What are we looking for?
Companies with a decent share price performance over the past six months and trading below their historical valuations.
Economic uncertainty is fuelled by the relentless rise in interest rates by central banks around the world, which could be leading to a global recession. In these uncertain times, the companies seen as the safest are sometimes overbid, leading to stretched valuations.
The screen (add this screener here)
We screened non-energy Canadian stocks focusing on the following criteria:
- A market capitalization higher than $1-billion;
- A StockPointer (SP) performance score higher than 70 – the score mainly considers risk-adjusted return on capital, earnings per share growth and free cash flow per share. The score varies between zero and 100, a score above 70 implies a high-performing company;
- A five-year average price-to-earnings ratio under 30 and a current P/E that is lower than the five-year average P/E (in other words, only stocks trading below their historical valuations);
- A positive six-month price change (the S&P/TSX Composite Index increased by 1.4 per cent, excluding dividends, during the period).
For informational purposes we have also included three-month growth in net operating profit after tax (NOPAT), one-year NOPAT growth, one-year price return and dividend yield. Please note that some ratios may be shown as of end of previous quarter.
We decided to exclude energy companies because of their extraordinary earnings in the past year, which makes them all attractive from a historical valuation standpoint.
More about Inovestor
Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock-picking by using model portfolios, and easily communicate investment decisions with clients through client-friendly reports.