	-557.27M
Financing Cash Flow	-282.49M	-542.37M	-23.77M	981.92M	-27.41M	-547.10M

Cogeco Communications Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 72.84
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CCA, the sentiment is Positive. The current price of 72.84 is above the 20-day moving average (MA) of 69.04, above the 50-day MA of 68.20, and above the 200-day MA of 66.31, indicating a bullish trend. The MACD of 1.08 indicates Negative momentum. The RSI at 71.93 is Negative, neither overbought nor oversold. The STOCH value of 90.53 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:CCA.

Cogeco Communications Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CCA	72 Outperform	$3.08B	9.36	10.84%	6.94%	0.21%	-6.81%
Sector *	61 Neutral	$41.26B	-0.79	-14.19%	3.78%	2.39%	-73.52%
BCE		$20.88B	83.21	2.83%	5.56%	―	―
RCI		$17.63B	13.54	16.65%	4.49%	―	―
TU		$24.68B	28.70	7.51%	7.33%	―	―
CGO	66 Neutral	C$664.00M	7.60	10.38%	7.36%	0.06%	115.11%
QBCRF		$7.04B	12.93	37.69%	3.33%	―	―

Cogeco Communications Corporate Events

Cogeco Communications Reports Q2 Fiscal 2025 Results, Highlights Transformation Progress

Cogeco Communications reported its financial results for the second quarter of fiscal 2025, highlighting a modest revenue increase and improved customer satisfaction in both Canada and the U.S. The company is progressing with its three-year transformation program, which aims to boost agility and competitiveness, and is on track with its Canadian wireless launch preparations. Despite facing revenue challenges, Cogeco achieved a 2.7% increase in adjusted EBITDA through cost reductions and operational efficiencies. The company declared a quarterly dividend increase of 8.0%, reflecting its commitment to returning value to shareholders.