Calian Group (CGY): Insider Buys Signal Confidence in Defense Tailwinds

Insider Buying at Calian Signals Strategic Optimism
Calian Group (CGY.TO) has seen notable insider buying in early 2025, with two directors significantly increasing their stakes—a clear vote of confidence in the company's prospects. Valerie Sorbie, an independent director, boosted her holdings by 360% to 2,401 shares, worth approximately CA$120,000 as of January 20, 2025. Meanwhile, director Josh Blair purchased 5,000 shares valued at CA$250,000 on February 18, 2025. These purchases, which represent 0.021% and 0.043% of the company's 11.7 million shares outstanding, respectively, underscore insider belief in Calian's ability to capitalize on its core defense and cybersecurity divisions. Such concentrated ownership stakes in a small-cap company amplify the significance of these moves, particularly amid a macro backdrop of soaring defense spending.

Defense Spending Surge: A Catalyst with Legs
The primary tailwind for Calian is Canada's accelerated push to meet NATO's 2% GDP defense spending target by fiscal 2025–2026. Prime Minister Mark Carney's government has allocated an additional CA$9.3 billion for military spending this year—a 32% increase from the previous fiscal year's CA$41 billion budget. This surge directly benefits Calian, which derives 49% of its trailing twelve-month (LTM) revenue from defense contracts (CA$363 million). The company's expertise in training, cybersecurity, and systems integration aligns perfectly with Canada's priorities:

• Training and Readiness: Calian's role as a prime contractor for NATO's Joint Warfare Centre (JWC), providing operational readiness training, highlights its global relevance.
• Cybersecurity and AI: With CA$2.1 billion earmarked for domestic defense innovation, Calian's advanced IT and cybersecurity solutions are positioned to win new contracts.
• Border Security: Expanded funding for northern and southern border patrols creates demand for Calian's logistical and infrastructure support services.

Analyst Rob Goff of Ventum Capital Markets notes that Calian's “exposure to defense spending is unmatched among Canadian peers,” with its small share count amplifying the impact of incremental revenue gains.

Valuation: A Discounted Play on Defense Growth
At current levels, Calian trades at compelling multiples. Its EV/EBITDA is 6.7x for 2025 and 5.8x for 2026—well below the average 10x–12x multiple for defense contractors in North America. Goff's discounted cash flow (DCF) analysis supports a CA$69 price target, using a 13.3% discount rate and an 8.25x terminal EV/EBITDA multiple. Even the near-term CA$60 price target implies a 70% upside from current levels, reflecting the market's underappreciation of Calian's defense leverage.

Risks to Consider
While the macro tailwinds are strong, execution risks remain:
1. Procurement Delays: Canada's defense spending has historically faced bureaucratic bottlenecks. The new centralized procurement agency aims to streamline processes, but progress could lag.
2. Dependency on Defense Contracts: Over 49% of revenue comes from defense, making Calian vulnerable to shifts in government priorities.
3. Valuation Pressures: If defense spending execution falters, the current low multiples could compress further.

Investment Thesis: Buy with a Long-Term Horizon
The confluence of insider buying, defense spending acceleration, and undemanding valuations makes Calian a compelling buy. Key catalysts to watch include:
- Q3/F25 Earnings: Expected to reflect new contract wins tied to the CA$9.3B spending boost.
- NATO 2035 Goals: A potential 3.5% spending target by 2035 could supercharge demand for Calian's services.

With a CA$60 price target (10% free cash flow yield) and upside potential to CA$69 via DCF, Calian offers asymmetric reward/risk at current prices. Investors should pair a position with a long-term view, given the lag between spending announcements and revenue recognition.

In summary, Calian Group is a rare small-cap play on Canada's defense renaissance. Insiders are betting big—so should you.