Recommendation: Speculative Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 24 Feb, 25 | DIV | Speculative Buy | CAD 2.82 | CAD 3.1 | CAD 3.33 | 84 days | 18.1% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Diversified Royalty Corp., a multi-royalty corporation, engages in the acquisition of royalties from multi-location businesses and franchisors in North America. It owns the Sutton, Mr. Lube + Tires, AIR MILES, Mr. Mikes, Nurse Next Door, Oxford Learning Centres, Stratus Building Solutions, and BarBurrito trademarks. The company was formerly known as BENEV Capital Inc. and changed its name to Diversified Royalty Corp. in September 2014. Diversified Royalty Corp. was founded in 1960 and is headquartered in Vancouver, Canada.
Higher Operating Margin Ratio: 90.1% in Q3 2024 vs 5.4% of Industry Median
Higher Net Margin Ratio: 42.8% in Q3 2024 vs 3.3% of Industry Median
Higher Debt to Equity Ratio: 0.91x in Q3 2024 vs 0.23x of Industry Median
Lower ROE: 2.4% in Q3 2024 vs 3.6% of Industry Median
Financial risks including credit risk, Interest rate, Currency risk, Interest rate risk, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 2.82 | 2.42 | 3.1 | 3.33 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Healthy Revenue growth: The company showcased decent results in first nine months ending September 2024, where its revenue was CAD 47.9 mn compared to CAD 40.1 mn in pcp, representing a 19.5% increase. The strong performance from its top royalty partner, Mr. Lube + Tires, continued to produce decent growth, generating Same-store-sales growth of 7.7% in Q3 2024. Mr. Lube management continues to see strong revenue growth opportunities across the system.
Rising cash flows: The Company’s cash from operating activities increased to CAD 34.7 mn in first nine months ended September 2024 compared to CAD 23.4 mn in pcp. Additionally, its distributable cash also stood higher at CAD 32.1 mn against CAD 27.7 mn in pcp. This rise was mainly on the back of higher royalty income received, lower professional fees, partially offset by higher interest expense.
Decent dividend yield: The dividend pay-out practice translates into an essential factor for regular income-seeking investors with a long-term horizon. Moreover, at the last closing price of CAD 2.83 as on February 18 2024, the stock offered a healthy dividend yield of 8.833%, which looks decent considering the current interest rates.
Considering the expected valuation upside growing topline and rising same store sales, decent outlook, healthy operating margin profile, current trading levels and key business risks a ‘Speculative Buy’ recommendation has been given on the stock at the last closing price of CAD 2.82 as on February 21, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Industrials Industry: Conglomerates
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| DIV Diversified Royalty Corp |
-0.005 0.17% | 2.92 | 15.25 | 16.05 | 8.18 | 1.76 | 11.67 | 12.36 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 21,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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