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Anthony Menard

Eleven defensive TSX dividend stocks for conservative investors

What are we looking for?

Profitable companies in defensive sectors selling at a reasonable price.

Despite a small decrease in inflation in Canada, a few points force us to stay conservative. The decrease was mainly due to cyclical factors such as gasoline prices. Inflation is still at 7.6 per cent and the Bank of Canada is expected to continue to tighten financial conditions through its monetary policy. Consequently, we think the market surged too much following the decline in headline inflation. We believe that defensive stocks are attractive given the recent rise in cyclical stocks.

The screen (add this screener here)

We screened Canadian stocks in the consumer staples, telecommunications and utilities sectors, focusing on the following criteria:

  • Market capitalization higher than $1-billion;
  • StockPointer (SP) score higher than 60. 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 60 implies a better than average company;
  • Relative economic performance index (Rel. EPI) higher than 0.8 – Rel. EPI is a multistep calculation that compares the profitability of a company with its valuation and cost of capital. Higher profitability, a lower valuation and a lower cost of capital increase the ratio. Ninety-five per cent of the time the ratio falls between zero and two and is not meaningful below zero, which implies a negative return on capital. A ratio of 0.8 indicates economic performance in the top 20 per cent of the Canadian universe;
  • Three-year annualized dividend growth higher than 3 per cent.

For informational purposes, we have also included one-year dividend growth, return on capital, price-to-earnings and price-to-book ratios, one-year price return and dividend yield. Please note that some ratios may be shown as of end of the previous quarter.

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.

What we found

TICKER NAME PRICE MKT VALUE ($ MIL.) SP SCORE REL. EPI 3Y ANN. DIV. GRTH (%) 1Y DIV. GRTH (%) ROC (%) P/E P/B 1Y PRICE RTN. (%) DIV YLD. (%)
EMP-A-T EMPIRE CO. LTD. CLASS A 38.41 10089 76 1.38 10.9 15.4 8.6 13.7 1.18 -6.8 1.7
QBR-B-T QUEBECOR INC. CLASS B 28.91 6795 74 1.37 60.6 21.1 7.0 11.3 0.94 -7.8 4.2
WN-T GEORGE WESTON LIMITED 154.88 22408 72 1.27 6.4 13.1 7.5 13.7 1.87 14.4 1.7
ACO-X-T ATCO LTD. CLASS I 47.9 5468 65 1.23 5.2 3.0 5.8 14.8 1.16 12.9 3.9
NWC-T NORTH WEST COMPANY INC. 34.65 1660 76 1.20 4.5 4.3 17.2 11.7 2.92 -5.1 4.3
H-T HYDRO ONE LIMITED 35.36 21171 64 0.95 5.0 5.0 6.2 20.7 1.87 12.5 3.2
MRU-T METRO INC. 70.06 16715 75 0.94 11.3 10.3 9.8 19.4 2.48 9.8 1.6
BCE-T BCE INC. 64.65 58956 64 0.91 5.1 5.1 7.8 20.6 2.01 -0.3 5.7
L-T LOBLAW COMPANIES LIMITED 117.31 38364 71 0.89 7.7 13.6 9.1 19.6 2.53 32.2 0.4
T-T TELUS CORPORATION 30.1 41568 65 0.89 6.3 6.5 7.9 22.4 1.93 3.9 4.5
FTS-T FORTIS INC. 58.83 28162 61 0.88 5.9 5.9 4.9 22.2 1.52 1.9 3.6

 

Empire Co. Ltd., owner of the supermarket chain Sobey’s, top our list with a relative EPI of 1.38. Moreover, its SP score, at 76, is tied with North West Co. Ltd. for highest of our names, and Empire also has second-highest one-year dividend growth at 15.4 per cent. The company ranks higher than other grocery chains on our screen, such as Metro Inc. and Loblaw Cos. Ltd., owing to Empire’s significantly lower valuation on a P/E or P/B basis. The market seems cautious to award credibility to the company’s recent strong results.

