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1. Company Snapshot

1.a. Company Description

Cogeco Inc., through its subsidiaries, operates in the communications and media sectors in Canada and the United States.The company operates in two segments, Communications and Other.The Communications segment provides a range of Internet, video, and telephony services through its two-way broadband fiber networks primarily to residential customers, as well as to small and medium sized businesses under the Cogeco Connexion name in Quebec and Ontario; and Atlantic Broadband brand in the United States.


The Other segment owns and operates 23 radio stations with complementary radio formats and coverage serving a range of audiences primarily across the province of Québec; and Cogeco News, a news agency.It serves primary service units, Internet, video, and telephony service customers.The company was incorporated in 1957 and is headquartered in Montreal, Canada.

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1.b. Last Insights on CGO

Cogeco Inc.'s recent performance was negatively driven by a 1.4% decline in revenue to CA$765.0m in Q1 2025, compared to the same period last year. Despite a 40% increase in EPS to CA$3.13, the revenue decline and lower-than-expected growth led to a price target reduction by CIBC Capital Markets to $64 from $67. This suggests that investors are concerned about the company's ability to sustain its growth momentum, potentially due to increased competition in the telecommunications market."

1.c. Company Highlights

2. Cogeco Communications' Strong Q4 Results and Guidance

Cogeco Communications reported a robust fourth quarter, marking the end of year one of their three-year transformation program. The company's free cash flow increased by $38 million year-on-year in constant currency, and adjusted EBITDA margin improved by 110 basis points. The company added 17,000 new Internet customers in Canada, its best Canadian Internet customer growth in 13 years. However, the actual EPS came out at $2.12, missing estimates of $2.59. Revenue and adjusted EBITDA are expected to decrease between 1% and 3% and 0% and 2%, respectively, in fiscal '26. The company's guidance for free cash flow is between $625 million and $690 million for the current fiscal year.

Publication Date: Nov -21

📋 Highlights
  • Free Cash Flow Growth:: $38M YoY increase in constant currency during Q4, with 110 bps EBITDA margin improvement.
  • Canadian Internet Growth:: 17,000 new Internet customers added in Q4, the strongest growth in 13 years.
  • U.S. Stabilization:: Ohio customer base grew for first time in 4 years; 35,000 fiber-to-the-home passings added at $400/home.
  • Wireless Launch:: Canada’s wireless service deployed in October 2025 across most wireline footprint, showing strong demand.
  • Future Guidance:: $625M–$690M free cash flow in 2026, with 50%+ rural fiber penetration and $100M allocated for growth investments.

Financial Performance

The company's financial performance was strong, driven by growth in digital advertising revenue, which increased by 8.5%. Cogeco Inc.'s media operations revenue growth was a highlight, and the company increased its dividend by 7% to $0.987 per share. The dividend yield is currently at 6.1%, which is an attractive feature for income investors. With a P/E ratio of 6.66, the stock appears to be undervalued.

Operational Highlights

The Canadian wireless service launch is progressing ahead of plan, with the deployment of this new service across most of the wireline operating footprint. The company is seeing a materially lower churn in the U.S. from customers also taking wireless from them. In the U.S., 35,000 new fiber-to-the-home passings were added using a new, more efficient technology, at an average cost of around $400 per home.

Guidance and Outlook

Cogeco guides for consolidated revenue and adjusted EBITDA to decline in the mid-single-digit range in constant currency in Q1, with a material sequential improvement in year-over-year adjusted EBITDA trends starting in the second quarter. The company expects continued growth in free cash flow in constant currency despite competition-driven top-line pressures. The return on investment for fiber rollouts is good, with over 50% penetration in rural areas with high demand.

Valuation

The stock is trading at an EV/EBITDA ratio of 3.69, which is relatively low compared to its peers. The free cash flow yield is high at 99.34%, indicating that the stock may be undervalued. With a ROE of 10.4% and ROIC of 6.27%, the company is generating good returns on its equity and invested capital.

