Stella-Jones (SJ) AI Stock Analysis

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TSE:SJ Dividends

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Stella-Jones

(OTC:SJ)

78Outperform

Stella-Jones shows strong financial performance with solid revenue and margin growth, complemented by effective cash management. The stock's valuation is attractive, offering potential upside. While technical indicators suggest some caution, the company’s strategic initiatives and financial flexibility support a positive outlook. Challenges in utility pole volumes and Q4 EBITDA softness are manageable within the broader growth context.

Stella-Jones (SJ) vs. S&P 500 (SPY)

Market Cap

C$3.71B

Dividend Yield1.71%

Average Volume (3M)107.38K

Price to Earnings (P/E)11.8

Beta (1Y)0.44

Revenue Growth4.52%

EPS Growth0.51%

CountryCA

Employees3,000

SectorBasic Materials

Sector Strength57

IndustryPaper, Lumber & Forest Products

Share Statistics

EPS (TTM)5.65

Shares Outstanding55,703,160

10 Day Avg. Volume96,508

30 Day Avg. Volume107,383

Financial Highlights & Ratios

PEG Ratio23.21

Price to Book (P/B)N/A

Price to Sales (P/S)1.08

Price to Cash Flow (P/CF)8.80

P/FCF Ratio11.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$82.29

Price Target Upside23.67% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Stella-Jones Business Overview & Revenue Model

Company DescriptionStella-Jones Inc. produces and markets pressure-treated wood products in Canada and the United States. It offers railway ties and timbers for railroad operators; and wood utility poles for electrical utilities and telecommunication companies. The company also provides residential lumber and accessories to retailers for outdoor applications; industrial products, including bridge and crossing timbers, foundation and marine piling, construction timbers, crane mats, fence posts, and highway guardrail posts; and coal tar-based products. In addition, company manufactures wood preservative and creosote. Stella-Jones Inc. was incorporation in 1992 and is headquartered in Saint-Laurent, Canada.

How the Company Makes MoneyStella-Jones generates revenue through the manufacturing and sale of pressure-treated wood products. The company's primary revenue streams are the sale of utility poles and railway ties. Utility poles are integral to the telecommunications and electrical utility sectors, providing a steady demand for replacements and new installations. Railway ties are critical components for railway maintenance and expansion, ensuring a consistent need within the transportation sector. Stella-Jones also benefits from long-term supply agreements with key customers and partners, which provide a stable and predictable revenue base. Additionally, the company may engage in strategic acquisitions to enhance its product offerings and expand its market reach.

Stella-Jones Financial Statement Overview

Summary

Stella-Jones exhibits strong financial health characterized by consistent revenue growth, solid profitability margins, and effective cash management. The company maintains a balanced approach to leverage and equity, enhancing its financial stability. Overall, Stella-Jones is in a strong financial position with positive growth trends and efficient operations.

Income Statement

Very Positive

Stella-Jones has demonstrated strong revenue growth with a 4.52% increase from 2023 to 2024. The company also maintains healthy profitability margins with a gross profit margin of 20.86% and a net profit margin of 9.19% in 2024. EBIT and EBITDA margins are strong at 14.50% and 18.24%, respectively, indicating efficient operational management.

Balance Sheet

Positive

The balance sheet reflects a stable capital structure with a debt-to-equity ratio of 0.88, indicating moderate leverage. The return on equity is solid at 16.44%, showcasing effective use of equity funds. The equity ratio of 47.31% suggests a well-balanced financing mix between debt and equity.

Cash Flow

Very Positive

Stella-Jones reported significant improvement in free cash flow, growing from negative in 2023 to a positive $265 million in 2024. The operating cash flow to net income ratio of 1.28 indicates robust cash generation relative to net income, and the free cash flow to net income ratio of 0.83 reflects efficient capital expenditures.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
3.47B	3.32B	3.06B	2.75B	2.55B
	Gross Profit
724.00M	688.00M	524.00M	456.00M	446.00M
	EBIT
503.00M	499.00M	359.00M	326.00M	309.00M
	EBITDA
633.00M	608.00M	448.00M	400.00M	385.00M
	Net Income Common Stockholders
319.00M	326.00M	241.00M	227.00M	210.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
50.00M	0.00	-167.00M	-144.00M	-139.00M
	Total Assets
4.10B	3.71B	3.07B	2.67B	2.43B
	Total Debt
1.70B	1.61B	1.11B	878.00M	745.00M
	Net Debt
1.65B	1.61B	1.27B	1.02B	884.00M
	Total Liabilities
2.16B	2.06B	1.52B	1.22B	1.05B
	Stockholders Equity
1.94B	1.65B	1.56B	1.45B	1.37B
Cash Flow		Free Cash Flow
265.00M	-58.00M	147.00M	187.00M	123.00M
	Operating Cash Flow
408.00M	107.00M	255.00M	251.00M	178.00M
	Investing Cash Flow
-137.00M	-258.00M	-154.00M	-193.00M	-54.00M
	Financing Cash Flow
-221.00M	151.00M	-101.00M	-58.00M	-124.00M

Stella-Jones Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price66.54

Price Trends

50DMA

67.68

Negative

100DMA

69.30

Negative

200DMA

78.14

Negative

Market Momentum

MACD

-0.52

Negative

RSI

49.63

Neutral

STOCH

95.69

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SJ, the sentiment is Neutral. The current price of 66.54 is above the 20-day moving average (MA) of 66.44, below the 50-day MA of 67.68, and below the 200-day MA of 78.14, indicating a neutral trend. The MACD of -0.52 indicates Negative momentum. The RSI at 49.63 is Neutral, neither overbought nor oversold. The STOCH value of 95.69 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:SJ.

