Category

Number Cruncher

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.

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.

17 consumer staples that offer portfolio protection from an economic downturn

What are we looking for?

Consumer staples with a balanced exposure to performance and risk.

The U.S. yield curve inverted at the beginning of April, which is a signal that a U.S. recession could be ahead in the next 12 to 18 months. In addition, inflation in basic needs such as food, housing and energy, combined with higher interest rates, could significantly erode discretionary purchasing power.

We believe that consumer staples is the most likely sector to offer resilience in this environment.

The screen (add this screener here)

We screened U.S. stocks in the consumer staples sector focusing on the following criteria:

  • Market capitalization higher than US$1-billion;
  • StockPointer (SP) performance score higher than 65. 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 65 implies a well-performing company;
  • StockPointer (SP) risk score lower than 35. The risk score is scaled from zero to 100 where 100 is a high-risk company. 35 is considered low-risk. The score takes into account many criteria; our software looks at leverage and stability of profitability, and uses an automatically calculated discounted cash flow to evaluate the expensiveness of the company;
  • positive five-year earnings-per-share growth. We look for a company that demonstrated improvements over the past five years;
  • SP performance score minus SP risk score, which is how the stocks are ranked.

For informational purposes, we have also included trailing 12 months’ return on capital, price-to-earnings, dividend yield, and one-year price return. Please note that some ratios maybe 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

17 staples that offer portfolio protection

TICKER NAME PRICE MKT VALUE  ($ MIL.) SP PERF. SCORE SP RISK SCORE PERF. MINUS RISK 5Y EPS GRTH. (%) ROC (%) P/E 1Y PRICE RTN. (%) DIV. YLD. (%)
VGR-N VECTOR GROUP LTD. 12.22 1881 75.9 15.6 60.3 23.7 20.3 13.2 -15.5 6.6
TSN-N TYSON FOODS, INC. CLASS A 92.44 32859 79.1 19.8 59.3 15.2 13.5 8.7 20.7 2.0
PM-N PHILIP MORRIS INTERNATIONAL INC. 100.07 155126 76.9 19.9 57.1 5.4 26.9 17.2 9.9 5.0
CHD-N CHURCH & DWIGHT CO., INC. 103.45 25091 78.9 31.6 47.3 13.7 16.1 31.2 19.2 1.0
KR-N KROGER CO. 61.67 44834 70.8 24.7 46.1 1.2 8.0 28.4 63.2 1.4
ADM-N ARCHER-DANIELS-MIDLAND COMPANY 95.25 53340 71.6 25.5 46.0 17.1 12.0 19.9 62.7 1.7
CPB-N CAMPBELL SOUP COMPANY 45.47 13732 70.5 24.8 45.7 13.7 11.7 15.0 -5.4 3.3
SFM-Q SPROUTS FARMERS MARKETS, INC. 34.75 3861 68.2 23.0 45.2 20.3 11.5 16.5 33.1
COKE-Q COCA-COLA CONSOLIDATED, INC. 488.14 4576 72.9 29.1 43.8 30.3 14.8 24.2 61.0 0.2
PG-N PROCTER & GAMBLE COMPANY 160.1 383770 73.3 32.1 41.2 10.5 15.3 28.3 17.4 2.2
CAG-N CONAGRA BRANDS, INC. 34.5 16570 67.0 26.7 40.3 17.2 7.0 16.0 -4.7 3.6
K-N KELLOGG COMPANY 67.56 23063 68.9 29.5 39.4 17.1 9.4 15.6 7.8 3.4
HRL-N HORMEL FOODS CORPORATION 52.71 28622 69.8 31.4 38.5 0.3 9.6 31.2 13.7 2.0
BG-N BUNGE LIMITED 118.25 16680 70.4 32.0 38.4 23.4 16.3 8.8 48.8 1.8
FLO-N FLOWERS FOODS, INC. 26.54 5610 68.2 30.2 37.9 4.3 9.9 27.4 11.1 3.2
WMT-N WALMART INC. 157.41 434609 69.1 31.6 37.5 2.2 12.8 32.3 12.6 1.4
ANDE-Q ANDERSONS, INC. 54 1828 67.4 30.0 37.4 50.5 8.0 18.3 94.6 1.3

Tobacco manufacturers Vector Group Ltd. and Philip Morris International Inc. rank No. 1 and No. 3 in our performance-minus-risk ranking, at 60.3 and 57.1 respectively.

