Top 30 Rational Formula Stocks, Featuring Thunderbird Entertainment $TBRD.v
Note on This Week’s Ranking List
Each week, I share the top-ranked companies from my Rational Formula ranking system. It’s inspired by the logic behind Greenblatt’s Magic Formula, but built with far greater depth, evaluating companies across 96 factors. The system looks for accelerating fundamentals, efficient capital allocation, expanding margins, and reasonable valuations, with a focus on consistency and improvement across multiple time frames. The goal is to generate a list of high-probability opportunities before they attract broader attention. I also highlight one company each week, sometimes as a deep dive, sometimes just an introduction. That write-up appears below the rankings.
Normally, I exclude many business services companies from the weekly top 30 list. That’s because parts of their financials tend to be lumpier, which makes them less compatible with the factor-based approach I use. These names can still be good businesses, but the model doesn’t capture their patterns well enough to include them always in the regular ranking.
This week, I’ve made a slight exception. I’ve included a few business services stocks in the broader ranking universe, and Thunderbird Entertainment came up as one of the highest-scoring names under that expanded screen. While it’s not in the regular group, the numbers are compelling enough to warrant a deeper look, so that’s what I’ve done below.
Alphabetical List of Top Rational Formula Stocks 7/18/25
1. ACFN – Acorn Energy, Inc. – $39.24M
2. ADW.A – Andrew Peller Ltd. – $220.57M
3. ARTW – Art's-Way Manufacturing Co., Inc. – $13.13M
4. ASTE – Astec Industries, Inc. – $888.48M
5. AVAH – Aveanna Healthcare Holdings, Inc. – $784.28M
6. BKTI – BK Technologies Corp. – $148.39M
7. BTMD – biote Corp. – $131.30M
8. CGEH – Capstone Green Energy Holdings, Inc. – $19.34M
9. CNRD – Conrad Industries, Inc. – $100.31M
10. CRRX – CareRx Corp. – $178.22M
11. DTOL – D2L, Inc. – $772.51M
12. DTEAF – DAVIDsTEA, Inc. – $21.39M
13. ETST – Earth Science Tech, Inc. – $58.83M
14. EVER – EverQuote, Inc. – $891.20M
15. GEO – Geodrill Ltd. – $162.90M
16. GRC – The Gorman-Rupp Co. – $984.99M
17. IFX – Imaflex, Inc. – $66.47M
18. KLTR – Kaltura, Inc. – $282.27M
19. MUEL – Paul Mueller Co. – $341.95M
20. NATR – Nature's Sunshine Products, Inc. – $271.20M
21. NEPH – Nephros, Inc. – $37.95M
22. NTWK – NetSol Technologies, Inc. – $44.14M
23. OOMA – Ooma, Inc. – $333.41M
24. PYYX – Pyxus International, Inc. – $132.88M
25. RFIL – RF Industries Ltd. – $71.69M
26. RSSS – Research Solutions, Inc. – $87.49M
27. TBRD – Thunderbird Entertainment Group, Inc. – $85.31M
28. TBTC – Table Trac, Inc. – $25.98M
29. TRZ – Transat A.T., Inc. – $105.32M
30. ATGN – Altigen Communications, Inc. – $15.44M
Thunderbird Entertainment: A Mispriced, Cash-Generating IP Platform
Thunderbird Entertainment is trading at valuation levels typically reserved for broken or deteriorating businesses, yet it is neither. Based on trailing financials, the company trades at less than 3x free cash flow and 2x EV/EBITDA, with a strong balance sheet, a stable service revenue base, and modest upside optionality from owned IP. It has shown consistent execution, generates good cash, and has visibility into future production work, all while being valued as if the model is in decline.
The company operates in a part of the content ecosystem that tends to be underappreciated: predictable, work-for-hire production services for major streamers. At the same time, it’s building its own IP portfolio, with early signs of monetization beginning to appear. Taken together, Thunderbird offers a favorable risk/reward profile, especially in the context of its capital-light structure and strong free cash flow generation.
At its current valuation, the market seems to be missing what this business is: a small, well-run production platform with durable demand, limited capital needs, and unrecognized operating leverage.
Purely on the numbers, this is among the cheapest stocks I’ve come across in my career.
