Canada’s real tech successes don’t get hype

If BlackBerry was half as successful at making smartphones as it is at attracting media buzz, it would be a profit-making juggernaut.

The latest news — that the Waterloo, Ont.-based firm has tapped a big Wall Street bank to find potential partners or buyers for the company — ignited the usual frenzy of media coverage.

By Monday’s close, BlackBerry’s shares were up more than $1 apiece to $11.13 on the Toronto Stock Exchange, on volume of nearly 6.4 million shares.

While the spurt brought joy to day traders, those who bought BlackBerry (formerly Research In Motion) shares for more than $140 apiece back in 2008 were likely somewhat less enthused.

BlackBerry — like previous Canadian tech darlings such as Nortel, Ballard Power and 360networks — has captured the national media’s fascination in a way that few companies do.

Chalk it up to the yearning by some to shed our roots as an exporter of profitable but boring natural resources, so we can be like the cool kids in Silicon Valley.

A search of Postmedia’s database shows nearly 5,600 stories mentioned BlackBerry since January 2012. That’s about 1,000 more hits than Canada’s largest railway, top oil company, biggest gold miner and largest forest products company got in total.

Even within the tech sector itself, BlackBerry garners an outsized amount of attention.

A casual reader of the business pages might assume BlackBerry is the most valuable tech company in Canada, but it’s not.

That honour goes to Montreal’s CGI Group, whose $11-billion market cap is nearly twice as large as BlackBerry’s.

Here’s a quick look at CGI and three other Canadian high-tech firms that don’t attract a fraction of the coverage lavished on BlackBerry, but have rewarded investors far more generously over the years:

CGI Group (TSX:GIB.A) is an acquisition-driven computer services powerhouse, with 69,000 employees worldwide and a long-term track record of steady growth.

Its purchase of European rival Logica PLC last year more than doubled CGI’s size, and the company’s shares have gained nearly 50 per cent over the past 12 months.

CGI posted hefty gains in revenues and earnings for the third quarter. Of the 15 analysts who track the stock, 12 rate it a “buy” or “strong buy,” according to Zacks Investment Research.

Scotiabank analyst Paul Steep rates the stock “outperform” with a 12-month target price of $41, about 15 per cent above Monday’s close.

Macdonald Dettwiler & Associates (TSX:MDA) is another low-profile tech company that has brought rich rewards to investors. Its shares have climbed from just $16 apiece in October 2008 to Monday’s close of more than $81.

The Richmond, B.C.-based company is a global satellite communications services provider whose customers range from big defence firms and government agencies to telecom companies.

Macdonald Dettwiler’s secondquarter earnings of $1.20 a share on revenues of $450.4 million were in line with analyst estimates, and the company boasts an order backlog of $3 billion.

That said, all the good news may already be reflected in the stock, which has gained about $11 over the past four weeks. In a recent report, CIBC World Markets analyst Stephanie Price set a 12-month target price of $81, a hair below Monday’s close.

Constellation Software is a big favourite of Edmonton investor Shawn Allen, editor of InvestorsFriend.com, an online investment site.

The acquisition-oriented Torontobased software services firm completed seven deals in the second quarter alone. Revenues jumped 43 per cent to nearly $300 million and adjusted net earnings rose 39 per cent to $50 million or $2.36 per diluted share during the period.

But after more than tripling in value since March 2011 and leaping more than eightfold over the past five years, Constellation’s shares may be getting a bit frothy. Indeed, the stock is already $10 above the $160 one-year target price set by Scotiabank analyst Paul Steep in an Aug. 1 research report, so investors may want to wait for a pullback before jumping in.

Open Text, like BlackBerry, is based in Waterloo. It provides specialized software to help large and small companies grow by better managing and utilizing their business information.

The company doesn’t have BlackBerry’s singularly lofty profile, but it’s no small fry either. It has a market cap of $4.1 billion, and for the fiscal year ended June 30, it generated revenues of nearly $1.4 billion.

Operating profit margins are high, at nearly 30 per cent, and earnings per share rose by about 20 per cent for fiscal 2013.

Like the other tech stocks highlighted here, Open Text’s share price has been on a tear, jumping from $53 last August to Monday’s close of just over $70 on the TSX.

CIBC analyst Price, however, sees more upside ahead.

Price rates the stock “sector outperform” with a 12-month target price of $73.