Vector also ranks first in terms of dividend yield (6.6 per cent), while Philip Morris has the highest return on capital on our list, at 26.9 per cent.

Tobacco stocks have their risks related to regulation as well as ethical or sustainable investing issues, but for those comfortable with them, they offer significant downside protection in case of lower discretionary spending.

Tyson Foods Inc., a processor and marketer of chicken, beef and pork, has the lowest P/E of our screen at 8.7. This low valuation could be explained by the multiple price-fixing lawsuits filed in recent years. However, that didn’t stop Tyson from generating a healthy price return of 20.7 per cent over the past year. The combination of strong performance and a cheap valuation could have potential for defensive investors.

Church & Dwight Co. Inc., well known for its Arm & Hammer home and personal care products, seems a bit expensive with a P/E of 31.2, and a risk score that reflects that higher valuation at 31.6. On the other hand, the company has a solid brand, which is indicated in its financial metrics: the second-highest performance score of our list at 78.9 with an EPS that has increased by a respectable 13.7 per cent over the past five years on an annual basis.

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.

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

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.

13 TSX large cap stocks profiting from higher inflation

What are we looking for?
Large cap stocks that have improved their profitability in an inflationary environment.

With the end of the earnings season, Canadian companies should have reported approximately three fiscal quarters when inflation was higher than 2 per cent, which gives us enough information to properly identify companies that are profiting from higher inflation.

We will focus on companies that increased their return on capital, or ROC, in the past three months and in the past year, as they are likely to continue to deliver solid performance if inflation remains prominent.

ROC is a great metric for comparing the profitability of companies with various degrees of leverage because the metric – unlike return on equity, for example – is unaffected by company leverage.

The screen (add this screener here)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization higher than $10-billion;
  • Three-month change in ROC – company must have increased its ROC by at least 1 per cent in the past quarter;
  • One-year change in ROC – company must have increased its ROC by at least 3 per cent in the past year;

For informational purposes, we have also included trailing 12-month ROC, five-year average ROC, price-to-earnings, 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, advisors 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

TSX large-cap stocks profiting from rising inflation

TICKER NAME PRICE MKT VALUE  ($ MIL.) 3M ROC CH. (%) 1Y ROC CH. (%) ROC (%) 5Y ROC (%) P/E DIV. YLD. (%) 1Y PRICE RTN. (%)
WFG-T WEST FRASER TIMBER CO. LTD. 124.4 12840 2.4 61.1 83.9 29.8 3.6 1.0 52.8
BAM-A-T BROOKFIELD ASSET MANAGEMENT INC. CLASS A 70.46 115600 4.6 26.4 29.0 16.2 23.3 1.0 24.9
TFII-T TFI INTERNATIONAL INC. 135.15 12430 2.1 12.0 24.3 15.1 15.4 1.0 42.7
IFC-T INTACT FINANCIAL CORPORATION 186.49 32770 3.6 9.9 22.9 13.5 15.0 2.1 23.9
ARX-T ARC RESOURCES LTD. 15.58 10780 9.5 18.0 22.1 8.1 12.4 2.6 106.9
TOU-T TOURMALINE OIL CORP. 50.58 16770 5.7 10.0 17.4 7.7 7.9 1.6 116.5
BIP-UN-T BROOKFIELD INFRASTRUCTURE PARTNERS L.P. 79.03 24125 1.4 5.8 14.5 10.5 33.9 3.6 20.7
OVV-T OVINTIV INC 60.34 12370 5.8 21.6 13.8 5.7 9.0 1.7 98.5
CNQ-T CANADIAN NATURAL RESOURCES LIMITED 76.4 70930 4.2 12.5 13.7 7.9 11.9 3.9 106.3
CVE-T CENOVUS ENERGY INC. 19.29 30450 2.9 16.9 13.0 3.3 71.6 0.7 95.8
NTR-T NUTRIEN LTD. 125.06 68950 3.6 5.8 11.6 7.5* 18.0 1.9 73.5
IMO-T IMPERIAL OIL LIMITED 54.07 36180 7.2 17.3 11.5 4.6 15.6 2.5 82.4
TECK-B-T TECK RESOURCES LIMITED CLASS B 49.11 26310 2.9 6.0 7.0 6.2 9.3 1.0 81.6

*Nutrien’s five-year average return on capital of 7.5% actually reflects a three-year history owing to a merger in 2018.

