The Canadian Investor - 6 Underrated Metrics Every Stock Investor Should Use

Episode Date: February 2, 2026

In this episode, Simon and Dan break down key investing metrics the financial media barely talks about—including free cash flow per share, free cash flow payout ratio, net interest margin, stock-based compensation, and leverage/interest coverage—and why these can matter more than the usual headline numbers. Then in Stocks on Our Radar (presented by EQ Bank), Simon covers Pure Storage—an under-the-radar AI infrastructure name with a surprising subscription-heavy model and potential S&P 500 tailwinds. Tickers of Stocks Discussed: PSTG, BCE, AQN, GOOGL, ADBE Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome to the Canadian Investor Podcast. I'm Simon Beranger. I'm back with Dan Kent. We are back for a regular episode here. It's going to be a fun one. We'll be talking about some of the most important metrics that no one hardly talks about.

And then we have stocks on our radar presented by EQ Bank. It may just be, I think, one of my stocks. And then next week we'll do another one for you. We don't want to make the episode too too long. But it is a company that I have not. talked about before. So I think it'll be a fun one. And just to keep people guessing,

were you aware of this company then? I have no idea. Okay. Yeah. No idea. There you go. I went outside the box. It should be a fun one here.

So let's get started. So really important metrics that no one hardly talks about. When we say no one, I think it's more like the financial media, right? When you see a lot of the time, you'll see the more constant metrics. where they'll talk about sales going up, they'll talk about earnings per share, EPS. They just keep things at a high level.

So we wanted to share some metrics that we think are really useful and important. And of course, I think just a reminder that some may apply better to certain types of companies versus others. Yeah, definitely. Actually, two of them are going to be pretty not as useful for specific industries, but we'll talk about it when we get there. Yeah, exactly. So let's get started here.

My first one is free cash flow per share. If you've been listening to a podcast for a while, you're probably pretty familiar with this metric here. But a reminder for newer listeners, to get free cash flow, you just take the cash from operation in the cash flow statement and remove capital expenditures, which is found in the investing activities. If you're looking at the actual financial statement, it's possible that you'll see sometimes purchase, of property, plant, and equipment. That is a synonym for capital expenditure. I remember when I started investing, I would sometimes look for a capital expenditure.

I'd be like, where the hell is it? So it was usually under that term. By removing capital expenditures, which are large expenses required to run the company and includes investments in large projects, you get a better idea of the actual cash coming into the company. That's because earnings, There's a lot of accounting principles,

and sometimes earnings can look a lot better than the actual cash coming into the company. And free cash flow is a widely used metric, but you don't hear a lot of people using free cashel per share. It's usually P, so price or earnings, or you'll look at the earnings per share, like I said. So those are kind of the metrics you hear the most, but free cashable per share, not as much. And that's really useful because it tells you what each share gets you in terms of free cash flow as a shareholder of the company. There's been several well research studies showing companies with high free cash flow tend to outperform broader markets. It's hard to find studies specifically for free cash flow per share, but based on, I guess now over close to 10 years, if not more than 10 years researching stocks, I would say, and let me know if you agree or not, that companies who grow free cash flow on a pay.

per share basis at a consistent rate tend to do very well, if not much better than the market and the aggregate. Because what it really gives you is also it factors in share dilution. So it's fine. Essentially what it says, it's like, okay, the company's growing the free cash will faster than it's diluting share. Sometimes they'll still dilute share. They'll just, they're just growing free cash at a much faster rate.

And that's why I think it's just a really important metric. And I think it really helps identify some solid businesses. Yeah, it's kind of the same as looking at like net income. Nobody really looks at net income all that much. They just look at earnings per share because obviously you can issue a ton of shares, which could increase net income. But on a per share basis, you're earning less. But yeah, I think like you won't see this very often on headlines just because for the most part,

like free cash flow on a quarter to quarter basis is very, very hard to predict. Yeah. Whereas earnings are more, you know, a bit more predictable. But yeah, like your earnings, I mean, you're talking more so on an accounting basis because companies can, they can lay out a bunch of money for a purchase today, which will come out of free cash flow. And then it's depreciated over, let's just say a useful life of 10 years on the income

statement. So it's more of a better picture of the actual cash available. to you as a shareholder. No. Yeah, exactly. And obviously you have the amortization too that can impact that. So there's a whole lot of different things. And that's why I think free cash is just a really important metric.