Company Overview
Thunderbird operates two primary business segments:
Production Services (~90% of revenue): This is fee-for-service content creation for clients like Netflix, Disney+, and Peacock. It includes both animated children’s programming and factual content. These projects are typically contracted well in advance, providing predictable, recurring revenue. This segment has grown consistently and forms the core of the company’s earnings power.
Original IP Licensing (~10% of revenue): Thunderbird also invests in and develops its own intellectual property. This carries more uncertainty and upfront cost, but also higher margin potential. Early examples include Mermicorno and Super Team Canada. Management has been disciplined in funding development, pacing investment according to internal capabilities and market appetite.
The business is led by CEO Jennifer McCarron, who has scaled the company from a boutique studio to over 1,200 employees. Her reputation in the animation industry and history of managing creative teams lend operational credibility, especially in a sector that often struggles with execution at scale.
It’s Cheap, Really Cheap
Thunderbird’s valuation is difficult to reconcile with its underlying performance. Based on recent financials:
Market cap: ~$86M CAD
Enterprise value: ~$78M CAD (net cash)
Trailing revenue: ~$190M
Trailing EBITDA: ~$37M
Trailing free cash flow: ~$29M
Valuation multiples:
EV/EBITDA = 2.1x
P/FCF = 3.0x
EV/FCF = 2.7x
P/S = 0.45x
EV/S = 0.40x
These metrics are often seen in companies facing structural decline, excessive leverage, or earnings instability. Thunderbird has none of those problems. The business has grown revenue at a 22% CAGR since 2019, turned consistently profitable, and generates meaningful cash. It holds a strong balance sheet with over $30M in cash and minimal debt.
The disconnect appears to stem from broader sentiment and structural factors. The market has pulled capital away from micro-cap content producers, particularly those listed in Canada and lacking U.S. coverage. At the same time, streamers have moderated content spending, creating a near-term headwind for perception.
Capital efficiency is a key component of the investment case. Using a Greenblatt-style approach:
EBIT: ~$11M
Invested capital: ~$38M (Accounts receivable + other current assets – payables + net PPE)
Return on capital: ~29%
This is a strong result for a media or production services company and suggests a scalable model that converts booked work into free cash flow without significant working capital drag or capex requirements. In a different sector, this type of performance would likely be valued much higher.
Investment Thesis
Thunderbird’s thesis is built around three central ideas: dependable baseline earnings, optional upside from IP, and a significant valuation disconnect.
Predictable, Cash-Generative Core
Most of Thunderbird’s revenue comes from production services, fee-for-service contracts that are usually booked well in advance. These engagements create visibility. Major clients include Netflix and Disney, and the company has been able to scale while maintaining quality and meeting delivery schedules. This core business continued to grow during COVID and has supported consistent cash generation.
IP Optionality with Disciplined Investment
The original IP segment represents about 10% of the business but carries the most upside. While early, the company has started monetizing properties like Mermicorno and Super Team Canada. Thunderbird is not pursuing a hit-driven, high-risk model. Instead, it’s developing IP in a measured way, leveraging its in-house production capabilities and existing creative infrastructure. Any success here could unlock higher-margin revenue streams and increase the perceived strategic value of the platform.
Valuation Mismatch Despite Operating Strength
Valuation remains compressed even as operational results have improved. There’s no clear structural reason for Thunderbird to trade at 2x EBITDA and 3x FCF.
In sum, this is a stable company with visible cash flows and credible upside drivers trading at distressed multiples for non-fundamental reasons.
Why It Scores Well on the Rational Formula Ranking System
Thunderbird ranks near the top of the Rational Formula system. The model integrates multiple factors including free cash flow yield, balance sheet health, margin expansion, and capital efficiency. It is particularly attuned to businesses that are under-earning relative to intrinsic strength or where valuation has not yet caught up to operating improvement.
What stands out in Thunderbird’s case:
1. High Free Cash Flow Relative to Enterprise Value
With ~$29M in trailing free cash flow and an enterprise value of ~$78M CAD, Thunderbird’s FCF/EV yield sits around 37%. That’s among the highest in the model. Most companies in that percentile are either deeply cyclical or in structural decline. Thunderbird doesn’t exhibit either trait.
2. Rising Return on Capital
The company’s return on capital has expanded meaningfully, from single digits several years ago to a range of 20–30% today using a Greenblatt-style ROC calculation. That kind of trajectory is seen as an inflection point in the system, which gives credit not just to high returns but to changes in return profile that suggest operating leverage or improved capital deployment.
