Geoff Gannon June 3, 2021

Jewett-Cameron (JCTCF): A Stock That Grew in Value Even When the Business Didn’t Grow in Size  

Over the last 10 years or so, Jewett-Cameron (JCTCF) has roughly quintupled its stock price while the company’s total revenue has remained basically the same.

There are some interesting signs here. But, I haven’t learned enough to say anything definitive about this company.

I can summarize what we know from the SEC filings though.

Jewett-Cameron is an illiquid microcap. The company files with the SEC. In fact, it also files with SEDAR (because it’s incorporated in Canada and used to trade on the Toronto Stock Exchange). Today, Jewett-Cameron is listed only on NASDAQ. And, although incorporated in Canada, it’s really an American company.

The business description for Jewett-Cameron describes the company as being involved in industrial wood products, products tied to pets and garden and lawn, and seed and seed processing. Older descriptions of the company also mentioned a discontinued industrial tool business (it was liquidated last year). I think these are somewhat misleading descriptions of the company. They give the impression this is more of a lumber business and more of a diversified business than it really is.

I don’t know a lot (yet) about the long-term history of this company. But, based on the dates given for when each business segment was created – it seems it started out as more of a lumber business and gradually moved further and further into what I think it is today: a pet, garden, and lawn business with the “pet” part (dog kennels, fencing to keep dogs enclosed, etc.) being the most important. No segment other than “pet, garden, and lawn” consistently contributes meaningful profits to the company. In fact, in recent years, this company would have earned about 10 cents per share more if it consisted only of the “pet, garden, and lawn” business.

So, over 100% of the EBIT you are seeing here is from “pet, garden, and lawn”. Also, the majority of sales in that segment (like 70%) are for metal products rather than wood products. I should mention the segment accounting here is a little different than you’re probably used to seeing. Jewett-Cameron separates out its corporate function and charges its subsidiaries for corporate services provided. It then shows a profit on the corporate line. As a result, all of the segments here look worse than they tend to when broken out by most public companies – because, most public companies are showing you segment data without charging each segment for corporate functions. The figures shown here probably better represent what each segment would look like if it was broken off from Jewett-Cameron and made a separate business. Really, the only meaningful business for an investor to consider is the “pet, garden, and lawn” business which did about $4 million in EBIT last year against an enterprise value of about $30 million here. So, the entire company is selling for like 7-8x what that one segment did in pre-tax income. Given that over 100% of EBIT comes from that segment and that the market cap and enterprise …

Read more