AI valuations meet a dividend test in Canadian small caps
Stock Talk Podcast Episode 355
The episode contrasts speculative AI infrastructure spending with the steadier economics, income potential, and growth questions facing A&W Food Services Canada.
- 1AI enthusiasm may obscure valuation, debt, and uncertainty over which companies ultimately capture the technology’s value.
- 2Perion Network’s buyout discussion highlights how balance-sheet strength and customer concentration shape resilience through business disruption.
- 3A&W Food Services Canada offers a fee-based franchise model and dividend appeal, but modest same-store sales make growth the central question.
Don't miss
The A&W analysis crystallizes the episode’s central tension: a strong franchise and dividend profile must still prove that same-store sales can accelerate.
The brief
The hosts begin with a poll on AI stocks, separating confidence in the technology from confidence that today’s investments justify their valuations.
They warn that debt-funded data-center expansion could echo dot-com-era excess unless investors identify where durable value is accruing.
Perion Network becomes the episode’s resilience test: its Microsoft dependence, recovery prospects, Apple acquisition, customer concentration, and balance sheet all shape the case.
The discussion then turns to A&W Food Services Canada, where more than 1,100 franchised locations and a fee-based model support dividend appeal.
The unresolved question is whether A&W’s brand strength and smash-burger launch can lift same-store sales beyond modest growth.
What was said on this episode
41 statements · 23 positive · 16 negative · 1 mixed · 1 neutral
Brett is more negative on AI stocks but more positive on AI technology.
“I'd be in a slightly more negative camp for stocks in itself, but actually more positive on AI as a technology as itself.”
Listen at 7:31
Anthropic and similar companies are not creating enough value.
“your Anthropics, which we went over last week, they're not creating enough value.”
Listen at 7:56
AI technology is improving and will continue improving.
“I think it's getting better and I would say it will continue to get better.”
Listen at 8:41
AI will not eliminate the need for human interaction.
“I don't think it, I think you're still going to have some human level of interaction too.”
Listen at 8:49
AI still lacks human-like thinking.
“I still think that that is there.”
Listen at 8:59
AI-driven growth eventually ends.
“I think that all good things come to an end eventually.”
Listen at 9:36
An AI spending pullback would quickly shake out the market.
“If all of a sudden there is a pullback, you know, I think that the market gets shook out pretty quickly.”
Listen at 9:46
AI is changing the world and will continue to do so.
“AI is definitely going to change the world and it is changing the world”
Listen at 10:15
AI is changing and will change the world.
“AI is definitely going to change the world and it is changing the world”
Listen at 10:15
AI will contain some very poor investments.
“Will there be horrible investments within AI just like there was in the dot-com bubble? Yes.”
Listen at 10:28
AI will contain some very poor investments.
“Will there be horrible investments within AI just like there was in the dot-com bubble? Yes.”
Listen at 10:28
Long-term value is not accumulating in neocloud companies.
“I don't think it's in the neoclouds”
Listen at 13:40
Long-term value is not accumulating in CoreWeave, Nebius, or IREN.
“I don't think it's in the neoclouds it's as simple as that your core weaves your nebius your irons i don't see the value accumulating in those companies long term”
Listen at 13:40
Investors largely expect the Perion acquisition to close smoothly.
“This implies that investors largely believe that the acquisition will close without an issue.”
Listen at 15:59
Brett considers AppLovin’s Perion offer attractive.
“I'll be inclined to agree that's a good offer.”
Listen at 16:10
The Perion acquisition has an exceptionally strong deal structure.
“Overall, this offer is about as strong as you get from a deal structure.”
Listen at 16:35
Perion’s acquisition implies approximately 4.8 times valuation against cash-adjusted figures.
“this puts the implied valuation about 4.8 times when looking at the cash value at the end of q3”
Listen at 16:43
Microsoft’s search changes cut Perion’s EBITDA by roughly two-thirds.
