Pacific Trader: Atlas Engineered Products is building for the next housing boom

The stock: It takes a certain fortitude to tune out the tariff noise and ignore the falling fever lines in the stock market right now. But for those willing to delve into fundamentals around business plan execution and growth, this could be a ground-floor opportunity to buy value-priced stocks building towards an eventual turnaround. A good example might be Nanaimo-headquartered Atlas Engineered Products (TSXV:AEP), an acquisitive manufacturer of ready-to-install building components like roof and floor trusses and wall panels.

The drivers: Since going public in 2017, Atlas has engineered eight takeovers of small manufacturers with brand names like Novum Building Components (Abbotsford), Pacer Building Components (Ontario) and Léon Chouinard et Fils (Quebec). The company’s mission is to help speed up home building by offering builders and developers coping with labour shortages factory-made pieces they don’t have to assemble on-site.

Revenues and free cash flow steadily grew through 2022 before spiking interest rates snuffed out the home building boom. Since then AEP has been building back, though. It posted revenue of $55.8 million in 2024, up 13 percent from a year earlier. There was a small net loss of $212,128 compared to net income of $3.1 million in 2023.

At least part of that loss can be attributed to investments in automation at its plants, which are expected to pay off over time. The efforts of CEO Hadi Abassi and his team have not been appreciated by investors, unfortunately. In the past year, AEP stock has dwindled 43.5 percent to 82 cents a share as of Tuesday’s close (April 29).

With sales almost exclusively within Canada, AEP is a lot less exposed to trade strife than most of its peers in the wood products industry, however. And though housing activity may be down, the demand for homes keeps growing and will inevitably see a cyclical revival.

Word on the street: Desjardins Securities analyst Frederic Tremblay doesn’t see the housing rebound arriving this year, but in the meantime he thinks AEP will be able to pick up more cash-strapped rivals in its space on the cheap. “We believe that AEP’s automation project can keep it steps ahead of the more traditional competition,” he wrote in a note initiating coverage this month. “We forecast revenue growth of more than 20 per cent in both 2025 and 2026 and, with the recent increase in activity, we believe that AEP’s phase of sacrificing margin to gain volume should soon come to an end.” He has a “buy” recommendation and a price target of $1.50 on the stock.

Coming and going: Lumina Gold Corp. (TSXV:LUM) of Vancouver has reached an agreement to be taken over by CMOC Singapore Pte. for $581 million or $1.27 per share. The price represents a 71-percent premium over Lumina’s volume-weighted average trading price over the previous 20 days. Lumina has been developing the Cangrejos project in Ecuador for the past several years.