Q: I have some SHLE and I'm thinking of adding to it, despite its recent run up. It seems quite cheap and substantial gains in profits are expected in 2005. Its taking a hit today, presumable because of Trumps announcement of a 25% tariff on all things from Canada. Yet, Most of Source's business is in western canada. But they do have a site in midland texas too, so i wonder if: a) there is much exposure from sales to/in the US and b) would having a site in the US shield the whole company from tariffs?
You said in response to a recent question on SHLE that you expect profits to more than double in 2025. Does that estimate change if tariffs are in fact enacted?
You said in response to a recent question on SHLE that you expect profits to more than double in 2025. Does that estimate change if tariffs are in fact enacted?
5i Research Answer:
Having US operations does protect from tariffs, somewhat. Goods imported to the US site may still have tariffs, however. In a geographic breakdown of 2023 sales, SHLE shows only $10M in US revenue, vs $559M in Canada. EPS is expected to go from $1.41 this year to $3.39 in 2025. The stock has responded to this expected growth, up 177% this year. This is a current estimate, and estimates have in fact ticked up a bit higher in the last month (only three analysts). If one is comfortable with small caps and the sector, it looks good to us at 11X earnings. It still has a fairly high degree of leverage on the balance sheet.