West Fraser Timber Co. Ltd. has the highest one-year ROC change, most recent ROC and five-year average ROC standing at 61.1 per cent, 83.9 per cent, and 29.8 per cent, respectively. Last Thursday, U.S. housing starts in February once again showed robust numbers, up 22 per cent from the same month last year. Many observers point to chronic underbuilding in Canada and the United States, coupled with robust demand, as favourable to sustainably higher lumber prices.

Casualty and property insurer Intact Financial Corp. reported solid results, but behind others on this list, with a one-year ROC increase of 9.9 per cent. We think Intact may need a bit more time to effectively capture the interest rate tailwind. As rates increase, the bonds that Intact holds provide a higher expected return because of the higher yield. The three-year Canadian bond yield, a proxy for interest income earned by the company, has increased sharply from the start of the year, from 1.02 per cent to 1.9 per cent.

Arc Resources Ltd., an oil and gas company, has the largest increase in ROC in the past three months at 9.5 per cent, and with the increase in oil prices since the last quarter, investors should also expect an impressive quarter ahead.

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.

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

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.

Nine growing mid-cap stocks with sustainable dividends

What are we looking for?

Growing Canadian mid-cap stocks that also distribute their profits.

Investors can be doubly rewarded by companies that can distribute a part of their net income to shareholders without penalizing growth. The reason could be that the company is able to grow organically without too much capital, with only time needed to build an incredible company. Mid-caps can offer the best of both worlds: enough stability to distribute dividends while having higher growth potential than large caps.

The screen (add this screener here)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization between $2-billion and $5-billion;
  • Three-year dividend growth rate higher than 5 per cent – and this is how our table is ranked;
  • Five-year average return on capital higher than 10 per cent – we want companies that can sustain their dividends with robust profitability;
  • Two-year cumulative growth in net operating profit after tax (NOPAT) higher than 5 per cent – we want companies able to grow their business while distributing a dividend.

For informational purposes, we have also included dividend payout ratio, five-year annual sales growth rate, price-to-earnings ratio, one-year price return and dividend yield. 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

Best of both worlds: Growing mid-cap stocks with sustainable dividends

TICKER NAME PRICE MKT VALUE  ($ MIL.) 3Y DIV. GRTH. (%) 5Y ROC (%) 2Y NOPAT GRTH. (%) PYT. (%) 5Y SALES GRTH. (%) P/E DIV. YLD. (%) 1Y PRICE RTN. (%)
LIF-T LABRADOR IRON ORE ROYALTY CORPORATION 37.53 2402 88.1 17.0 63.2 102.0 18.9 6.4 16.0 14.6
GSY-T GOEASY LTD. 152.85 2521 41.6 26.9 231.6 15.5 18.5 10.3 1.7 56.7
ENGH-T ENGHOUSE SYSTEMS LIMITED 44.48 2471 21.1 18.9 31.9 38.2 10.3 26.8 1.4 -29.6
STLC-T STELCO HOLDINGS, INC. 32.02 2476 20.5 41.5* 734.9 5.7 24.5 2.6 2.2 35.1
SJ-T STELLA-JONES INC. 39.94 2576 14.5 11.8 33.5 19.7 10.3 10.9 1.8 -13.8
ELF-T E-L FINANCIAL CORPORATION LIMITED 913.75 3388 14.5 11.7 454.2 2.0 2.5 2.7 1.1 13.6
EQB-T EQUITABLE GROUP INC. 70.35 2394 12.1 16.4 48.8 9.0 12.7 8.6 1.1 30.5
FN-T FIRST NATIONAL FINANCIAL CORPORATION 42.97 2577 5.8 41.3 38.2 60.0 10.5 11.8 5.5 0.8
CWB-T CANADIAN WESTERN BANK 38.66 3456 5.1 12.2 24.6 31.0 7.2 10.4 3.1 30.3
*Stelco figures for return on capital and sales growth reflect a four-year history