Just to be clear, though, some industries, it doesn't really apply banking. You don't want to be using free cash flow. But for most type of businesses, it will be a very useful metric. Next on the list here for you. So let's go with your first one. I'll actually go over just free cash flow ratio. because that was, yeah, let's just do that. So I think this is more so, I guess you could say in the headlines as well in terms of

dividend stocks, but also just on like data aggregation websites. So this is not a metric that's going to be readily available on a lot of them. I mean, if you have like let's say access to fiscal or I can white charts, whatever it may be. Yeah. Yeah. So they either include it or you can create your own. But if you just go to like say Yahoo finance and you, look at the payout ratio. It's going to give you the payout ratio in terms of earnings per share.

And I mean, again, as you had mentioned, for some industries, this will look, this will be perfectly fine. For banks, for example, this is an industry where you kind of rely solely on the earnings per share payout ratio because banks, obviously, you know, they're loaning out money. Free cash flow is not, not an indicator with banks, but REITs would be another issue, but earnings are also kind of free cash is kind of useless for REITs as well. But they use something else. Yeah, funds for operations or AFFFO. Yeah. For the most part, like as you've mentioned, you know, free cash flow per share, you want to

be using the free cash flow payout ratio in terms of the dividend because that is where dividends come out of. They do come out of free cash flow. Like if a company has, and I mean, we ran into a situation with like, let's say BCE, which was paying out, you know, let's just say $4 a share in dividends when they were only generating, you know, $2.80 a share. in free cash flow, like that dividend is eventually going to get cut. But for the free cash flow payout ratio, use it on a trailing 12 month basis because as I had mentioned when you were talking

about free cash flow, it can be lumpy quarter to quarter. So if you look at a quarterly free cash flow ratio, it can fluctuate quite a bit. And it gets to the situation where if you have a company, like let's just say that has a lot of capital expenditures, like let's say at the start of the year or something. They might have to roll out maintenance or something like that. It might look a little bit higher than usual. But this is going to be one that you want to use that not only, like I think a lot of people will probably get the assumption that I'm speaking on this to avoid like a dividend

cut, but you can also find a lot of situations where you're looking at companies who have very high earnings payout ratios, but very low free cash flow payout ratios. So you might even be missing stocks that. have solid dividends that, you know, might end up being cut. So yeah, I think this is the better, if you're a dividend investor, I think, you know, for the vast majority of companies, this is going to be the better payout ratio for you to use. And it's one that I find a lot of people don't quote at all. Yeah. And if you don't use it, I think the BC, I know we've talked about it a whole lot in last year, year and a half, but that's a prime example. If you're not using it,

you're missing some crucial data. I think just looking at the free cash flow payout ratio and seeing it being so unsustainable over a pretty long period of time for BCE, it was getting worse and worse. You could see that the writing was on the wall. So it's something you don't look at. It would have been much harder for you to try and decipher whether it was actually going to get cut or not. But if you started looking at it and then factor in a few other things, including interest expense that was getting higher and higher, the debt levels,

and so on. I think it was as easy as a call that I think we made. And we were like a year, a year and a half in advance before they actually cut it. They really waited till the last minute. And if people would have listened to us back then, they would have saved a whole lot of money than trying to cling on to a dividend that was not sustainable.

Yeah, because there was really no improvement to the ratio. But yeah, it's the one thing I guess I'll say too in terms of why this ratio is more useful is you can have a lot of one-time accounting charges on the income statement that might reduce a company's taxable income, but ultimately it doesn't really cost them any money. Like it's a non-cash charge, which will, it will make the payout ratio on an earnings basis look large, whereas free cash flow, it might be perfectly fine because it might not impact that.

So yeah, I tend to use this ratio, the vast majority of the time. Yeah. I'll usually look at both. I'll look at the. Looking at both is definitely. Both is really important. And then you can try to figure out where the discrepancy is if there is a big one. Having cash on hand is essential for any business.

Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too until we switched to the new EQ Bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at EQBank.

