Calian is the right stock for tariff turmoil, Ventum says

Ventum Capital Markets analyst Rob Goff thinks he has found a tariff turmoil winner in Calian Group (Calian Group Stock Quote, Chart, News, Analysts, Financials TSX:CGY).

In a research update to clients April 9, Goff maintained his “Buy” rating and price target of $68.00 on CGY, implying a return of 64.7% at the time of publication.

The analyst says he expects the disappointing organic growth of the past three quarters will dissipate.

“Our expectation that organic growth will recover considers that headline tariff negotiations highlighted the prospect for Canada to significantly increase its military spending while consolidation in the IT Services space reflects buyers looking ahead to the vertical’s growth potential where AI feeds the ecosystem,” Goff wrote. “While calling the turn is clearly a challenge, we see strong valuation support at current levels where the FCF yield is of particular note. Calian has minimal exposure to export tariffs with ~5% of its revenues from US exports. The recent opening of a US Military subsidiary reflects a focus on building US revenues where management looks to sell its Cybersecurity applications to the US Military. While the Company’s exposure to military learning and healthcare narrows potential acquirers to Canadian buyers, we could see Calian as a possible takeover consideration, or alternatively, we could see management’s capital allocation discipline monetize on higher-valued assets.”

Goff thinks Calian will post EBITDA of $97.1-million on revenue of $804.3-million in fiscal 2025.

“CGY shares reflect 6.5x/4.9x 2024/25 EV/EBITDA, with the shares yielding 14%/17% our F25/F26 FCF. From a historical perspective, the shares have averaged 9.5x NTM EV/EBITDA over the past four years with one standard deviation range of 7.3x to 11.6x,” he said on valuation. “At 4.9x, CGY shares remain meaningfully below the lower bound of one standard deviation, supporting our view on Calian as an attractive undervalued stock, awaiting stronger momentum while facing some uncertainty in the near-term outlook.”