Cogeco Inc. SV (CGO) AI Stock Analysis

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Cogeco Inc. SV

(TSX:CGO)

Rating:74Outperform

Price Target:

C$74.00

▲(13.93%Upside)

Cogeco Inc. shows a solid valuation and robust technical indicators, indicating potential for appreciation. However, financial performance is mixed with high leverage and declining profitability. The earnings call highlighted both strategic progress and ongoing challenges, resulting in a balanced outlook. The overall score reflects these strengths and risks.

Cogeco Inc. SV (CGO) vs. iShares MSCI Canada ETF (EWC)

Market Cap

C$626.30M

Dividend Yield5.68%

Average Volume (3M)8.58K

Price to Earnings (P/E)7.2

Beta (1Y)0.60

Revenue Growth0.06%

EPS Growth115.11%

CountryCA

Employees4,400

SectorCommunication Services

Sector Strength84

IndustryTelecommunications Services

Share Statistics

EPS (TTM)2.11

Shares Outstanding8,040,562

10 Day Avg. Volume6,581

30 Day Avg. Volume8,577

Financial Highlights & Ratios

PEG Ratio-1.67

Price to Book (P/B)0.72

Price to Sales (P/S)0.00

P/FCF Ratio2.33

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$84.50

Price Target Upside30.10% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Cogeco Inc. SV Business Overview & Revenue Model

Company DescriptionCogeco Inc. is a diversified telecommunications and media company based in Canada. The company operates through two primary sectors: Cogeco Connexion and Cogeco Media. Cogeco Connexion provides residential and business customers with a wide range of telecommunications services, including cable television, internet, and telephony services, primarily in Quebec and Ontario. Cogeco Media operates radio stations across Quebec, offering entertainment and information content to a broad audience.

How the Company Makes MoneyCogeco Inc. generates revenue through several key streams. The primary source of income is from its telecommunications services offered by Cogeco Connexion. This includes subscription fees from cable television, internet, and telephony services provided to residential and business customers. Additional revenue comes from equipment rentals and installation services. Cogeco Media contributes to the company's earnings through advertising sales across its numerous radio stations. Significant partnerships with content providers, technology companies, and local advertisers also play an essential role in driving revenue. Strategic investments in infrastructure and technology further enhance service offerings, supporting customer retention and acquisition, which are critical factors in sustaining and growing the company's earnings.

Cogeco Inc. SV Earnings Call Summary

Earnings Call Date:Apr 09, 2025

(Q2-2025)

% Change Since: 9.75%|

Next Earnings Date:Jul 15, 2025

Earnings Call Sentiment Neutral

The call presented a mixed picture with significant operational highlights and strategic advancements, particularly in the wireless segment and cost management. However, the revenue decline and challenges in certain segments like radio advertising and subscriber base contractions were notable lowlights. The sentiment is balanced between optimism for future growth and current operational challenges.

Q2-2025 Updates

Positive Updates

Expansion of EBITDA Margins

Transformation efforts contributed to the expansion of consolidated EBITDA margins. Operational performance was ahead of expectations due to well-executed plans and deferred investments.

Increase in Internet Subscriber Base

In Canada, the internet customer base grew by 8,300 subscribers during the quarter. The fiber-to-the-home expansion program added nearly 7,000 new homes passed.

Stable EBITDA in Breezeline

Despite revenue pressures, Breezeline's constant currency EBITDA remained stable due to cost reduction initiatives and operating efficiencies.

Free Cash Flow Increase

Free cash flow in constant currency increased by 12.8%, driven by lower capital expenditures and financial expenses.

Wireless Ramp Up

U.S. wireless volumes are ramping up, and Canadian pre-registrations exceeded expectations, supporting the company's wireless strategy.

Negative Updates

Revenue Decline

Cogeco Communications' consolidated revenue declined by 2.7%. Revenue in both the U.S. and Canadian segments decreased due to competitive pressures and subscriber base decline.

Gaming Revenue Decline

Revenue decline in Breezeline was attributed to a 4.5% decrease in constant currency due to the cumulative decline in the subscriber base, especially for entry-level services.

Decline in EPS

Diluted earnings per share declined by 20% in reported currency due to higher D&A expenses, acquisition integration and restructuring expenses, and higher taxes.

Challenges in Radio Advertising

Cogeco Media faced ongoing challenges in the radio advertising market, although digital advertising solutions contributed positively.

Company Guidance

During the Cogeco Inc. and Cogeco Communications Inc. Q2 2025 earnings call, several key metrics and strategic guidance points were discussed. The company is focusing on increasing free cash flow over the next two years, which is expected to grow significantly due to the completion of CapEx investment cycles in rural network builds and network modernization efforts. Cogeco is also maintaining a relatively low dividend payout ratio to sustain dividend growth. In Q2, the company's transformation program contributed to expanded EBITDA margins, with their fibre-to-the-home expansion adding around 7,000 new homes passed, primarily in Canada. The Canadian internet customer base grew by 8,300 subscribers, and the Ontario network expansion is set to continue through fiscal 2025, with completion expected by fiscal 2026. Consolidated revenue declined by 2.7%, while EBITDA remained stable in constant currency. Free cash flow increased by 12.8% due to lower capital expenditures and financial expenses. The net debt-to-adjusted EBITDA ratio was stable at 3.4 turns. For fiscal year 2025, Cogeco maintains its guidance, expecting consolidated revenue and adjusted EBITDA to decrease in the low single digits for Q3, with capital intensity anticipated to be approximately 350 basis points above Q3 of the previous year.

