Why Transcontinental Inc. (TCL.A) is a Hidden Gem in the Packaging Growth Surge

The stock market often overlooks companies undergoing strategic transitions, mistaking short-term turbulence for long-term decline. Transcontinental Inc. (TSE:TCL.A), a Canadian media and packaging giant, is a prime example of this phenomenon. While its traditional print division faces headwinds, the company’s pivot to high-margin flexible packaging—a sector with 14.2% year-over-year growth in operating earnings—positions it as a compelling undervalued opportunity. Here’s why investors should act now.

The Flexible Packaging Gold Rush: Transcontinental’s Secret Weapon

Flexible packaging is the future of consumer goods. From food to pharmaceuticals, companies are shifting to lightweight, durable, and sustainable materials—a market Transcontinental is dominating. Its $80 million investment in a mono-material recyclable packaging facility in Spartanburg, South Carolina, underscores its leadership in this space. This segment now accounts for 58% of total revenue, with operational improvements driving a 14.2% jump in adjusted operating earnings in fiscal 2024.

Crucially, this division is insulated from economic cycles. As global brands prioritize sustainability, demand for eco-friendly packaging is soaring. Analysts at BMO Capital estimate the North American flexible packaging market could grow by 6–8% annually through 2030—a trajectory Transcontinental is primed to outpace.

Print Division: A Stabilized Cash Machine

While print revenue has declined—accounting for just 38% of total revenue—the division is far from obsolete. Transcontinental has stabilized profitability here through cost-cutting and innovation:
- The raddar™ flyer, a digital-first solution reducing paper use by 60%, is gaining traction in key markets like Québec.
- In-store marketing and analytics services are boosting margins, with adjusted operating earnings rising 2.1% in fiscal 2024.

This stabilization ensures the print segment remains a cash generator, funding growth in packaging without diluting shareholder value.

Valuation: A Bargain at 9.86x P/E—And Growing

Despite its dual-engine growth strategy, Transcontinental trades at a 9.86 P/E ratio, well below the sector average of 13.3x. Its EV/EBITDA of 5.62x is even more compelling, offering a discount to peers in a sector with 1.3x average price-to-sales ratios.

Even more compelling:
- The dividend yield of 10.07%—nearly seven times the industry median—provides immediate income.
- Analysts at RBC expect a 19.68% upside to the stock price, with a $22.57 price target, driven by its strong balance sheet (debt reduced to 1.71x EBITDA).

Why Act Now? The Catalysts Are Coming

1. Upcoming Earnings (June 4, 2025): Analysts project EPS of $1.91, which could surprise to the upside as packaging demand accelerates.
2. Sustainability Momentum: The Science-Based Targets Initiative (SBTi) approval of Transcontinental’s GHG reduction goals positions it as a top ESG investment.
3. Technical Strength: The stock is near its 52-week high of $19.29, with strong buy signals from rising volume and momentum indicators.

Final Call: A 20%+ Return Waiting to Happen

Transcontinental Inc. isn’t just surviving—it’s thriving. Its flexible packaging dominance and stabilized print division create a low-risk, high-reward profile at today’s price. With a $1.90 annual dividend and a stock poised to hit $22.57, investors who act now could pocket 19.68% gains by year-end.

This is a textbook value play: a misunderstood company with sustainable growth drivers, a fortress balance sheet, and a valuation that’s lagging behind its potential. Don’t let the print division’s legacy cloud your view of the packaging revolution Transcontinental is leading.

Act before the market catches on.