KeyStone’s Stock Talk Podcast Episode 167

We’re back – starting with a Star of the Week from our Canadian Small-Cap Growth Stock Research – Dynacor Gold Mines Inc. (DNG:TSX) – the company purchases ore from small-scale miners (artisanal miners) in various regions of Peru, processes it at its mill and sells the extracted gold and silver internationally at market prices. The company just reported record Q1 quarterly revenues and earnings and appears positioned for further growth.

In Our Stock vs. Stock segment, Aaron answers a listener question on which tech online retail enabler, Amazon (AMZN:NASDAQ) or Shopify (SHOP:TSX) offer better value in the current market. The listener wonders if Shopify, which is down an astonishing 75% year to date in 2022 alone, is finally offering value.


Star of the Week

Dynacor Gold Mines Inc. (DNG:TSX)

Why a Star: Record Quarterly Results – shares jumped from a low of $2.64 on Thursday to $3.10 on Monday – following those results.

Dynacor has a very simple business model. The company purchases ore from small-scale miners (artisanal miners) in various regions of Peru, processes it at its wholly-owned Veta Dorada mill and sells the extracted gold and silver internationally at market prices. As a result, the profitability of this business depends on two factors:

  • A margin between the price of ore purchased and the market price of gold – the higher the margin the better.
  • Throughput (the amount of ore processed) – the higher throughput the better.

A higher gold pricing environment encourages more small-scale mining which grows Dynacor’s ore supply and creates profitable growth.

Q1 2022

Higher gold production, gold market price and trend and favorable exchange rate (Peruvian sol against US$) boost overall financial performance.

Increase of 22.5% in Sales. With greater quantities and a higher gold market price, revenues rose to $50.1 million in Q1-2022 compared to $40.9 million in Q1-2021;

Earning per share in line with financial guidance (considering the non-cash deferred tax recovery). Dynacor recorded a net income of $5.1 million in Q1 2022 ($0.13 or CA$0.16 per share) compared to $2.1 million ($0.05 or CA$0.06 per share) in Q1-2021.

Solid cash position. Cash on hand of $25.7 million at the end of Q1-2022 compared to $27.1 million at year end 2021 due to the variance in working capital items. $0.85 per share in cash.


Dynacor is not without significant geopolitical risk operating in Peru, but it has operated profitably in country for well over a decade. The company has solid current growth and multiple avenues for expansion which we have detailed recently for clients. KeyStone has been recommended Dynacor for several years and we reiterated our SPEC BUY on the stock in our Canadian Focus BUY portfolio last year at $1.80. The stock has performed very well over that period in a down market closing today in the $3.00 range and increasing its dividend 3 times to currently yield over 3.6%. We expect another dividend increase in 2022. Despite the jump in Dynacor’s shares it currently trades at P/E (TTM) of 6.37 – removing the cash and the trailing PE is 4.63. Price to FFO is 5.49 over the past 12-months. And the company expects growth in 2022. Yes, it deserves a geopolitical discount as well as a discount due to its exposure to gold (a somewhat volatile commodity), but the discount appears high. We will be updating clients on the quarter and out outlook this week. Dynacor’s 75% gain in a down market over the past year make it our Star of the Week.

Dynacor is a great example of the unique research KeyStone can provide. The stock literally has no other analysts following it in Canada.

Why? Likely because it is cash rich, holds all the cash it needs to grow and does not need to raise capital. So, at present, Bay Street or the big banks, which make their money from raising capital – not from picking or investing in great businesses – have little interest in covering it.

We are happy to take the ever-increasing dividend and strong share price gains. Value does not stay hidden forever and Dynacor should continue to get recognised overtime.



Shopify Inc. (SHOP)

Price: $470
Market Cap: $54 billion
Performance: Down ~80% since November. Inc. (AMZN)

Price: $2,223
Market Cap: $1.13 trillion
Performance: Down ~40% since November.


Description: Provides a platform that allows merchants to set up online stores and ecommerce on a variety of platforms.


Description: Largest ecommerce platform in the world and also the largest cloud computing company in the world (AWS).

Financial Performance:

Q1 2022:

·       Total revenue in the first quarter grew 22% to $1.2 billion.

·       Adjusted net income4 for the first quarter of 2022 was $25.1 million, or $0.20 per diluted share, compared with adjusted net income of $254.1 million, or $2.01 per diluted share, for the first quarter of 2021.

3 Year Average Growth:

·       Revenue: 62%

·       Cash flow per share: 103%


Financial Performance:

Q1 2022:

·       Net sales increased 7% to $116.4 billion.

·       Adjusted net income was $3.8 billion, or $7.56 per share, compared to $8.1 billion, or $15,79 per share.

·       Includes a pre-tax valuation loss of $7.6 billion from common stock investment in Rivian Automotive, Inc.

·       AWS grew 37% year-over-year in the first quarter.

3 Year Average Growth:

·       Revenue: 26%

·       Cash flow per share: 26%


·       134 times expected 2023 EPS.


·       43 times expected 2023 EPS.


·       Expects slower growth in the first half of 2022 and then some acceleration in the second half and fourth quarter. Ecommerce growth peaked during the pandemic in the near term. Expects some contract terms in subscription business to be headwinds to growth in the first half of the year.


·       Earnings peaked in 2021 due to strong pandemic demand. Analysts are expecting a significant drop in earnings for 2022 and then return to growth in 2023 but still lower than the peak of 2021.

·       Cloud computing (AWS) growth remains very strong.



·       Amazon is the much more mature business.

·       Shopify has been producing better growth in revenue over the last 3 years.

·       Both companies see growth rates declining in the near term as ecommerce growth peaked during the pandemic.

·       Shopify is starting to produce profitability but profit per share remains low and the valuation is extremely high in spite of the 80% correction in the stock.

·       Amazon trades at a price to earnings valuation which is reasonable relative to its historic average but this also reflects slowing growth.

·       Amazon is a much more defensive business with a strong leadership position in ecommerce and cloud computing.

·       Shopify is likely more exposed to competitive pressures, less defensive and less diversified.

·       We would choose Amazon over Shopify for long-term investors but aren’t a buyer of either name in the near term.



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