My wife and I are currently planning a big summer trip to the Maritimes and our daughter will be visiting Halifax for the very first time. We're looking for a place on Airbnb right near the water so she can wake up and see the ocean every morning. We can already picture ourselves exploring the waterfront and coming back to a cozy house to cook a family dinner or for a quick change of clothes and head to a local family-friendly seafood restaurant. Finding the perfect home base is making the whole trip feel real. It also got us thinking about our own place while we're away. If another family's home can be the backdrop for our first maritime adventure,

maybe ours could be that for someone else. Hosting our home on Airbnb would let travelers make their own memories in our beautiful neighborhood, while giving us extra money to put towards all those lobster rolls in Alifax. And the nice thing is the flexibility. We can decide to host our home only when it works for our schedule. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host.

Calling all DIY, do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time.

And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning duolingo style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there. I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know. I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools.

So go ahead, blossom social in the app store and I'll see you there. Next one here on the docket for me would be net interest margin. So this is obviously mostly to banks, I would say, or saving in loans institutions or banks. I think it's really especially true for banks that have a big deposit base and also do a lot of loans. Because there are some investment banks, especially in the U.S. There are some big investment banks where this won't be as crucial for them. But for a lot of the banks, it's really a crucial metric to look at. It's not one that's overly talked about, but it is one of the most important metrics for a bank.

I think if you have invested in any of the big Canadian banks and you don't know whether the net interest margin is and how it's trended, you don't really know what you own. So I'll be very blunt here. And it's quite simple too. They always have it in the supplemental information. They'll actually have different interest margin, but the net interest margin one is just really good. That leaves be aware of. It's simply the difference between the rate that the bank lands money to borrowers in the aggregate versus what they pay depositors.

So if a bank lands out at an average of 5%, and they pay depositors an average of 2%, then they have a net interest margin of 3%. So it's just a spread between both of them. And that's why banks love it when you keep your money in a checking account, the big banks. That's why they give you, they tell you, you know what, we will, the fees for your monthly fees if you keep 5,000, 6,000, whatever it is for the kind of checking account, because it's essentially a zero interest loan that you are providing the bank. They can then turn around, loan out that money at a pretty high rate because, and the rate

doesn't have to be that high for them to make it pretty profitable. And it's something that you should always pay attention to with banks and not only how it's trending, like I said over time, but how a bank is performing the net interest margin versus its peers. I think that's also an important one. And the more squeeze the net interest margin gets, the more of a headwin it will become on profits. And obviously, the more it expands, the more it could be a tailwind for profit. So really important metric that I think any bank investor, unless it's a, like I said, an investment bank that's head. That's head. Like what, like a Goldman Sachs probably?

Yeah, Goldman Sachs, something like that or I can't recall some of the other ones. But there's a few in the US, right? So just wanted to mention that, but I think really important one for banks. Yeah, and I think they vary quite a bit from bank to bank as well. Like they aren't just like you can't just look at two in general and kind of come to the conclusion because the loan books are very different across a lot of these banks. I mean, you could compare if they segment. like the Canadian side of things. But if you look to like a company like Scotia Bank, for example, that has a lot of Latin

American exposure, things like that, it's going to be a much different, you know, situation that's say something like a royal bank. But yeah, it's probably, you know, a lot of people look at, let's say gross operating profit margins, like net interest margins for the banks is probably the most important one. Yeah. Yeah. And also the loan composition, right? So even in Canadian banks, if a bank is more reliant on deposits from checking or savings accounts that don't pay a whole lot of interest versus a bank that's more reliant on depositors in GICs, so term loans that will pay a higher interest rate.

So that's going to be compressing or not compressing or having a higher margin. So there's other things to be aware of. But at the very least, be aware what the peers are doing and also the bank, how it's been trending for the last year or two. It will give you a good insight on that. So moving on to the next one here. So back to you. I think it's stock-based comps. Yeah.

So this one is definitely one that's not brought up at all in, you know, the headlines. And actually also a lot of finance, Twitter, people that are really into tech stock tend to just forget about. Yeah. Yeah. And the tech is probably where it's most prevalent. So. The most frequent offenders are usually. where those high-growth tech businesses.

