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Sprott: Growth Started To Sprout At The Height Of The Pandemic

Mar. 03, 2021 5:03 PM ETSprott Inc. (SII), SII:CA2 Comments


  • Sprott, Inc. has shown financial stability despite the slow-moving revenue and income growth as a result of its strategic acquisition, sale, and diversification of assets for the last five years.
  • Dividend growth has not been continuous but the payouts have been consistent since 2014.
  • After the downtrend followed by almost unchanged values of the stock price for about four months, a stronger uptrend has been observed since the latter part of January.
  • With its fruitful performance despite the adverse effects of the pandemic, the potential reopening of the economy may give opportunities to speed up its growth.

Sprott, Inc. (NYSE: SII) emerged unfazed and even stronger despite the disruptive effects of the pandemic in the previous year as growth and stability have been more visible. Likewise, dividend payments increased substantially despite decreased Free Cash Flow ("FCF"). Moreover, even if there were points when the stock price moved in the opposite direction, the potential of a strong uptrend for more than a month must be given more attention to.

Company Financials

Operating Revenue and Total Expenses

Sprott, Inc. has been operating in a wide range of financial services, particularly investment advisory across many segments such as Exchange Listed Products, Lending, Managed Equities, Brokerage, and Corporate. The main revenue growth drivers consist of fee income, particularly management and advisory fees, commissions from the income and its investment services, and income from its lending and investments. While growth has been quite slow, revenues remained stable and adequate for the last five years. In 2015-2016, the operating revenue has grown by 30% to $165 million, primarily driven by the IPO of Sprott Energies Opportunity Trust that raised $46 million. But as the company tried to optimize its resources and expenses, it sold some of its Canadian retail assets contract and other non-core assets to focus on its core competencies, which in turn, temporarily decreased its capacity. With that, the operating revenue fell for two consecutive years to $110 million in 2017 and $100 million in 2018, respectively. This optimization to improve its diversification of assets, particularly investments, and improve efficiency can be confirmed through the downtrend in total expenses. This was most noticeable in selling and administrative expenses, fee expenses, compensation expenses, provision expenses, and amortization of intangibles as the total expenses decreased to $96 million and $72 million. The operating profit has initially dropped from $41 million to $13 million before rising again to $28 million. Note that the changes in revenue and expenses were also driven by its acquisition of the Central Fund of Canada. With that, it may be safe to say that the advantageous effect has just been observed in the following

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