Quebecor Inc., a telecom primarily serving Quebec, has the highest three-year and one-year dividend increase at 60.6 and 21.1 per cent. It also has the second-highest relative EPI at 1.37, reflecting its lower valuation. The company trades at the lowest P/E and P/B of our screen, at 11.3 and 0.9, respectively. Despite its recent plan to acquire Freedom Mobile, which would expand Quebecor’s wireless operations nationally, the market didn’t particularly react to the news. The market could fear the impact of the acquisition on the balance sheet or doubt the management’s ability to succeed in this breakthrough outside of Quebec.

Atco Ltd., an electricity, logistics and energy infrastructure company, is fourth in our list, the highest-ranking name from the utilities sector. Its performance metrics are generally less impressive than either Quebecor or Empire, but like the other utilities stocks on our list (Hydro One Ltd., Fortis Inc.), Atco provides stable results and is a candidate to weather almost any storm.

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free: inovestor.com/en-CA/store/

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

StockPointer® Canada Portfolio Transactions – July 2022

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Stockpointer® Canada model portfolio. These trades are effective as of Friday, July 15 after market close.Here are the details of the trades:

Ins:

  1. Canadian Natural Resources Ltd (CNQ) – Market Trend. Increase in the Energy sector as shown by the Top 100 index, therefore, increasing our position in the portfolio.

Outs:

  1. Leon’s Furniture Ltd. (LNF) – Market Trend. Decrease in the Consumer Discretionary sector as shown by the Top 100 index, therefore, decreasing our position in the portfolio.

Number Cruncher Extra – goeasy, TMX Group & Equitable Group

in our last Number Cruncher we discussed how goeasy (GSY), TMX Group (X) & EQB Inc (EQB) are great candidates if you are interested to look at smaller financial companies.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with GSY

The company has a healthy SP score of 73, but it decreased by 8 points in the last 90 days. The SP score is derived from the high performance (71.5) and risk score (21.3) . The company has a moderate exposure to all factor except for momentum which stands at 37. Sales increased by a whopping 35.5% year-over-year basis and increased by an annualized 20.6 per cent over 5 years. However, earnings per share decreased by 36.4% in the last year, but still grew by 63.9% per year in the last 5 years.

We see that the company increased its NOPAT during COVID and is now reverting. While the trend is scary, the price also came down a lot.

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Let’s continue with X

The company has a score of 71 with a solid increase of 10 points in the last 90 days. The SP score is derived from the performance (70.1) and risk (25.3) score. The company has a balanced exposure to all factors with a little bias for quality. The company reported vigorous year-over-year earnings growth of 67.7% with a respectable 5-year annualized EPS growth of 25.7%.

 

X currently has the lowest valuation based on our intrinsic value model. Based on our intrinsic value, the company would be worth $124.02 per share, which is below the current price. However, we see that in the past, the company traded as high as 2.73 times the intrinsic value estimated by our model sugesting that the company is currently attractive.

EQB has a score of 74 in our system with a 1 point increase in the last 90 days. The SP score is derived from the performance (69.7) and risk (15.2) score. The company has a value and quality bias with a score of 83 score and 80 respectively. The company achieved stable EPS growth over the last 5 years and rose by a respectable 18.8% on average during this period.

EQB beats all of its peers in terms of risk and also scores well in terms of performance by ranking in the top 3.

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com

Nine TSX financial stocks that may be flying under your radar

What are we looking for?
Small and mid-cap stocks in the financial sector with attractive trade-offs between performance and valuation.

Everyone appreciates large Canadian banks and they are indeed solid companies. Unfortunately, when a stock is highly appreciated it will naturally sell at a higher price and our banks, beloved by investors, are no different.

We believe smaller companies in the financial sector could be overlooked owing to the large weightings portfolio managers typically assigned to the large Canadian banks and the current volatility in the stock market.

The screen (add this screener here)

We screened Canadian financials focusing on the following criteria:

  • Market capitalization between $500-million and $10-billion, which would exclude any of the Big Six banks;
  • StockPointer (SP) Performance score higher than 60. The score mainly considers risk-adjusted return on capital, earnings a share growth and free cash flow by share. The score varies between zero and 100. A score above 60 implies a better-than-average company.