Yeah. And the reasoning for this is stock-based compensation is, well, I guess to explain what it is effectively, like the company is giving employees stock instead of, you know, say instead of payment. So like instead of a salary, they can get stock-based compensation. So there's a lot of reasonings for it. Like for like maybe a profitable company, it's some sort of, you know, motivation. First off, you can, if you extend like, let's say, the vesting period out of this stock-based compensation, you can kind of keep talent there because they can't, you know, get all these shares until a certain amount. But where it's kind of, well, I guess I'll get to where it's abused. It also keeps your cost lower in the short term,

right? Yes. So it's not coming off the books. So it's not cash coming out, but you pay the piper down the line. Yeah. But where it gets, you know, the reasoning it gets so overlooked is it can be tucked away as a non-cash cost. So you'll find companies. that will add back stock-based compensation to their adjusted EBITA or their adjusted earnings. And if companies are like responsible with this, it is very, it's very small. But there's a lot of companies that, you know, have abused this. It's kind of a tax on investors of the company. I mean, there's no question.

Like, as I had mentioned, some stock-based comps are warranted, but some companies abuse it. I mean, like right off the bat, one I can think of that was abusing it and one that I held. and one that was one of the main reasons I sold was light speed. I mean, it was crazy the amount of stock-based compensation, like the amount of, you know, the amount of money they were spending paying these companies, or sorry, their employees rather than cash. And you can't really tell this is happening. Like, it's not going to show up in adjusted EBITA,

and it's not going to show up in adjusted earnings. And another area where this becomes an issue is in free cash flow. because stock-based compensation is a non-cash cost, it's added back to operating cash flow. And it doesn't impact free cash flow. So you can have companies reporting record free cash flow all while issuing a boatload of shares to employees via stock-based compensation. That ultimately ends up making things look a lot better. And that's why free cash flow per share is probably the better metric. But the other issue with stock-based comps is that a lot of companies that go aggressive,

on this front, they're typically, as you had mentioned, you know, you're talking fast growing companies unprofitable for a lot of the, a lot of the time so they can kind of, you know, keep talent and they can kind of pay talent, good, you know, good amounts of money through stock-based comps rather than cash. But these companies are prone to massive drawdowns, like huge drawdowns in price. And what happens when you get a massive drawdown in price and your employees need to be, you know, compensated the same. Obviously, you have to issue much more shares to kind of make up for that. So it kind of compounds in that regard. It's not always bad, but again, it has to be kept in check. You know, for example, stock pays comp on very expensive stocks is actually a good thing because instead

of paying, you know, top end talent cash, they can instead pay them high valuation shares. So it's not always a bad thing, but it can be abused. I know like a lot of people were complaining about big tech for a long time doing this, like Alphabet, all those types of companies had massive stock-based comps reporting huge free cash-will growth, but, you know, under the surface, it wasn't as good as perceived. But just check this. I mean, you can see it in. Well, just to talk about the light speed here. So stock-based compensation as a percentage of revenue peak in 2020 as 20%. Yeah. So that was the equivalent of 20% of their revenue. Now it's around 5%. So I think it's just to show what you were saying here. Yeah, it's not, it's not a good

thing. I mean, it's readily available information. They'll have it. Most all these companies will have it. You probably have to go to a footnote or something to kind of see adjustments made, but stock based comps will almost always be in there. And pretty much every company has stock based compensation, like to some degree. It's just when it gets abused is when we need to pay attention to it. Okay. So now next on the list here. So for tech investors, it's called the Rule of 40. I think Braden and I talked about this one a while back when we used to do the episode regularly together before you join them. We just did an episode about SaaS stock, so software as a service and why, and essentially why they're crashing. So we looked at that. Go back to last Monday if you miss that episode.

And the Rule of 40 is pretty simple. So you take the revenue growth rate and then add the profits margin. You just add both of them. Free cash flow or EBTA tends to be the most commonly used here profit margins. And the sum of both should be more than 40. So if it's more than 40, then the company is performing at a very strong level. Lower than 40, then it's likely really risky or just not growing quickly enough to justify the cash is burning. For example, let's look at Adobe, one of the names we looked at last Monday. Estimates for the name, next year that revenues will grow at a 9.5% rate or so. It has an EBITA margin of 40%. So based on the rule of 40, it would be, it would pass the test here. The issue with the rule of 40, though,

is it really looks at how the company is doing right now or maybe in the near future, maybe the next year or so, the next 12 months. The problem is for Adobe specifically, but even for the rule of 40 in general is what will it look like in two, three, four, five years. And that's the issue with the rule 40. It can't help you with that. But it can still give you a good idea, especially for those companies that are on the verge of profitability. It can give you a good idea whether they're growing quickly enough to make sense. Yeah, we used to use this all the time. But I think like right now it's a little bit different because of like, you know, SaaS stocks have been relatively predictable for a very long time.