“the ebitda that changed to microsoft cut their ebitda by about two thirds going from 169 million in 2023 to 51 million in 2024”
Listen at 18:10
Microsoft’s search changes cut Perion’s EBITDA by roughly two-thirds.
“Microsoft cut their ebitda by about two thirds going from 169 million in 2023 to 51 million in 2024.”
Listen at 18:12
“over half of it. billion dollars in cash in Q3 2023. That's higher than the current market cap, higher than the acquisition price.”
Listen at 19:22
A net-cash balance sheet can reduce business volatility and risk.
“a net cash position can really stem that volatility and lower the risk by quite a bit”
Listen at 21:50
“The stock could have fell to a dollar or lower.”
Listen at 23:48
Girash Manufacturing became a longer-term speculative buy near $4.50.
“we ended up increasing them back to a longer term spec buy at about $4.50 per share”
Listen at 23:59
Cash-rich companies are attractive acquisition targets for private equity.
“Companies with cash rich balance sheets make really nice target acquisitions for private equity companies.”
Listen at 26:08
A&W uses franchisees to sell burgers and collects fees on every sale.
“A&W does not sell burgers. The franchisees sell the burgers. A&W collect a fee on every sale.”
Listen at 27:15
A&W has approximately $221 million debt, equal to 2.2 times EBITDA, and declining.
“bank debt is about 221 million dollars that is 2.2 times one year of ebitda and it is going down”
Listen at 28:05
A&W’s Q3 2026 revenue rose 11%, with same-store sales up 1.8%.
“q3 of 2026 revenue was 79.3 million dollars that is up 11 from last year same store sales grew 1.8 percent”
Listen at 28:46
A&W has a record 26 restaurants under construction, double its 2024 figure.
“26 restaurants are under construction. That is a record and double the 13 at the end of 2024.”
Listen at 30:08
A&W trades at approximately 11x EBITDA, 15x earnings, with a 5.3% dividend yield.
“On that basis, the EV is around $1.1 billion. That is 11 times adjusted EBITDA. The price to earning ratio is 15 times and the dividend is 5.3%.”
Listen at 30:56
A&W trades at 11x EBITDA, about 15% below its five-year average.
“today it is trading at 11 times so anw is trading about 15 below its own average”
Listen at 31:34
A&W trades approximately 15% below its five-year valuation average.
“ANW is trading about 15 below its own average”
Listen at 31:36
A&W trades at a 24% EBITDA-multiple discount to comparable franchise companies.
“ANW trade at 11 times EBITDA. The peer median is around 14.5 times. That is about a 24% discount.”
Listen at 31:51
A&W could gain approximately $7 per share if it halves its peer valuation gap.
“if ANW closes half of the gap to its peers, the stock could be worth about $7 more per share.”
Listen at 32:18
A&W stock could be worth approximately $7 more per share if valuation converges.
“the stock could be worth about $7 more per share”
Listen at 32:21
A&W’s 5.3% dividend is covered by cash flow.
“ANW pays a 5.3% dividend and its cash flow covers it.”
Listen at 32:29
A&W’s stock is inexpensive relative to its history and peers.
“the stock is cheap compared with his own history and its peers”
Listen at 32:47
A&W’s same-store sales growth is weak at 1–2%.
“same store sales are weak only one to two percent”
Listen at 32:52
A&W’s full-year target appears difficult to achieve.
“the full year target looks tight”
Listen at 32:57
A&W’s brand ranking fell from first to seventh.
“the brand ranking fell from one number one to number seven”
Listen at 33:01
Continued same-store sales improvement would support A&W’s attractive yield.
“If we saw any continued uptick in same-store sales, I mean, it looks to be that the yield is good.”
Listen at 33:24
A&W needs same-store sales growth above roughly 1.5%.
“It'd be nice to have more than one and a half percent or something, same store sales, but can you get there?”
Listen at 36:56
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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