For informational purposes, we have also included five-year annualized earnings a share growth, four-year annualized dividend growth, one-year dividend growth, return on capital, beta, price-to-earnings and price-to-book ratios, dividend yield and one-year price return. Please note that some ratios may be shown as of end of previous quarter.

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.

What we found

Smaller financial players that may be flying under your radar

TICKER NAME PRICE MKT VALUE ($ MIL.) SP PERF. SCORE 5Y EPS GRTH. (%) 4Y DIV GRTH. (%) 1Y DIV GRTH. (%) ROC (%) BETA P/E P/B 1Y PRICE RTN. (%) DIV YLD. (%)
CVG-T CLAIRVEST GROUP INC. 65.01 978.6 75.7 55.4 16.7 36.8 38.5 0.27 3.0 0.83 -2.2 0.2
CF-T CANACCORD GENUITY GROUP INC. 8.43 742.3 75.0 435.4 68.2 28.0 18.6 1.26 3.4 0.46 -39.9 3.8
GSY-T GOEASY LTD. 98.1 1564.7 71.5 63.9 39.4 43.8 18.9 2.07 10.2 1.91 -39.9 3.6
X-T TMX GROUP LTD. 131 7325.2 70.2 25.7 11.9 13.8 12.5 0.66 14.4 1.82 0.9 2.5
EQB-T EQB INC 53.15 1814.0 69.7 18.8 14.3 12.8 16.5 1.55 5.9 0.96 -22.0 2.1
GCG-A-T GUARDIAN CAPITAL GROUP LIMITED CLASS A 30.3 814.8 69.0 -16.1 15.8 12.5 16.2 0.70 5.7 0.83 -8.2 3.3
CWB-T CANADIAN WESTERN BANK 26.03 2383.5 62.8 9.0 5.3 1.7 11.3 1.27 6.9 0.80 -25.7 4.8
IAG-T IA FINANCIAL CORPORATION INC. 64.02 6891.3 60.4 10.9 11.0 14.4 11.7 1.45 8.5 0.94 -5.8 4.1
FN-T FIRST NATIONAL FINANCIAL CORPORATION 33.11 1985.5 60.2 13.7 5.9 15.7 40.5 1.15 10.3 4.11 -33.5 7.0

Source: Inovestor

Non-prime lender goeasy Ltd. increased its dividend by 43.8 per cent and 39.4 per cent on an annualized basis over the past year and the past four years, respectively. While these hikes seem aggressive, they were fuelled by an annualized EPS growth of 63.9 per cent over the past five years, which indicates a margin of safety in the dividend policy. Affected by the uncertainty of an economic slowdown, goeasy is 54.9 per cent cheaper than at its peak last September. As the bad news gets incorporated in the stock, the gradual decline in the valuation is worth keeping an eye on.

TMX Group Ltd., owner of the TSX and other financial exchanges, is the most expensive stock of our list on a P/E basis, standing at 14.4. However, it has increased its EPS by an annualized 25.7 per cent in the past five years and seems less risky than many of its counterparts, as reflected by its beta of 0.66, the second-lowest of our list. On Aug. 12, 2021, the company completed the acquisition of AST Investor Services Inc. (Canada), a provider of transfer agency, corporate trust and related services.

Digital bank EQB Inc. recently changed its name from Equitable Group to more closely align it with subsidiary Equitable Bank and its trade name, EQ Bank. This followed the acquisition of Concentra Bank, the 13th largest Schedule 1 bank in Canada. The deal, announced in February, is expected to close in the second half of 2022. EQB generated a healthy return on capital of 16.5 per cent, which contrasts with its P/E of only 5.9.

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free.