That's why a lot of them traded at 30, 40x earnings. But I think now you're getting into a situation where people don't really know the forward outlook, I guess, has become a bit cloudier. So, yeah, this, I think this is a good, you know, kind of, I don't know what I would call it, well, I guess a rule, but like an indicator to kind of screen for quality. But then I think even now more than ever, like digging in is digging in and see what's going happen moving forward is uh it's always important but i think it's it's more important in in that industry right now yeah definitely so now let's move on to your last one here on the list so

leverage ratios yeah so this isn't like one you know necessarily one specific ratio but more like leverage in general i do find like a lot of financial health is you know something another term people might use yeah yeah you could argue that you know a lot of people spend a lot of time on the income statement and the cash flow statement, but not a lot of time on the balance sheet. They taught looking at debt just, you know, but it's not as fun. It's not as exciting. Yeah. It is it's not as exciting, but it's, I mean, we seen in COVID where, you know, it wasn't

important for a very long time and then it became very important. This is industry, like if we're strictly speaking on leverage ratio, like if I was to say leverage ratio, 90% of the time, it's going to be adjusted EBITA to net debt. That's often what you'll see with leverage ratio. ratios and by net debt it just means cash you know cash on the balance sheet obviously you know if a company has cash it could use that cash to pay down the debt plus the eat us so they do go net debt i do think this is one of the most overlooked aspects of the company it is it is one that you do need to be industry dependent on like for example if we look to something like a utility

or a telecom it's not it's not really all that surprising to see them at three to four x leverage ratios, whereas, you know, other companies over two would probably, you know, set some alarm bells off. And I find for a very long time, like say post financial crisis, I be where in what? We're in a free money era. Like companies could borrow, they could borrow very cheaply, they could expand very cheaply. So I think a lot of this stuff was kind of ignored because it never became that large of an issue. But now you see 2022, we had that massive inflation yields or up, Interest rates are way lower. Debt is becoming much more expensive to finance.

A lot of companies are kind of being exposed. I mean, two right off the top of my head I can think of are BCE and Algonquin. I mean, in the States, we can look at AT&T 3M that all, you know, they kind of got, I guess you could say, caught with their pants down and ended up all having to cut the dividend, highly leverage companies. And another important element that kind of goes with. leverage is the interest coverage ratio. So the net debt to EBTA is kind of what it would take for the company to pay that debt off, the leverage ratio. The interest coverage ratio is how much EBTA they have relative to the interest. So this is just interest. It doesn't involve, you know, the paydown of any debt. So what you'll see with this one is companies with high

exposure to floating rate debt will have wildly fluctuating interest coverage ratios, while ones with more fixed rates, they'll fluctuate, but they tend to be more stable. And Algonquin is a prime case of this. So from 2021 to 2024, its interest rate, its interest coverage ratio was cut in half. And one of the main reasons for this is the company had over, I believe it was over pretty close to 25% exposure to floating rate debt. So obviously when rates went through the roof, interest went through the roof, they had to cut the dividend.

It was effectively the downfall of the company. And I just feel, you know, not a lot of headlines focus on this type of stuff, especially quarter to quarter. Because quarter to quarter, you know, it's not really worth talking about, I guess you could say on a quarter to quarter basis. So nobody's really going to tell you about any of this stuff. You need to do the digging yourself. Yeah. Yeah, I mean, it's really important. And obviously, BC, that was a big part of their issues as well, is that interest expense.

They had taken on so much debt that the interest expense with rising rates was just no longer. sustainable, they had to find more cash and cutting the dividend was the answer. Yeah, and I find with BC it's even more interesting because, and I find nobody really talked about this, but they set a leverage target. I can't even remember what it was. Let's just say it was 3x, which would be their net debt or adjusted even at a net debt. Yeah, they kept moving the goal line, right? Yeah, they kept moving it up. So like they kept revising their leverage target higher to higher and higher and higher, but nobody talked about it. But that, that is a massive, like, that should have been alarm bell central because they figured they can't hit their leverage targets

