Canadian Tech Trio

03/25/2014 10:00 am EST



Many investors think of Canada as the land of mining stocks; yet the nation is also home to thousands of companies in computing, e-commerce, and IT, notes Michael Robinson. In Money Morning, the analyst looks at a trio of Canadian tech opportunities.

Mitel Networks (MITL)

Small-cap Mitel is known for its advanced contact center platform that includes mobile chat and also helps mid-market firms generate sales leads while lowering expenses.

In late January, Mitel completed the $370 million merger with fellow Canadian tech firm, Aastra Technologies. The move solidifies its position in cloud-computing and gives Mitel an annual sales rate of around $1.1 billion.

It also means the combined firm now has 60 million users around the world and makes Mitel the market leader in Western Europe.

The new momentum means CEO Richard McBee's growth strategy is working. The stock is up more than 161% in the last 12 months. But don't worry. The stock still has a lot of upside left.

Open Text (OTEX)

Known as one of the world's leading data management firms for large organizations, Open Text ranks as the biggest software company in Canada. A roster of A-list clients helps a great deal. Some of Open Text's stable of blue-chip clients include Coca-Cola, BP, and Visa.

In January, the company completed the acquisition of GXS Group, which provides corporate cloud services, and added such marquee clients as Bank of America, FedEx, and General Electric.

The company has a market cap of $5.95 billion, operating margins of more than 17%, and a forward PE of 13.91—about a 15% discount from the overall market.

The stock also has two new catalysts; in January, the firm reported earnings that beat the consensus of analysts and it announced a 2-for-1 stock split.

Smart Technologies (SMT)

Smart Technologies is a company that literally lives up to its name. It's a supplier of interactive education tools, used by more than 40 million students, in more than 175 countries.

As such, it has a rich legacy in this sector. In 1991, the company developed the first interactive whiteboard, called the SMART Board. Since then, the tech firm has made over two million of them.

Frankly, I'd like to see stronger financials. But the company is working on it. To further fatten its revenue stream, Smart Technologies is moving more deeply into the corporate e-learning market.

Smart Technologies has plenty of room to run. With a market cap of $450 million, the stock has a forward PE of 23, a roughly 20% premium to small-caps as a group.

But the PEG ratio is a different story altogether. A ratio of 1 means the stock is trading at a "fair value." But Smart Technologies has a PEG ratio of minus 2.58.

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