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

 

Number Cruncher Extra – Asbury Automotive Group, Inc., Hilton Worldwide Holdings & Casey’s General Stores Inc

in our last Number Cruncher we discussed how Asbury Automotive Group, Inc (ABG). , Hilton Worldwide Holdings (HLT) & Casey’s General Stores Inc (CASY) could be excellent candidates if you want to look for Consumer Discretionary stocks that have room to increase their profitability.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with ABG

The company has a healthy SP score of 72 with a 90 days decrease of 4. The SP score is derived from the high performance (70.8) and risk score (23.2) . The company has a high exposure to value (75) and quality  (72). Sales increased by a whopping 49.8% year-over-year basis and increased by an annualized 16.8 per cent over 5 years. Earnings per share followed a similar trend, but even more solid with a 90.1% annualized increase in earnings per share and a 52.8% annualized increase on a 5-year horizon.

 

Despite not having the best growth score, compared to peers in its sector, it does relatively well. Overall, the company has the second highest growth score compared to its peers.

 

Let’s continue with HLT

The company has a score of 63 with a solid increase of 9 points in the last 90 days. The SP score is derived from the performance (63.8) and risk (36.7) score. The company has a momentum and volatility bias with a score of 70 and 67 respectively. The company reported vigorous year-over-year sales growth of 102.5 percent due to the relaxation of sanitary measures.

 

HLT was hit hard by the COVID. Its EPS fell from $4 to approximately -$3, but we see that the company has a powerful rebound in its profitability. The share price declined recently and so it could be a potential entry point for buyers.

 

CASY has a score of 66 in our system with a 1 point increase in the last 90 days. The SP score is derived from the performance (72.4) and risk (35.8) score. The company has a quality bias with a score of 67 score and a exposure close to 60 for momentum, volatility and yield. The company achieved solid 1-year sales growth of 38.4%, probably due to fuel revenue increase, while EPS declined 3.8%.

 

CASY increased its NOPAT very smoothly since 2019. In 2018, an extraordinary item seems to have boosted the NOPAT. We note that the last quarter has been promising and that the share price adjusted accordingly.

 

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com

These 11 consumer discretionary stocks should withstand cyclical headwinds

What are we looking for?

Consumer discretionary companies whose trailing return on capital is below historical levels, suggesting that there is room to grow their profitability.

The screen (add this screener here)

The consumer discretionary sector is cyclical, and a trend reversal is anticipated. Companies that have profited heavily from the pandemic environment, pushing their return on capital to unsustainable levels, can expect this key profitability metric to revert to historical levels in the next few quarters.

That said, not all consumer discretionary companies will be equally affected by the trend. A solid contrarian strategy is to buy companies where the return on capital is historically low – and sell when it is high.

With that in mind, we screened North American stocks focusing on the following criteria:

  • Market capitalization higher than $1-billion in their respective currency;
  • Five-year average annual return on capital higher than 10 per cent – we look for a company with proven long-term profitability;
  • Trailing return on capital lower than the five-year return on capital (and which, according to our strategy, can reasonably be expected to revert to its historical level);
  • Positive sales growth in the past three months – we look for a company with a positive industry trend (and this is how our list is ranked);
  • Three-month growth in net operating profit after tax (NOPAT) higher than 3 per cent.

For informational purposes, we have also included price-to-earnings, dividend yield and one-year price return. Please note that some ratios may be shown as of end of the previous quarter.

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.