because they have too much leverage, so they just keep ticking it up, right? So yeah, these, they're definitely overlooked, but I think more people need to spend more time on the balance sheet side of things. Yeah, no, it's funny. The amount of discussions we had on Twitter is with certain bowls of BCE where you tried to just like show them. them the data. It's like, what are you missing? And the amount of money they could have saved by just, you know, taking a step back. I'm not saying, you know, keep your dividend strategy. That's fine. But wouldn't you want to invest in good dividend paying companies? But a lot of people were just, I think, blind, or not blindsided, but they just had their blinders on and just

anything they could see was the yield, just the yield of that dividend. Yeah, I think it gets some of it as sunk cost as well. Yeah. Yeah. Yeah, the motions to be akin, they don't want to admit they were wrong. Yeah. Yeah. Yeah. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience, too, until we switched to the new EQBank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance.

You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up, quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eCubank.ca slash business. My wife and I are currently planning a big summer trip to the Maritimes and our daughter will be visiting Halifax for the very first time. We're looking for a place on Airbnb right near the water so she can wake up and see the ocean every morning.

We can already picture ourselves exploring the waterfront and coming back to a cozy house to cook a family dinner or for a quick change of clothes and head to a local family-friendly seafood restaurant. Finding the perfect home base is making the whole trip feel real. It also got us thinking about our own place while we're away. If another family's home can be the backdrop for our first maritime adventure, maybe ours could be that for someone else. Hosting our home on Airbnb would let travelers make their own memories in our beautiful neighborhood,

while giving us extra money to put towards all those lobster rolls in Alifax. And the nice thing is the flexibility. We can decide to host our home only when it works for our schedule. Your home might be worth more than you think. Find out how much at Airbnb.ca.com. Calling all DIY, do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000,

Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know,

I bet you they're already on there. People are just on there talking, sharing their investment ideas, and using the analytics tools. So go ahead, blossom social in the app store, and I'll see you there. Well, let's move on here to our stocks on a radar presented by EQ Bank, our great sponsor, EQ Bank here. So I'll just be talking about the one on my radar here. And next Monday, we will have another one. And then we'll do his. We are trying to keep the episodes below 40 minutes, ideally 35, 40 minutes.

I think we've been doing a good job for the last couple of weeks. Not always easy, but it's what we're trying to do. So the one on my radar is pure storage, ticker, PSTG, a company that I didn't really know about. I do like to do in these stock on our radars, just some names sometimes that I'm not too familiar with. I think a while back I talked about Quanta Services. Yeah. That was a company that I kind of discovered through stocks on a radar. So I like to pick these companies.

So I'll just go over what they do. It's not a deep dive, maybe just a kind of medium dive here or small dive. I don't know how to say it, but pure storage sells all flash storage arrays and related software that enterprises use to store, manage, and access data. Their products are used for databases, virtual machines, analytics, and increasing AI workload. So it is a type of AI play for those interested. One that you probably have not heard about or very little know about. It's not a huge company here.

It's a market cap of around $23 billion. They have over $1.5 billion on the balance sheet just to give some context here. It offers fast access to data because those NVIDIA GPUs, they don't perform well at their full potential if they have to wait for slow storage. So they even have NVIDIA certified solution and are extremely power efficient. So obviously we've talked about how AI is just power-hung. So if you can offer some power efficiency there, it becomes very attractive, especially for those data centers.

But they do cater to a broader base of clients, broader than just AI, but it has become a big tail win for them, of course. And what's really interesting with pure storage here is that they get almost half of their revenue from subscription services, which is pretty unusual for a hardware company. Yeah, how does that work? Well, so the subscription can include software licenses, support and maintenance, cloud data services, AI-ready data pipelines, and even options for hardware refresh. So that's how they do that subscription model. Again, an interesting business model, I'm still not saying it's a company I would invest in or just not yet.

I have to do some more digging. But revenues definitely do look pretty good. they've increased at a rate of close to 10% over the last three years. They have over $1.5 billion in net cash on the balance sheet. Like I said, they actually don't have any debt. So really interesting. Operating margins are okay, not super high, but pretty stable around 15 to 16%. And free cash flow margins are definitely on the thinner side here at 2% to 3%.