Labrador Iron Ore Royalty Corp. has increased its dividend by 88.1 per cent annually in the past three years and the 16-per-cent dividend yield and P/E of 6.4 unquestionably catch the eye. Despite that extreme payout, the company has the second-highest five-year sales growth rate of our list at 18.9 per cent. It’s worth noting that iron ore prices fell by 63.2 per cent between May and November largely owing to concerns over Evergrande and the Chinese real estate market, but, since the November bottom, the price has risen by 57.4 per cent. (The high yield should not be taken as a signal of trouble, but neither should investors treat the current payout as “normal.” It will depend on the iron ore price, which is a good indicator of profitability/growth for the company.)

Enghouse Systems Ltd., a software and services company, may not have the best price momentum right now, but it has the key attributes of a dividend grower: a dynamic industry, high and sustainable return on capital of 18.9 per cent, sustained dividend growth, 21.1-per-cent annual growth in the past three years, and solid management. The company paid a special dividend of $1.50 in January, 2021. According to management, there were few opportunities for acquisitions. As it turned out, the Canadian technology sector has fallen by 7.8 per cent on a total return basis over the past 12 months as of Jan. 21, while the S&P/TSX has climbed 18.2 per cent. Distributing a special dividend was probably the best decision available to maximize shareholder value.

Stella-Jones Inc., a producer and marketer of pressure-treated wood products, shows a relatively low dividend payout and NOPAT growth rate, but these figures don’t reflect that, since 2019, the company has bought back $207-million worth of shares in addition to distributing $113-million in dividends. With lumber futures back to about US$1,140, the near-term outlook of the residential lumber division, which represents 25 per cent of the company’s revenue, may be better than management had anticipated in November when prices were around US$650.

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

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

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.

These 14 IT companies improved their fundamentals in the last three months

What are we looking for?

Information technology companies with robust fundamentals and lagging stock prices.

U.S. tech stocks are famous for their incredible performance and lofty valuations. They tend to be burdensome to evaluate, given their high growth and intangible nature. We will mitigate this issue by looking at them on a relative basis instead. We will compare their stock returns over the past three months and highlight the outliers.

The screen (add this screener here)

We screened U.S. stocks focusing on the following criteria:

· Market capitalization higher than US$1-billion;

· A StockPointer (SP) score of 60 or higher. The SP score is a complex composite that focuses on quality and value. The score varies between zero and 100. A score of more than 60 is considered higher than average;

· Three-month change in the SP score higher than 1 per cent. This is our main criterion to measure the short-term attractiveness of a company;

· Return on capital higher than 15 per cent. IT companies generate tremendous cash flow compared to their capital. We increase our ROC standard to reflect it;

· One-year sales growth higher than 5 per cent. We want to eliminate low-growth companies from the screen.

For informational purposes, we have also included three-month and one-year price returns, P/E ratio and dividend yield. Please note that some ratios may be shown as of the 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, advisors 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.In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks, and American depositary receipts).