What we found

Consumer discretionary companies

TICKER NAME PRICE MKT VALUE  ($ MIL.) 3M SALES GRTH. (%) 3M NOPAT GRTH. (%) 5Y ROC (%) ROC (%) P/E 1Y PRICE RTN. (%) DIV. YLD. (%)
ABG-N ASBURY AUTOMOTIVE GROUP, INC. 182.72 4044 17.5 19.6 11.5 10.8 5.7 0.5 0.0
HLT-N HILTON WORLDWIDE HOLDINGS INC 142.17 39665 14.4 17.5 10.4 10.2 54.8 13.8 0.4
MAR-Q MARRIOTT INTERNATIONAL, INC. CLASS A 174.65 57163 13.6 12.9 10.5 10.4 38.7 22.6 0.7
CASY-Q CASEY’S GENERAL STORES, INC. 211.68 7856 10.2 10.6 11.4 11.1 24.6 -1.7 0.7
CHH-N CHOICE HOTELS INTERNATIONAL, INC. 131.01 7306 7.0 10.5 20.6 18.4 22.0 8.3 0.7
EA-Q ELECTRONIC ARTS INC. 141.00 39480 6.8 30.3 15.5 12.2 51.1 -3.2 0.5
TOY-T SPIN MASTER CORP 44.17 4541 5.4 27.8 16.7 10.4 15.1 8.9 0.0
IHRT-Q IHEARTMEDIA INC CLASS B 11.53 1640 3.8 22.7 11.2 6.9 74.2 -52.9 0.0
CMCSA-Q COMCAST CORPORATION CLASS A 42.93 192383 3.3 4.1 11.3 6.5 13.8 -24.6 2.2
DOL-T DOLLARAMA INC. 70.12 20532 2.9 20.5 30.0 25.2 32.2 30.7 0.3
MSM-N MSC INDUSTRIAL DIRECT CO., INC. CLASS A 84.52 4719 2.7 13.3 14.7 14.4 16.0 -8.0 3.9

Asbury Automotive Group Inc., one of the largest U.S. automotive retail companies, has a three-month sales growth of 17.5 per cent and a P/E of 5.7, the highest and lowest on our list, respectively. Auto dealerships benefited from rising used-car prices, sparked from high demand from consumers amid limited supply from auto manufacturers. But while overall performance was probably helped by the pandemic, volume growth was constrained by low supply. At the end of 2021, the company acquired Stevinson Automotive, a dealership group, and the NOPAT increased by a robust 19.6 per cent after the acquisition.

Hilton Worldwide Holdings Inc., a hotel and resorts company, has the second highest P/E at 54.8, which reflects the anticipation of a solid rebound in the company’s profitability as health restrictions ease and normalcy returns. This rebound seems confirmed by the three-month sales growth at 14.4 per cent, the second highest of our list. The return on capital is close to the five-year trend, but the COVID years are included in that number and so we could expect the return on capital to increase beyond the five-year return on capital for that industry.

Casey’s General Stores Inc., a convenience-store manager in the U.S. Midwest, achieved respectable three-month sales growth of 10.2 per cent and NOPAT growth of 10.6 per cent. Fuel sales, which represent about a third of Casey’s total revenue, fell dramatically during COVID. With gasoline prices now at historically high levels, the company could naturally generate healthy profits if it maintains a stable gross margin relative to its revenue for its service stations.

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

For more details about these stocks, subscribe to the Inovestor for Advisors platform for free.

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

StockPointer® US Portfolio Transactions – May 2022

We have rebalanced our Stockpointer® US model portfolio. The trades are effective as of Friday, May 13 after market close.
Here are the details of the trades:

Ins:

  1. Nexstar Media Group Inc (NXST)– Market Trend. Increase in the Consumer Discretionary sector as shown by the Top 100 index, therefore, increasing our position in the portfolio.
  2. Best Buy Co Inc (BBY) – Market Trend. Increase in the Consumer Discretionary sector
  3. Meta Platforms Inc (FB) – Market Trend. Increase in the Information Technology sector

Outs:

  1. Philip Morris International Inc. (PM) – Market Trend. Decrease in the Consumer Staple sector as shown by the Top 100 index, therefore, decreasing our position in the portfolio.
  2. Verizon Communications Inc. (VZ) – Market Trend. Decrease in the Telecommunication sector.
  3. Exxon Mobil Corp (XOM) – Market Trend. Decrease in the Energy sector.

Number Cruncher Extra – ONEX Corporation, Quebecor & Manulife

in our last Number Cruncher we discussed how Onex Corporation (ONEX), Quebecor (QBR.B) & Manulife (MFC) could be good candidates if we want to protect our portfolio from an economic downturn.

Here is the screener we used to find these stocks and that you can add to your personalized screeners.

