Even though the larger market indices are close to their peak values, numerous Canadian growth stocks haven’t returned to their previous high points. An example of this can be seen with one particular stock.
Canadian tech stock
is
Kraken Robotics
(
TSXV:PNG
). With a
market cap
At a value of $644 million, Kraken Robotics’ stock has dropped 15% from its peak.
Kraken creates sophisticated underwater technologies such as sonar detectors, visual systems, resilient under-pressure batteries, and robotics gear designed for remote-operated devices. The company provides items like the MINSAS sonar system and the KATFISH towable unit along with various services tailored for both military and civilian use cases. These offerings facilitate detailed seafloor surveys and superior subaqueous imagery solutions worldwide.
Let’s explore why I’m optimistic about this small-cap stock at present.
Should you consider purchasing this Canadian growth stock?
In 2024, Kraken Robotics reported unprecedented financial outcomes, witnessing a 31% surge in revenue reaching $91.3 million compared to the previous year, alongside an increase of 47%, up to $20.7 million, in their adjusted EBITDA (which includes earnings prior to accounting for interest, taxes, depreciation, and amortization). This enterprise focuses on developing cutting-edge underwater imaging sensors and robotics systems and anticipates even more substantial expansion throughout 2025.
CEO Greg Reid offered revenue forecasts ranging from $120 million to $135 million for 2025, suggesting a 40% increase at the mid-point, with adjusted EBITDA projected around $30 million. Additionally, Kraken’s sales pipeline has surged past $2 billion, up from $900 million as stated in February 2024.
Kraken’s business sectors demonstrate strong positive trends. The product sector, making up 72% of the company’s revenues in 2024, experienced a 26% increase largely due to expansion within their subsea battery operations. In contrast, the service arm expanded by 47%, reaching $25 million in value over the past year, thanks to an uptick in Sub-Bottom Imager tasks and Acoustic Corer initiatives.
The firm has obtained $45 million in subsea power contracts so far this year and intends to expand its output threefold by establishing a new 60,000-square-foot manufacturing plant in Nova Scotia, set to start operations before the end of the year. Additionally, CFO Joe Mackay stated that the company anticipates achieving a positive working capital position in 2025.
Reid pointed out increasing geopolitical strains driving faster investment in marine tech, as countries pay more attention to safeguarding vital underwater infrastructure. Additionally, Kraken’s synthetic aperture sonar systems and undersea power innovations are becoming popular choices among makers of unmanned underwater vehicles.
Although the offshore wind sector in the U.S. shows some weakness, Kraken anticipates sustained development within its commercial services division via geographical expansion and the incorporation of its newly obtained 3D at Depth subsea LiDAR enterprise.
Is this Canadian technology stock priced below its value?
The management thinks that Kraken is ideally placed to sustain an annual growth rate of 30-40%, pointing to heightened military expenditures within NATO countries and partner states along with growing requirements for submarine monitoring technologies.
During 2024, Kraken concluded more than $70 million in equity financing rounds and acquired an additional $45 million in fresh credit lines to fuel its growth initiatives.
Bay Street anticipates that Kraken will boost sales from $91.3 million in 2024 to $217 million by 2027. In terms of profitability, adjusted earnings are projected to rise from $0.09 per share in 2024 to $0.13 per share in 2027. Additionally, analysts foresee an uptick in free cash flow to $22.5 million in 2027, compared with $16.7 million expected for this year.
Should Kraken’s valuation reach 50 times future free cash flow, the Canadian equity could see an appreciation of roughly 75% within the coming two years. According to average analyst forecasts, they continue to show strong confidence predicting that this technology stock might jump nearly 40% above its present value.
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This Canadian Growth Stock Down 15% Looks Poised for a Comeback
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More reading
- 3 Canadian Value Stocks Iâd Consider for My Long-Term TFSA Strategy
Fool contributor
Aditya Raghunath
has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kraken Robotics. The Motley Fool has a
disclosure policy
.