What we found

Information technology companies

TICKER NAME PRICE MKT VALUE (US$ MIL.) SP SCORE 3M SP SCORE CH. 1Y SALES GRTH. (%) ROC (%) 3M PRICE RTN. (%) P/E 1Y PRICE RTN. (%) DIV. YLD. (%)
ATEN-N A10 Networks, Inc. 15.23 1180 61 38.6 8.4 27.9 10.0 12.8 90.9 1.3
CALX-N Calix, Inc. 68.04 4336 63 26.0 37.0 41.5 43.0 17.7 187.3
ZM-Q Zoom Video Communications 220.21 65408 61 3.4 170.1 25.3 -35.4 63.9 -54.0
NFLX-Q Netflix, Inc. 665.64 294847 62 3.3 20.2 17.3 21.0 58.4 35.7
NATI-Q National Instruments Corp. 42.98 5700 67 3.1 11.4 16.6 3.8 106.1 14.8 2.5
KLAC-Q Kla Corp. 398.96 60541 73 2.8 25.9 33.2 19.5 22.4 58.3 1.1
QRVO-Q Qorvo, Inc. 148.11 16360 61 1.7 29.3 15.4 -20.3 15.0 -5.5
APPF-Q Appfolio Inc Class A 120.41 4171 63 1.6 10.2 52.5 -1.3 2254.7 -26.1
PYPL-Q Paypal Holdings Inc 187.79 220465 64 1.6 22.9 21.8 -31.4 44.6 -12.3
POWI-Q Power Integrations, Inc. 102.38 6176 67 1.5 50.7 19.0 -2.8 40.9 43.4 0.6
GOOGL-Q Alphabet Inc. Class A 2843.66 1890130 69 1.5 39.6 23.0 0.5 27.0 62.1
AAPL-Q Apple Inc. 156.81 2575884 70 1.4 33.4 40.2 6.3 27.7 31.7 0.6
MSFT-Q Microsoft Corp. 329.68 2475231 70 1.4 19.8 24.9 10.2 36.6 54.0 0.8
SWKS-Q Skyworks Solutions, Inc. 152.48 25190 73 1.4 52.3 30.1 -15.7 16.8 8.0 1.5

 

A10 Networks Inc., a provider of secure application services and solutions, has the highest three-month SP score change – an increase of 38.6. On the other hand, the stock price increased by just 10 per cent during the period. The company has relatively low one-year sales growth of 8.4 per cent, and it has a P/E of just 12.8. Both metrics are the lowest of our screen, which balances things out.

At the end of 2019, A10 Networks founder Lee Chen stepped down as CEO and was replaced by Dr. Dhrupad Trivedi. Since then, the company has slashed its costs while maintaining its revenue and now seems focused on revenue growth.

The company has an interesting story as well as operating in a compelling industry.

PayPal Holdings Inc., a digital payments company, has negative price momentum with a three-month price return of -34.9 per cent, and the one-year metric stands at -12.3 per cent. Investors seem to be worried about increased competition from e-commerce giants, including Shopify Inc. and Amazon.com Inc., as well as more direct competitors such as Square Inc., another digital payments company. It bought Afterpay Ltd. – a buy now, pay later platform – in August.

However, over the past three months, PayPal’s SP score increased by 1.6, driven by a lower valuation and results in line with historic growth. The market moved before fundamentals, which is not unusual, but considering the magnitude of the share price decline, the market could be too confident in the outcome without seeing it.

Electronic components manufacturer Power Integrations Inc. has a plenty of notable attributes. They include a respectable SP score of 67, an increase of 1.5 over the past three months. The company has also been ignored by the market over this period, with a price return of -2.8 per cent, although it has a reasonable one-year performance of 43.4 per cent, which shows robustness, but no excessiveness.

The company has the third-highest sales growth on our list, at 50.7 per cent, and pays a dividend of 0.6 per cent.

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.

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

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.

Why these 11 strongly profitable U.S. stocks may be easy to miss

What are we looking for?

U.S.-listed mid-capitalization companies with healthy profitability metrics.

The U.S. market is massive and limiting ourselves to big names could lead us to miss opportunities. For that reason, today we lower our market cap threshold in the hope of finding “pearls” that might otherwise have been overlooked.

The screen

We screened U.S. stocks focusing on the following criteria:

  • Market capitalization between US$2-billion and US$5-billion;
  • Five-year return on capital higher than 12 per cent – we want a highly profitable company;
  • StockPointer (SP) performance score higher than 75. 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 75 implies a top performing company.
  • Price-to-intrinsic-value between 0.6 and three. The intrinsic value is calculated automatically by our software using a discounted cash flow. A value of one would suggest a fair price, higher than one an overvalued stock and below one an attractive stock.
  • Two-year EVA-to-capital-growth rate higher than 1 per cent. The EVA (economic value added) represents the value that a company created through efficient capital allocation. We look for companies that managed to increase their value creation in comparison of their capital.

For informational purposes, we have also included five-year growth rate in annual earnings per share; beta; dividend yield; and one-year price return. (A beta lower than one implies that the stock should be less volatile than the market.) 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. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks and American depositary receipts).

