What are we looking for?
At least until Monday’s pullback, the S&P/TSX Composite Index has been on a great run, rising more than 3 per cent this year as of Friday’s close. Investor sentiment driven by expectations of a positive earnings season, a stable economic outlook and the China-U.S. Phase 1 trade deal have helped the market reach new record highs in 2020. Investor sentiment, driven by expectations of a positive earnings season, a stable economic outlook and the China-U.S. Phase 1 trade deal, have helped the market reach new record highs in 2020.
Today, we look for Canadian mid-cap stocks that had a good run in the short term, and where price gains are supported by fundamentals such as sales and profitability.
We screened the Canadian companies by focusing on the following criteria:
•Market capitalization greater than $500-million and lower than $3-billion;
•Price change over one month higher than 2 per cent – we are looking for companies with a positive momentum in the very short-term;
•Price change over three months higher than 6 per cent – we are looking for companies with a positive momentum in the short-term;
•A return on capital more than 7 per cent – we want to find profitable companies that have a good return on investment;
•Sales growth higher than 10 per cent over 12 months – we are looking for a growing company. (Sales growth of 10 per cent may seem like a lot, but smaller companies can grow more easily than big ones);
For informational purposes, we have also included recent stock price, dividend yield and one-year price return. Please note that some ratios may be reported at the end of the previous quarter.
What we found
We found 10 companies with these criteria, with the accompanying table ranked by 12-month sales growth. K92 Mining Inc. tops the table, realizing huge sales growth over the past year. The return on capital is also a lot higher than our threshold, sitting at 50.9 per cent. Note: Results can be quite volatile for mining companies and we need to be careful with the short track record of this company.
Aside from K92 Mining, Wall Financial Corp. and Heroux-Devtek Inc. have had big years, with 72.9 per cent and 51.1 per cent, respectively, in sales growth. Wall Street Financial has shown strong price momentum over the past three months while Heroux-Devtek has done quite respectably over the past month.
Investors are advised to do further research before investing in any of the companies listed in the accompanying table.
|Ticker||Name||PRICE ($)||EXPECTED DIV. YIELD (%)||MARKET CAP. ($M)||3M PRICE RETURN (%)||1M PRICE RETURN (%)||RETURN ON CAPITAL||Sales Ch. 12M (%)||1Y PRICE RETURN (%)|
|KNT-X||K92 Mining, Inc.||3.48||–||740.10||35.21||20.83||50.87||192.20||242.86|
|WFC-T||Wall Financial Corporation||35.95||5.58||1,220.62||37.51||7.06||11.86||72.91||39.97|
|REAL-T||Real Matters, Inc.||12.75||–||1,083.06||11.59||3.49||7.34||18.46||273.33|
|ENGH-T||Enghouse Systems Limited||52.25||0.85||2,860.03||32.00||8.45||18.63||12.54||45.10|
|HCG-T||Home Capital Group Inc.||33.76||–||1,935.50||27.90||2.43||7.96||11.59||128.89|
|ET-T||Evertz Technologies Limited||18.3||3.94||1,405.47||7.40||2.46||17.89||10.65||10.32|