With inflation hitting 6.3 per cent in December, public companies are feeling the crunch of higher prices.
With the Bank of Canada raising its benchmark interest rate in tow, and with it the cost to borrow money, the current macro environment is especially difficult to remain operational at an optimal level without adequate capital on hand.
This is why, during turbulent times such as the present moment, many investors tend to limit their pool of prospective allocations to the cash-flowing and the cash-rich.
With this thesis in mind, The Market Herald’s Cash-Rich Report introduces you to profitable companies with coffers fortified to weather a multitude of headwinds.
Our first profile features Datametrex, a Toronto-based technology company with diversified exposure to artificial intelligence (AI), machine learning, telehealth and the electric vehicle market.
Margin of safety
Datametrex’s recurring revenue-based model features subscriptions for EV charging, primary healthcare, and automated data analytics, all of which have allowed it to register positive net income in four out of the last six quarters and all of 2021, as well as positive cash flow from operations and free cash flow in five of the last six quarters.
The company has over $12 million in its treasury, which is over one-fifth of its 53.3 million market cap as of February 14, 2023, and a history of responsible liability management, with debt standing at only one-fifth of assets as of Q3 2022.
Fluctuations in profitability are reflective of pandemic-stricken demand but also of Datametrex’s expansion through strategic acquisitions. Notable purchases include cybersecurity and social media analytics company, Nexalogy, which benefits from e-commerce growth and ongoing government contracts, and telehealth provider, Medi-Call, which makes healthcare more affordable and accessible during a time of unprecedented need.
Given the company’s 2023 outlook, management is confident in its approach and expects inorganic growth to be accretive to shareholder value over time. Insiders have even been increasing their skin in the game and, with it, their alignment with their 90+ per cent public investor base.
Finally, as an added layer of protection, Datametrex’s divisions operate in uncorrelated industries, substantiating the company’s diversification through retail and enterprise clients unlikely to retreat in unison, except due to market-wide factors like recessions.
Looking ahead
The company’s plans for 2023 include continued healthcare and AI expansion, as well as the installation of 500 EV chargers across British Columbia, all in the service of increased revenue and profitability.
While this picture may sound overly rosy from many of its peers in the tech space, which depend on debt and share dilution to establish themselves in their respective niches, Datametrex has managed to carve out a space for itself in multiple industries with the earnings to back up its lofty ambitions.
The company is undoubtedly one to watch, especially for investors in search of smaller, higher-risk assets on their way to developing moat-like characteristics.
Datametrex (DM) is up by over 85 per cent year-to-date, trading at $0.13 per share.
