2 TSX stocks to buy as Canada plans single-use plastic ban: WPK & CAS

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2 TSX stocks to buy as Canada plans single-use plastic ban: WPK & CAS

 2 TSX stocks to buy as Canada plans single-use plastic ban: WPK & CAS
Image source: © Sonyachny | Megapixl.com

Highlights

  • The Canadian government has outlined plans to ban single-use plastics.
  • WPK stock zoomed by roughly 12 per cent in six months
  • Cascades posted sales of C$ 1.03 billion in Q1 2022, higher than C$ 942 million in Q1 2021

Some Canadian investors are showing an increased interest in green packing stocks since the Trudeau government, on Monday, June 20, outlined a plan to ban single-use plastics. According to its final regulations, certain plastic items, including checkout bags, cutlery, certain food service ware that is hard to recycle, etc will be prohibited from production and import in Canada effectively from December 2022.

It is likely that the demand and production of sustainable, recycle-friendly packaging ware will increase in Canada in the near future as the federal government said it will ban the sale of these plastic items by the end of next year. Further, the government stated its plan to prohibit the export of these plastic items by December 2025.

As many environmental sensitive consumers are already making green choices, this move to ban single-use plastic could expedite collective efforts at the national level to reduce plastic waste and pollution. Hence, here are two TSX consumer stocks engaged in delivering recyclable packaging solutions.

Winpak Ltd (TSX: WPK)

Winpak is a Winnipeg-headquartered firm that produces and sells packaging materials, including plastic-based products and equipment. In March, however, the C$ 2.6-billion market cap firm signed an agreement with PureCycle Technologies (NASDAQ: PCT, PCT: US) for Ultra-Pure Recycled (UPR) Polypropylene to ensure a ‘circular economy’.

The mid-cap packaging company reported a revenue of US$ 275.98 million and a net profit of US$ 33.92 million in Q1 FY2022.

WPK stock zoomed by roughly 12 per cent in the last six months. Refinitiv data appears to be on a consolidated trend, with WPK stock attaining higher highs and lower lows since mid-February. WPK’s Relative Strength Index (RSI) was at a moderate level of 49.32 on June 20.

Also read: 5 TSX stocks to explore to recreate Warren Buffett's portfolio

Cascades Inc (TSX: CAS)

Cascades is a small-cap company that primarily uses recycled fibres to provide packaging and tissue products. On June 15, Cascades commissioned a new production site in York, Pennsylvania, for its northbox® product line. The C$ 1-billion market cap company also launched isothermal packaging technology to improve the meal boxes packaging line.

Cascades posted sales of C$ 1.03 billion in Q1 2022, higher than C$ 942 million in the same quarter of the previous year. However, the packaging company reported C$ 15 million of net loss as its operating income declined to a negative C$ 2 million in the latest quarter due to depreciation and amortization expenses (as operating income before depreciation and amortization was C$ 58 million).

CAS scrip plunged by over 27 per cent year-to-date (YTD). As per Refinitiv, CAS held an RSI value of 43.78 on June 20, supported by increasing trading volume over the last two days. 

 WPK and CAS: 2 TSX stocks to buy as Canada gears up for plastic ban

Bottomline

According to the official statement, single-use plastics like checkout bags and straws account for most of the plastic litter on shorelines. Investors could focus on these TSX packaging stocks as they offer sustainable alternatives, including recyclable and paper-based solutions, that could see a surge in demand with these plastic regulations.

Also read: TSX telecom stocks to buy as Quebecor & Rogers strike deal over Freedom

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.

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