3. NewsRoom

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Why You Might Be Interested In Cogeco Inc. (TSE:CGO) For Its Upcoming Dividend

Nov -08

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Cogeco (TSX:CGO) Margin Compression Reinforces Persistent Earnings Pressure Narrative

Nov -01

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Cogeco Announces Q4 2025 Financial Results

Oct -30

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Cogeco and Cogeco Communications Schedule the Release of their Financial Results for the Fourth Quarter of Fiscal 2025 and Related Conference Call

Sep -24

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Cogeco "Dismayed" As Fed Govt Upholds "Broken Telecom Regime, Jeopardizing Canada's Prosperity"; But Telus Welcomes Decision

Aug -07

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Government Upholds Broken Telecom Regime, Jeopardizing Canada's Prosperity

Aug -07

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Cogeco Announces Q3 2025 Financial Results and Canadian Wireless Launch

Jul -16

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Cogeco and Cogeco Communications Schedule the Release of their Financial Results for the Third Quarter of Fiscal 2025 and Related Conference Call

Jun -18

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.99%)

6. Segments

American Broadband Services

Expected Growth: 4.65%

American Broadband Services from Cogeco Inc. achieves 4.65% growth driven by increasing demand for high-speed internet, expansion into underserved rural areas, and strategic investments in network infrastructure. Additionally, the segment benefits from a growing customer base, competitive pricing, and a focus on delivering exceptional customer experience.

Canadian Broadband Services

Expected Growth: 7.4%

Cogeco's Canadian Broadband Services growth of 7.4% is driven by increasing demand for high-speed internet, bundling strategies, and investments in network infrastructure. Additionally, rural area expansions, competitive pricing, and customer retention efforts contribute to the growth. Furthermore, the shift towards online streaming and remote work accelerates broadband adoption, supporting the segment's expansion.

Other

Expected Growth: 4.83%

Cogeco Inc.'s 4.83% growth in 'Other' segment is driven by increasing demand for its business services, expansion into new markets, and strategic acquisitions. Additionally, the company's focus on digital transformation, cost savings initiatives, and investments in network infrastructure have contributed to this growth.

7. Detailed Products

Internet Services

Cogeco offers a range of internet services, including high-speed internet, Wi-Fi, and fibre-optic connections, providing fast and reliable connectivity for residential and business customers.

Television Services

Cogeco provides a variety of television services, including digital TV, HD TV, and on-demand content, offering a range of channels and programming options for residential customers.

Phone Services

Cogeco offers home phone services, including local and long-distance calling, voicemail, and call features, providing reliable and affordable communication solutions for residential customers.

Fibre-Optic Network Services

Cogeco provides fibre-optic network services, including dedicated internet, Ethernet, and wavelength services, offering high-speed and reliable connectivity for business customers.

Data Centre Services

Cogeco offers data centre services, including colocation, cloud, and managed services, providing secure and reliable infrastructure for business customers.

IT Services

Cogeco provides IT services, including managed IT, cybersecurity, and cloud services, offering comprehensive technology solutions for business customers.

8. Cogeco Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Cogeco Inc. is medium due to the availability of alternative telecommunications services from competitors.

Bargaining Power Of Customers

The bargaining power of customers is low due to the lack of negotiating power and the high switching costs associated with changing telecommunications providers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium due to the presence of multiple suppliers of network equipment and services, but the high costs associated with switching suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry, including the need for significant capital investments and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established competitors in the telecommunications industry, leading to intense competition for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 84.67%
Debt Cost 5.29%
Equity Weight 15.33%
Equity Cost 5.29%
WACC 5.29%
Leverage 552.16%

11. Quality Control: Cogeco Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Cogeco

A-Score: 7.0/10

Value: 9.3

Growth: 5.9

Quality: 4.5

Yield: 9.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Cogeco

A-Score: 6.6/10

Value: 8.5

Growth: 5.3

Quality: 5.6

Yield: 8.0

Momentum: 3.5

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
TDS

A-Score: 5.4/10

Value: 8.1

Growth: 3.2

Quality: 3.1

Yield: 4.0

Momentum: 9.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
ATN International

A-Score: 4.5/10

Value: 8.8

Growth: 4.6

Quality: 2.7

Yield: 7.0

Momentum: 0.0

Volatility: 3.7

1-Year Total Return ->

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Stock-Card
Crexendo

A-Score: 4.4/10

Value: 1.7

Growth: 7.7

Quality: 7.0

Yield: 0.0

Momentum: 7.0

Volatility: 3.0

1-Year Total Return ->

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Stock-Card
Cable One

A-Score: 3.6/10

Value: 7.6

Growth: 4.1

Quality: 2.8

Yield: 5.0

Momentum: 0.0

Volatility: 2.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

64.5$

Current Price

64.5$

Potential

-0.00%

Expected Cash-Flows