3. Clean Capital Structure
Thunderbird has over $30M in cash, no long-term debt, and low short-term obligations. The model penalizes balance sheets that constrain reinvestment or require dilution to fund growth. TBRD clears those hurdles comfortably. The absence of preferred stock, convertibles, or contingent liabilities further supports its score.
4. Efficient Working Capital and Cash Conversion
A common weakness in media companies, particularly microcaps, is inefficient working capital or speculative spending on development assets. Thunderbird’s business model, anchored in contract-based production, enables fast revenue-to-cash conversion. Cash flow closely tracks operating income, and the working capital cycle has been improving. These traits are rare at this size and contribute to a high-quality earnings signal.
5. Operational Momentum
The model tracks changes in free cash flow over time. Thunderbird has gone from modest cash generation to consistent FCF in excess of $25M on a trailing basis. This reflects margin expansion and discipline rather than one-off items. The model rewards this kind of progression, especially when paired with stability in the core business.
6. Valuation Dislocation with No Red Flags
Many companies that screen at these valuation levels are shrinking, highly levered, or have opaque financials. Thunderbird’s fundamentals are straightforward. There’s no concerning share dilution, off-balance-sheet risk, or suspect accounting.
In sum, the ranking system interprets Thunderbird not just as a statistically cheap stock, but as one that is actively improving while being mispriced.
Here’s the 3 year rank chart:
Catalysts
A few tangible near- and medium-term events could shift sentiment or re-rate Thunderbird’s valuation:
1. IP Monetization
Thunderbird has been deliberate in how it develops its own intellectual property, avoiding overinvestment and prioritizing capital discipline. That strategy may be starting to pay off: properties like Mermicorno and Super Team Canada are entering monetization phases. If even one of these IP bets gains traction — through licensing, distribution, or merchandising — the impact on margins and the company's valuation framework could be significant. The current multiple implies zero value for owned IP.
2. Buyback Acceleration
The company resumed its NCIB and repurchased ~700,000 shares between May and July. With over $30M CAD in cash and healthy free cash flow, Thunderbird has the capacity to materially reduce the float. At these valuation levels, each repurchased share is highly accretive. If management increases its pace or announces a more formal capital return plan, it could improve sentiment and increase investor confidence.
3. Strategic Review or Sale
Voss Capital, the largest known shareholder (institutions own 38% and Voss is almost half of that), has pushed for a strategic review in the past. With good financials, recurring cash flow, and no leverage, Thunderbird is a logical acquisition target, either for private equity or larger Canadian media firms like Boat Rocker or even Lionsgate. The IP pipeline and steady service cash flows would likely look more valuable within a larger platform.
4. Visibility and U.S. Listing Optionality
Management has discussed the potential for a U.S. listing in the future, which would dramatically increase investor reach. Even short of that, more consistent IR activity or sell-side coverage could attract small-cap investors looking for cash-generative businesses. Right now, the valuation reflects a name that few investors are looking at but that can change quickly with visibility.
5. Macro Tailwinds for Content Spend
While streamer belt-tightening hurt the industry in recent years, there are signs of stabilization. Netflix, for example, has resumed more aggressive content spend. If macro conditions or platform-specific budgets normalize, vendors with a track record of on-time, high-quality delivery, like Thunderbird, may benefit.
Risks
There are several risks to acknowledge that could pressure the thesis:
1. Volatility in IP Revenue
The bull case involves optionality from Thunderbird’s owned IP. But monetizing original content is inherently uncertain, and the path from development to profitability can be long. A failed property or slow adoption could make this portion of the business immaterial. The base business cushions this, but the market is unlikely to reward IP potential without real financial impact.
2. Customer Concentration
Thunderbird depends on a relatively small group of key media platforms—Netflix, Disney+, Peacock, Max, HBO Max, Nickelodeon, Apple TV+, NBCUniversal, CBC, Discovery, Hulu, PBS, History, HGTV, and others— for roughly 90% of its production services revenue. These long-established relationships bring advantages in visibility and repeat bookings. That said, the loss or reduction of a contract with any one of these studios, especially if it accounts for more than 10% of revenue(which Netflix likely does), could materially impact quarterly results and operating income. While management has emphasized multi-year pipelines stretching through 2026, ongoing dependency on a limited number of clients introduces a measurable concentration risk.