But free cash flow per share has increased at a rate of 12% over the last three years, although it has been a bit lumpy here and I wanted to make sure I use that metric because we did talk about it not too long ago. The P is definitely on the highest side here. It's at a, I think, 184. So haven't dug into the earnings

just yet to understand why it's so high if it's because of how they do the accounting. But price of free cash flow is on the high side as well. You'd probably say it's a bit more reasonable at 43, so still definitely higher. So definitely a company that is trading on the higher side, I would assume, because of all the AI high, but a name that I think could be interesting is definitely a smaller cap company here at 23 billion.

I can't believe I'm saying smaller cap 23 billion. But it's definitely a bit smaller than some of the companies we've talked about. And apparently from what I've read, they are in consistent. consideration for being added to the S&P 500, although they were overlooked in the most recent update, but something else that could act as a tailwind for them in the near future, of course, if they are added to the index. They're almost an S&P 500 company at that. That's crazy.

Yeah, they, like I would say earnings are taking a hit just because, again, we talked about like a lot of non-cash costs, like depreciation has doubled since 2023, obviously because capital expenditures have doubled. Like they're probably, I don't know this company that well. I don't know what they're spending the money on. I would imagine it's the demand side of things. That seems to be what everybody, or sorry, the supply side. That seems to be what every AI company is rolling out a ton of money on in right now.

So yeah, it seems like an interesting option. I mean, I'm not going to lie. When I looked at it, I thought it was like a storage company, like where you buy a rent facilities, but yeah. It's your storage. Yeah. No, no. It's a, yeah, I thought that because they had one storage company.

I remember it trades on the venture and it just went through the roof during COVID. But yeah, that was my first impression. Yeah, I think, yeah, the only storage all that said the only Canadian, I think, public publicly listed storage company, at least for a reed or reed style company. But yeah, no, I thought it was an interesting name, not a company that you hear a whole lot and still, again, probably benefiting getting lifted from. the hype around HII, not, definitely not as much as some other companies, but it has seen, I mean, the stock is up in the last three years, 165%. So clearly, you know, it's seen quite a bit. And last three years is basically when Chad GPD came out, right, late 2022.

So it's definitely benefited from that. It's on a bit of a pullback right now. Do your research on that one. It's not a recommendation, but definitely got my curiosity in terms of, of the solution and also just the fact that they get almost half of it as subscription revenue. Yeah, that was kind of what I was going to bring up is there's a lot of people who are kind of debating the hardware, I guess, life. Hardware as a service.

Yeah, hardware. Yeah. You know, we're questioning the depreciation of all this, you know, all this buildouts and we're turning into hardware as a service, which doesn't necessarily bode well for the, you know, time span of that hardware. But yeah. Yeah, I mean, I would say like, well, Without knowing the company, but just knowing a decent, like a little bit about the, this type of hardware, I would say it's probably, it probably has more expectancy in terms of that compared to like a GPU, for example.

Yeah. So I'd feel a lot like the, you know, the usable life of it is probably a bit longer. I may be wrong, but that would be my impression. Maybe it, maybe it's not because it just, you know, the use and. over time just takes a toll on it. It just doesn't work as well over a certain period of time. But it's much easier to make a case against GPUs because it's evolving so quickly. Yeah.

I mean, we're, yeah, GPUs are obsolete. And I mean, at least from a computer standpoint, very, very quickly for sure. Yeah, exactly. And there are, there is plenty of competition in the space too. So keep that in mind. So it's not like it's the only option. But it does seem to offer some, some options that are very highly in demand from some of the biggest AI consumers there.

So yeah, so just a new name here. So ticker PSTG, so stock that I'll keep an eye on. Again, so just based on what I read, probably won't start a position, but just interesting to keep an eye on. Anything else, Dan, before we let it go here, we wrap it out. No, that's it. Okay, so well, thanks a lot for listening to the podcast. We love the support.

Really appreciate it. Make sure you subscribe to our YouTube channel. Fingers cross it's a success But we will be trying to do a live recording on YouTube Coming up this Thursday So if you want to have the time Subscribe to our YouTube channel We'll probably do where you can set it in events when it is

So it'll probably be around what 2pm probably Would be my guess 2 or 3 p.m. You just tell me and I'll be there. Next Thursday. Exactly. So around that time So afternoon next Wednesday Sorry if I said Thursday, so next Wednesday, that's when we record. So just make sure you tune in there.

We will set up a couple of days in advance so people know the time. So thanks a lot for listening. We will be back on Thursday or I guess Wednesday if you watch the live. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.