Let’s start with ONEX

The company has a decent SP score of 58 with a 90 days decrease of 3. The SP score is derived from the high performance (55.6) and very low risk (35) score. The company has a high exposure to value (90). Its momentum score is acceptable. The strong increase in its fundamentals in the recent 3 to 12 months  could explain the score even if the share price momentum shows some weakness. Sales and earnings growth are not necessarily relevant for this company given its volatility.

 

We se that the company is a top performer compared to its peers, but is maybe not the best performer for a given risk score.

 

Let’s continue with QBR.B

The company has a robust score of 74 with a stable 90 days score. The SP score is derived from the performance (77.6) and risk (26.9) score. The company has a quality bias with a score of 74. The company achieved moderate five-year sales of 2.5%, but still generated annualized EPS growth of 12.2%.

 

Quebecor has a stable profitability and this chart shows it well. The company not only increased its NOPAT, it also increased its EVA which mean the company didn’t just inflated their numbers, they created value for shareholders. Despite the stable uptrend in the NOPAT and EVA, the share price seems to have lost a bit of momentum which could signal an attractive entry point.

The company has a score of 71 in our system with a stable 90 days score. The SP score is derived from the performance (66.5) and risk (14.8) score. The company has a value bias with a moderate exposure to the yield factor. MFC achieved much lower sales in the last year, down 23.9%, but EPS are up 20.8%. The company registered respectable annualized EPS growth of 45.9% in the last 5 years.

 

MFC seems to trade at a reasonable price and based on our Market value added metrics, we come also to this conclusion. The MVA shows market expectation and see that currently, those are quite low for MFC which suggest that the company could be undervalued based on its historical pricing.

 

 

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com

15 attractively valued TSX stocks with profitability and declining price

What are we looking for?

Before Monday’s sell-off, the S&P/TSX Composite Index generated a return of 6 per cent over the past year, but a chunk of this performance is attributable to the energy sector, which doubled in the same time frame, camouflaging the sluggish performance registered by many non-energy companies.

We will look for companies with positive free cash flow and a declining stock price over the past year to find some that are trading at an attractive price.

The screen (add this screener here)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization higher than $5-billion;
  • Negative one-year price return – we look for stocks with a lack of positive momentum;
  • Relative Economic Performance Index higher than 0.8 – relative EPI is a multistep calculation that compares the profitability of a company to its valuation and cost of capital. Higher profitability, a lower valuation and a lower cost of capital increase the ratio. Ninety-five per cent of the time the ratio falls between zero and two and is not meaningful below zero, which implies a negative return on capital. A ratio of 0.8 indicates economic performance in the top 20 per cent of the Canadian universe;
  • Positive five-year average free-cash-flow-to-capital – we want companies that generates excess cash flow that they can redistribute to shareholders or pay off debt.

For informational purposes, we have also included the most recent trailing 12 months’ return on capital, price-to-earnings, price-to-book, dividend yield and one-year price return. Please note that some ratios may be as of the end of previous quarter.

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.