Stella-Jones Peers Comparison

Overall Rating

UnderperformOutperform

Sector (48)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SJ	78 Outperform	C$3.71B	11.77	17.93%	1.71%	4.52%	0.51%
ADN	68 Neutral	C$302.09M	13.70	6.61%	6.84%	24.29%	-27.59%
Sector *	48 Neutral	$1.91B	-1.66	-22.29%	3.86%	0.68%	-27.44%
CFF	44 Neutral	C$13.17M	―	-29.58%	―	-9.51%	3.97%

* Basic Materials Sector Average

Performance Comparison

TSE:SJ

Stella-Jones

66.58

-11.79

-15.04%

TSE:ADN

Acadian Timber

16.95

0.99

6.20%

TSE:CFF

Conifex Timber

0.36

-0.26

-41.94%

IFSPF

Interfor

9.88

-3.06

-23.65%

CFPZF

Canfor

9.36

-1.04

-10.00%

Stella-Jones Earnings Call Summary

Earnings Call Date: Feb 27, 2025 | % Change Since: -4.01% | Next Earnings Date: May 7, 2025

Earnings Call Sentiment Positive

Stella-Jones demonstrated robust growth with consistent sales and EBITDA increases, strong performance in key segments, and significant capital return to shareholders. However, there were challenges with a decline in utility pole volumes and a softer Q4 EBITDA. Despite these challenges, the company's strategic initiatives and financial flexibility position it well for future growth.

Highlights

Consistent Sales and EBITDA Growth

Stella-Jones achieved a 5% increase in sales to $3.5 billion and a 4% growth in EBITDA to $633 million for the year 2024, maintaining an EBITDA margin of over 18%.

Strong Performance in Railway Ties and Residential Lumber

Railway ties sales grew by 15% in Q4 and achieved a mid-single-digit sales growth for the third consecutive year. Residential lumber sales increased by 12% organically in Q4, staying within the $600 million to $650 million target range.

Dividend Increase and Strong Capital Return

The company increased its dividend payout by 22% to $1.12 per share in 2024 and announced an 11% increase in the quarterly dividend to $0.31 per share, marking the 21st consecutive annual increase.

Successful Bond Offering

Stella-Jones completed an inaugural bond offering of $400 million for seven years, enhancing financial flexibility.

Commitment to Sustainability

Made significant strides in reducing greenhouse gas emissions, finalizing solar panel installations expected to cover 48% of a facility's electrical consumption.

Lowlights

Utility Poles Volume Decline

Utility pole volumes were down 4% in Q4 2024 compared to the same period last year, impacted by lower volumes for non-contract business.

Softness in Q4 EBITDA

Q4 EBITDA decreased by 4% to $150 million, affected by an unfavorable sales mix and non-recurring expenses.

Higher Net Debt to EBITDA Ratio

The leverage ratio increased to 2.6 times, slightly above the target range, due to the appreciation of the U.S. dollar.

Company Guidance

In Stella-Jones' fourth quarter earnings call for 2024, the company reported a 5% increase in annual sales to $3.5 billion, driven by a 6% organic growth in both utility poles and railway ties. EBITDA rose to $633 million, maintaining a margin of over 18%. For the fourth quarter, sales increased by 6% to $730 million, with utility poles generating $385 million in sales despite a 4% volume decline. Railway ties sales grew by 15% to $193 million, reflecting strong Class 1 demand. Residential lumber sales rose 12% to $93 million, ending the year within the $600 million to $650 million target range. The company maintained a disciplined capital allocation strategy, increasing its dividend by 22% to $1.12 per share, and initiating a normal course issuer bid. Stella-Jones reported $408 million in cash from operations and $275 million in free cash flow for the year. Looking forward, the company anticipates mid-single-digit growth in utility poles and low-single-digit growth for railway ties in 2025, while maintaining an EBITDA margin of at least 17%.

Stella-Jones Corporate Events

DividendsBusiness Operations and StrategyFinancial Disclosures

Stella-Jones Reports Strong 2024 Financial Results and Increases Dividend

Positive

Feb 27, 2025

Stella-Jones Inc. reported a 5% increase in annual sales to $3,469 million and an EBITDA margin of 18.2% for the year ending December 31, 2024. Despite softer market demand for utility poles, the company maintained strong operating cash flows and increased its quarterly dividend by 11%, reaffirming its financial objectives for 2023-2025. Looking forward to 2025, Stella-Jones aims to capitalize on the need to strengthen North America’s electrical grid and expand its offerings to infrastructure customers, focusing on optimizing its operating model and maintaining a healthy EBITDA margin to enhance shareholder value.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.