3. Content Sector Overhang
Media production, especially small-cap outsourced content, has been out of favor since 2022. The sector has been derated following the streaming correction, Hollywood strikes, and the AI narrative. Even solid financial execution may be overlooked in the current macro environment.
4. AI Disruption – Perception and Reality
AI-generated content is a market fear. Investors are increasingly pricing in the idea that large portions of animation, editing, voiceover, and even scriptwriting could be automated. That perception can compress multiples for content-service providers like Thunderbird, even if near-term impacts are limited. In practice, Thunderbird’s work (especially in animation and unscripted) is less vulnerable to generative AI disruption than peers. Moreover, the company is actively exploring AI as a production enhancer, not a replacement, suggesting potential margin expansion or faster delivery times as internal tools mature. But until that’s proven out, the headline risk remains.
5. Small-Cap Liquidity and Awareness
At sub-$100M CAD market cap, Thunderbird is illiquid. The stock trades thinly, lacks broad institutional coverage, and is largely off the radar for U.S. investors. That limits near-term catalysts from passive inflows, institutional buying, or index inclusion, and can leave the stock underpriced for extended periods even with solid results.
6. Currency and Geographic Headwinds
The company earns most of its revenue in USD but reports in CAD, which creates some FX-related noise in results. It’s also listed on the TSX Venture exchange, a constraint on its visibility and investor pool. While Thunderbird has a production presence in Los Angeles that supports U.S. customer access, its geography and listing structure are net headwinds to rerating. There’s also the tariff issue but to consider, and who knows how to assess that.
Why It’s Not as Risky as It Looks
1. Net Cash and No Structural Leverage
The company has ~$30M in cash and minimal long-term liabilities. There are no convertibles, no preferred shares, no hidden obligations. Net cash is around ~$8M, and short-term debt has been reduced meaningfully in recent quarters. This balance sheet removes solvency risk and gives management optionality to buy back stock or pursue strategic moves without diluting shareholders.
2. Predictable, Contract-Based Revenue
About 90% of revenue comes from contracted production services, a work-for-hire model with limited speculative risk. These contracts are typically secured 12–18 months in advance and executed under cost-plus terms. It’s not a glamorous business, but it offers stability and consistent operating cash flow, which is uncommon in the small-cap content world.
3. Disciplined Capital Allocation
Thunderbird has not overreached on IP spending. Capex is low, and working capital management has improved. The company has begun returning capital via buybacks and appears focused on profitability rather than scale. That’s especially important for microcaps, where “growth stories” can often come at the expense of shareholder returns.
4. High-Quality Earnings
The company converts GAAP profits into cash with unusual efficiency for a media business. There are no signs of earnings manipulation, no bloated share-based compensation, and no red flags in working capital. Unlike peers who capitalize development costs or rely on non-recurring income, Thunderbird’s financials are clean and cash-backed.
5. Execution Through Disruption
Management delivered during a period of industry upheaval — COVID disruptions, industry strikes, and budget pullbacks — without burning cash or needing to raise capital. That operational resilience builds credibility, especially when paired with long-standing relationships with top-tier customers.
6. No Hidden Landmines
There’s no off-balance-sheet leverage, no complicated joint ventures, and no aggressive accounting. Insider ownership is modest (~2%), but stable with a few recent small purchases. The dilution profile is reasonable, and share count growth has been minimal. This is a small-cap that, at least on paper, doesn’t carry the usual baggage.
Conclusion
This is a small, boring, well-run content producer generating cash, trading at distressed-level multiples despite stable operations and improving returns. At 2x EBITDA and ~3x free cash flow, the company is priced for deterioration, but it’s executing, buying back stock, and expanding margins.
You don’t need a breakout hit or a takeout for this investment to work. If the company simply maintains its current performance and returns modest capital to shareholders, it’s likely to generate pretty solid absolute returns. If any of the optionality hits, IP monetization, strategic review, rerating on better visibility, the upside could be substantial.
Disclosure:
I/we own shares of Thunderbird Entertainment (TBRD.V) at the time of writing. This position may change at any time without notice.
Disclaimer:
This content is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Investors should conduct their own due diligence or consult a qualified financial advisor before making any investment decisions. The accuracy of the information is believed to be reliable but is not guaranteed.
I think thunderbird is very interesting; on their homepage they only have annual reports of 2022 and 2021.
What am I missing?