The Canadian Technology Fast Fifty Analysed

The Canadian Technology Fast Fifty Analysed

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For the last three years, Deloitte & Touche has compiled an annual list of the fastest growing technology companies in Canada - the Fast Fifty. (In 1998 it was actually the Fast Fifty-Five.) These companies can be publicly traded or privately held, as long as they meet the criteria set out.

The criteria? The companies must have had minimum revenues of $75,000 in 1995 and of $1 million in 1999. And they must be headquartered and controlled in Canada.

Deloitte & Touche solicits nominations for the list from business and the community, so the Fast Fifty competition is not exhaustive. There may be companies with greater revenue growth not on the list simply because they were not nominated.

After sifting through the applications, the accounting firm publishes the Fast Fifty, this year in the National Post's Business Magazine for October 2000 (which was distributed with the newspaper on Sept. 28th).

As this is the third year of the Fast Fifty, I thought it might be worthwhile to look at publicly traded companies on the current and previous lists to see how they have fared as an investment. This year there are 27 public companies on the list. Last year there were 26 and in 1998 there were 18.

Nine of these public companies have made the list each time. Another eight made it last year and this year. There were five that made it the first two years but not this year. The rest made it in only one year.

To help digest all the data, you may want to click the links below to see tables of data. The first table lists the price of the stock on Sept. 30th of the year it first made the list, the interim high, the interim low and the price on Oct. 4, 2000. The high/low prices for stocks new to the list this year are the high/low for the past year. They are listed in the following order - companies making all three lists, companies making the most recent two lists, companies making it the first time this year, companies making it the first two years only, companies making only the 1999 list, companies making only the 1998 list.

The second table shows gains made on $1000 invested in each stock making the list in 1998 and 1999. I've formatted the pages so you can print them off easily (no side ads).

Fast Fifty Comparison Table
Fast Fifty Showing Gains on $1000 Invested

Now here is some interesting additional data. Of a total of forty publicly traded companies making any or all of the lists, 27 are in positive territory today. 13 are in a loss position. And that includes the ten new additions to this year's list, seven of which are up already in only a week. Looking at the maximum gains possible, only 8 of 30 (ten are new to the list this year and not included) failed to double in price at some time. Only 5 failed to gain at least 25% at some point.

But here's the interesting kicker - of the thirty stocks that have been the list in 1998 or 1999, five have been ten baggers at their peaks - over 1000% gain. Another four were five baggers or better at their peaks.

In fact, if $1000 had been invested in each of the thirty stocks that made the list for those two years - in other words, you bought positions in each of the 18 stocks on the 1998 list on Sept. 30, 1998 and each of the 12 new ones on the 1999 list on Sept. 30, 1999, you would have $132,238.51 today, a gain of 340.8%, notwithstanding the ten losers. If you had cashed out at each stock's peak, you would have a staggering $241,270.48, a gain of 704.2%. A 700% return in two years is simply amazing!

Capping this performance is the phenomenal success of several spectacularly successful companies - Research in Motion, Janna Systems, BCE Emergis, Descartes Systems Group and Sierra Wireless, all ten baggers plus at their peaks. Janna is still up 4038.89% and climbing. Research in Motion was up as much as 4382.76% and is currently up 2624.14% and climbing.

New to the Fast Fifty this year is a subsidiary list - the Shooting Stars - companies that have not been around five years but have jumped revenues from $75,000 a year to $1 million a year in three years from 1997 to 1999.

Downside to the Fast Fifty

The Fast Fifty is based on revenue growth, not profit growth. And in the long run, profits drive a stock's price. There is, of course, a correlation between revenue growth and profit growth. But there is no causal connection. There are many companies growing sales at a good rate today who may never reach profitability.

The worst performers on the list are dismal indeed. Six of the eight companies that made the list in 1998 or 1999 only are down 30% or more. SunBlush Technologies is off 86.25%. The only exceptions are PMC Sierra and Sierra Wireless which are both up over 350%.

Even making the list three times doesn't guarantee success. A.L.I. Technologies is off 67.67% from the price at Sept. 30, 1998 in spite of excellent revenue growth and never gained more than 10% at any time. MDSI Mobile Data is up a paltry 9.33%, although it did peak up 766.67%. (Woe to those who didn't sell!)

Past success of Fast Fifty stocks is no guarantee of future success, of course. The failures in the bunch point out the importance of doing additional research and of spreading your investing out over a number of stocks.

That said, the Fast Fifty is certainly an excellent place to start in your quest for the ten baggers of the future! Which of the new additions to this year's list is the next Janna or the next Research in Motion?