What we found

Profitability, declining price make these 15 TSX stocks look attractively valued

TICKER NAME PRICE MKT VALUE  ($ MIL.) REL. EPI 5Y AVG. FCF / CAP (%) ROC (%) P/E P/B 1Y PRICE RTN. (%) DIV. YLD. (%)
ONEX-T ONEX CORPORATION 74.39 6457 2.17 N/A 11.1 3.7 0.6 -12.4 0.5
QBR-B-T QUEBECOR INC. CLASS B 29.54 7068 1.37 5.6 7.7 12.9 5.6 -13.4 4.1
CTC-A-T CANADIAN TIRE CORPORATION, LIMITED CLASS A 169.45 10192 1.36 6.7 11.9 9.2 2.0 -15.0 3.1
MFC-T MANULIFE FINANCIAL CORPORATION 24.96 48497 1.17 N/A 14.9 7.1 1.0 -3.4 5.3
BHC-T BAUSCH HEALTH COMPANIES INC. 20.69 7436 1.14 2.4 4.5 18.7 -42.9 0.0
LUN-T LUNDIN MINING CORPORATION 11.01 8125 1.09 1.6 11.9 6.4 1.4 -25.8 3.3
GWO-T GREAT-WEST LIFECO INC. 33.97 31613 1.06 N/A 14.0 9.9 1.3 -6.3 5.8
IAG-T IA FINANCIAL CORPORATION INC. 66.93 7199 1.00 N/A 13.6 8.7 1.1 -5.5 3.7
BTO-T B2GOLD CORP. 5.56 5864 0.92 8.0 13.4 11.2 1.6 -11.5 3.7
OTEX-T OPEN TEXT CORPORATION 49.36 13304 0.89 5.1 8.5 22.1 2.6 -15.1 2.3
CCL-B-T CCL INDUSTRIES INC. CLASS B 55.26 9957 0.87 7.9 12.0 16.7 2.7 -22.6 1.7
PKI-T PARKLAND CORPORATION 35.06 5405 0.85 6.3 9.3 43.8 2.7 -12.0 0.0
IGM-T IGM FINANCIAL INC. 37.42 8969 0.82 N/A 14.7 9.2 1.4 -16.5 6.0
SLF-T SUN LIFE FINANCIAL INC. 63.68 37316 0.81 N/A 13.7 9.5 1.6 -3.8 4.2
CAR-UN-T CANADIAN APARTMENT PROPERTIES REAL ESTATE INVESTMENT TRUST 47.34 8289 0.81 3.5 6.0 5.9 0.8 -17.2 3.1

Source: Inovestor

Note: Free cash flow is not calculated for financial corporations owing to their structure, so free-cash-flow-to-capital is not available.

Onex Corp., an investment manager involved in credit strategies and private equity, stands out of the list with a relative EPI of 2.17. The nature of its profits is volatile since most of it comes from changes in the fair value of their investments. While the company will record losses from time to time, especially in a stressed environment, investors looking for value may take comfort in its P/E of 3.7 and price-to-book of only 0.6. The company’s stock has fallen more than 25 per cent year-to-date. The company is slated to report its first-quarter earnings on Friday.

Quebecor Inc. has been invited by Rogers Communications Inc. to participate in negotiations to acquire Freedom Mobile from Shaw Communications Inc., according to a Globe and Mail report. The Competition Bureau is seeking to block Rogers’s takeover of Shaw. The acquisition of Shaw’s Freedom would allow Quebecor to follow an earlier expansion plan outside Quebec and could put it in a better position to compete with its telecom rivals. The company will release its first quarter results on Thursday.

Manulife Financial Corp. has a return on capital of 14.9 per cent, the highest of our list, and a juicy dividend of 5.3. The life insurance industry has seen some tough times in the past decade with historically low long-term interest rates, but that could be about to change with the Canadian 10-year bond hitting 3.11 per cent, the highest level since 2011. The company will release its first-quarter results on Wednesday.

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

Anthony Ménard, CFA, is vice-president of data management at Inovestor.

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StockPointer® Canada Portfolio Transactions – April 2022

We have rebalanced the Nasdaq Inovestor Canadian Index based on our Stockpointer® Canada model portfolio. These trades are effective as of Thursday, April 14 after market close. Here are the details of the trades:

Ins:

  1. Brookfield Asset Management (BAM.A) – Market Trend. Increase in the Financial sector as shown by the Top 100 index, therefore, increasing our position in the portfolio. We chose the company because of its high SP score.
  2. Arc Resources (ARX) – Market Trend. Increase in the Energy sector. We chose the company due to its high SP Score.
  3. Intact Financial Corporation (IFC) – Intra-sectorial transaction. In the top of its sector.

Outs:

  1. Metro (MRU) – Market Trend. Decrease in the Consumer Staples sector as shown by the Top 100 index, therefore, decreasing our position in the portfolio.
  2. GDI Integrated Facility Services Inc. (GDI) – Market Trend. Decrease in the Industrial sector.
  3. Power Corporation (POW) – Intra-sectorial transaction. The company is no longer in the top of its sector.