Cascades Inc. or Cargojet Inc.: Which Is the Better Buy?

Investors: looking for a new stock for your portfolio? Let’s compare the numbers for Cascades Inc. (TSX:CAS) and Cargojet Inc. (TSX:CJT) to see if one is a better buy for you.

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On the lookout for a new investment? Let’s examine two companies that don’t have a whole lot of peers — Cargojet Inc. (TSX:CJT) and Cascades Inc. (TSX:CAS) — to see if one is the better buy.

Cargojet Inc.

Cargojet, based out of Mississauga, provides overnight air cargo service in Canada and across the globe.

Cargojet release second-quarter results in August and reported adjusted earnings of $0.39 per share, in line with analyst expectations. This beat last year’s second-quarter results by 8.33%. Cargojet’s net profit number only sits at 0.34%. Over the last three years, the company’s revenue growth has averaged 23.58% annually. Its earnings, however, have declined by an average of 18.91% annually over the last three years, so the company needs to get better at converting revenue to profit.

The stock has a huge trailing P/E ratio of 663.47, so buying this company’s earnings isn’t cheap. The company also has a high debt-to-net-equity ratio of 3.064, so this company is carrying three times more debt than equity right now.

The stock has a low return-on-equity number of 1.26%. Cargojet is also trading near its 52-week high of $52.56 right now. If you are an income investor, Cargojet offers a small dividend. Its annual declared dividend is currently $0.77 per share for a yield of 1.48%.

Cascades Inc.

Cascades, headquartered in Winnipeg, produces and converts tissue products and packaging using recycled fibres and has facilities across North America and Europe.

Cascades also released second-quarter results in August. The company reported earnings per share of $0.25. This missed analyst expectations of $0.29 per share and missed 2016’s second-quarter results by 34.21%. The company’s net profit number is healthier than Cargojet’s at 12.43%. Over the last three years, revenue growth has averaged only 5.89% annually. However, earnings over the last three years have grown by an average of 47.64% annually, so Cascades does a better job of converting revenue into profit.

Cascades has a much better trailing P/E ratio of 3.15, so it’s cheaper to buy the earnings of this stock than Cargojet. Cascade’s debt-to-net-equity ratio looks a little better at 2.24, but the company is still carrying a lot of debt.

The stock has a great return-on-equity number of 42.42%, much higher than the 15-20% analysts like to see. The stock is trading closer to its 52-week high of $18.20 than its 52-week low of $10.95. Cascades also offers a small dividend. Its annual declared offering is $0.16 per share for a yield of 0.98%.

Bottom line

Both stocks have some good numbers. Cargojet had a good second quarter and good revenue numbers over the last three years. However, it holds a lot of debt and has a high P/E number. Cascades missed expectations in its second quarter, but earnings growth looks good, and it has a low P/E. While both offer a dividend, neither is a dividend superstar at the moment. Analysts seem positive about the future of both stocks. If you are looking for a new investment for your Foolish portfolio, both of these stocks deserve a second look.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Susan Portelance has no position in any stocks mentioned.

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