Cogeco Inc. SV Financial Statement Overview

Summary

Cogeco Inc. shows strong operational efficiency with healthy EBIT and EBITDA margins. However, it faces challenges with low net income margins and slowing revenue growth. The balance sheet is heavily leveraged, presenting potential risks despite stable asset management. Cash flow generation is robust, yet recent declines in free cash flow warrant attention. Overall, the company reflects a mix of strengths in operational metrics but faces risks due to high leverage and declining profitability.

Income Statement

Positive

The TTM (Trailing-Twelve-Months) gross profit margin stands at 64.35%, indicating robust profitability. However, the net profit margin is relatively low at 2.81%, reflecting challenges in translating revenue into net income. The revenue growth rate has been sluggish, with a slight decline in recent periods. EBIT and EBITDA margins are healthy, suggesting operational efficiency, but the decreasing net income signals potential concerns.

Balance Sheet

Positive

The company's debt-to-equity ratio of 6.04 indicates high leverage, which could pose financial risks. The return on equity (ROE) is modest at 9.96%, showing decent but not outstanding returns for shareholders. The equity ratio of 8.44% is low, suggesting a reliance on debt financing. Overall, the balance sheet reflects a stable but highly leveraged financial position.

Cash Flow

Positive

The operating cash flow to net income ratio of 13.00 is strong, underscoring effective cash generation relative to earnings. However, the free cash flow growth rate has been negative recently, which may impact future financial flexibility. The free cash flow to net income ratio of 3.16 reveals some room for improvement in converting earnings to free cash flow.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
3.06B	3.07B	3.08B	3.00B	2.60B	2.48B
	Gross Profit
1.42B	904.15M	928.87M	897.14M	1.23B	1.17B
	EBIT
754.33M	776.39M	817.47M	777.22M	711.79M	667.70M
	EBITDA
1.45B	1.37B	1.32B	1.37B	1.22B	1.18B
	Net Income Common Stockholders
86.19M	96.75M	70.63M	457.75M	439.01M	401.83M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
69.46M	77.75M	334.59M	251.15M	368.43M	406.11M
	Total Assets
9.71B	9.77B	9.87B	9.47B	7.54B	7.02B
	Total Debt
5.09B	4.98B	5.11B	4.75B	3.33B	3.23B
	Net Debt
5.02B	4.90B	4.78B	4.50B	2.97B	2.83B
	Total Liabilities
6.38B	6.39B	6.43B	6.20B	4.64B	4.32B
	Stockholders Equity
795.18M	810.44M	925.86M	919.84M	816.66M	761.50M
Cash Flow		Free Cash Flow
271.95M	521.15M	101.98M	274.75M	436.05M	454.39M
	Operating Cash Flow
1.12B	1.19B	968.21M	1.26B	1.03B	941.63M
	Investing Cash Flow
-717.76M	-848.34M	-957.88M	-2.41B	-986.24M	-560.50M
	Financing Cash Flow
-346.81M	-620.09M	-32.84M	970.90M	-73.41M	-530.95M

Cogeco Inc. SV Technical Analysis

Technical Analysis Sentiment

Positive

Last Price64.95

Price Trends

50DMA

63.19

Positive

100DMA

60.50

Positive

200DMA

58.58

Positive

Market Momentum

MACD

0.40

Positive

RSI

52.76

Neutral

STOCH

32.26

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CGO, the sentiment is Positive. The current price of 64.95 is below the 20-day moving average (MA) of 65.08, above the 50-day MA of 63.19, and above the 200-day MA of 58.58, indicating a neutral trend. The MACD of 0.40 indicates Positive momentum. The RSI at 52.76 is Neutral, neither overbought nor oversold. The STOCH value of 32.26 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:CGO.

Cogeco Inc. SV Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
QBR.A	79 Outperform	C$9.24B	12.24	37.46%	4.75%	-1.11%	8.17%
QBR.B	78 Outperform	$9.24B	12.19	37.69%	4.78%	-1.11%	8.17%
CGO	74 Outperform	C$626.30M	7.17	10.38%	5.68%	0.06%	115.11%
CCA	74 Outperform	$2.89B	8.79	10.84%	5.39%	0.21%	-6.81%
RCI.B	74 Outperform	$20.88B	11.59	16.65%	5.25%	1.50%	193.09%
BCE	63 Neutral	$27.59B	70.82	2.83%	5.85%	-1.23%	-78.01%
Sector *	61 Neutral	$14.55B	5.92	-3.82%	8.36%	2.79%	-33.24%

* Communication Services Sector Average

Performance Comparison

TSE:CGO

Cogeco Inc. SV

64.29

19.44

43.34%

TSE:BCE

BCE

29.83

-11.60

-27.99%

TSE:CCA

Cogeco Communications

68.48

18.52

37.06%

TSE:QBR.B

Quebecor

40.88

13.02

46.75%

TSE:RCI.B

Rogers Communication

38.15

-11.48

-23.13%

TSE:QBR.A

Quebecor Inc Cl A MV

40.31

11.31

39.00%

Cogeco Inc. SV Corporate Events

DividendsBusiness Operations and StrategyFinancial Disclosures

Cogeco Inc. Reports Q2 Fiscal 2025 Results Amid Ongoing Transformation

Neutral

Apr 9, 2025

Cogeco Inc. reported its financial results for the second quarter of fiscal 2025, highlighting the progress of its three-year transformation program aimed at increasing agility and competitiveness. Despite stable revenue, the company experienced a decline in profit, attributed to challenges in the telecommunications segments in both Canada and the U.S. and a competitive radio advertising market. However, customer satisfaction improved, and the company maintained its fiscal 2025 financial guidelines, declaring an 8% increase in quarterly dividends. The Canadian wireless launch is on track, and digital advertising continues to contribute to revenue growth.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.