TICKER NAME PRICE MKT. CAP ($ MIL.) 5Y ROC (%) SP PERF. SCORE P/IV 2Y EVA/CAP GRTH. (%) 5Y ANN. EPS GRTH. (%) BETA 1Y PRICE RTN (%) DIV. YIELD (%)
MLI-N Mueller Industries, Inc. 52.64 3019.8 15.8 84.9 0.77 15.1 56.9 1.41 75.8 1.0
BKE-N Buckle, Inc. 41.62 2072.0 17.7 83.6 0.76 15.4 33.3 0.85 67.2 3.2
WGO-N Winnebago Industries, Inc. 67.69 2238.0 17.9 82.1 0.81 2.1 88.8 1.90 41.6 1.1
WDFC-Q Wd-40 Company 227 3111.9 19.6 81.8 1.93 2.2 9.1 0.25 -7.2 1.3
SNBR-Q Sleep Number Corporation 88.34 2090.0 28.7 80.8 1.04 18.3 59.9 1.89 34.1
LCII-N Lci Industries 139.64 3528.6 16.6 79.7 1.11 1.3 29.5 1.55 23.3 2.6
WWE-N World Wrestling Entertainment 61.09 4644.5 19.8 79.5 1.03 4.5 58.5 0.64 59.1 0.8
ATKR-N Atkore Inc 94.53 4358.1 18.8 79.2 0.96 14.5 80.0 1.96 340.5
MC-N Moelis & Co. Class A 72.74 4790.0 55.7 78.7 0.95 48.1 49.7 0.97 93.4 3.3
LOB-Q Live Oak Bancshares, Inc. 89.18 3858.3 15.3 78.3 2.61 18.3 127.2 1.81 134.8 0.1
VGR-N Vector Group Ltd. 13.26 2044.1 16.7 77.1 0.67 11.2 58.6 0.73 42.1 6.0

Mueller Industries Inc., a manufacturer specializing in copper and copper alloy products, has the highest performance score of our list standing at 84.9 while trading at a favourable price-to-intrinsic-value of 0.77. On Oct. 19, the company presented robust results fuelled by the surge in copper prices. According to Greg Christopher, Mueller’s chief executive officer, the demand is solid, the backlog is building and this pace should be maintained for the foreseeable future.

Apparel retailer Buckle Inc. not only produces strong results as shown by its performance score of 83.6, but also has some defensive attributes such as a 3.2-per-cent dividend and a beta of 0.85. However, apparel retailers are not what we would qualify as defensive – they tend to progress in a procyclical manner. Finding a good entry point in this kind of stock can be exceptionally lucrative; the stock’s rebound of 232 per cent from its bottom in April, 2020, is a sweet reminder. The company is expected to report its third-quarter earnings on Nov. 19.

Bed manufacturer Sleep Number Corp. has an aggressive profile. It has the second-highest five-year return on capital and it’s tied for second highest in two-year EVA/capital growth. The company’s 360 smart bed innovation seems to have paid off. On Oct. 28, the company reported a stellar third-quarter sales growth of 21 per cent and earnings growth of 24 per cent compared with the same period a year ago. The stock price has fallen 41 per cent from its record high of US$151.44 in March, but is up 34.1 per cent over a one-year horizon.

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.

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These 10 TSX dividend stocks offer profitability and attractive valuations

WHAT ARE WE LOOKING FOR?

Profitable companies that have a sensible price.

Return on capital and price-to-book tend to evolve in the same direction. As profitability rises, the price-to-book ratio is likely to increase to compensate for higher profitability. But what if we established lower and upper limits – such as a floor for profitability and a ceiling for valuation? Today, we’ll use such floor and ceiling limits to help us discover mispriced stocks.

THE SCREEN

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization higher than $2-billion;
  • Return on capital higher than 10 per cent (we want a profitable company – this is our profitability floor);
  • Price-to-book lower than 2.5 (we want a company with moderate valuation based on shareholder’s equity – this is our valuation ceiling);
  • Positive three-month price growth (that is, a company with a positive trend in its share price);
  • Positive two-year sales growth (we want a growing company);
  • Positive one-year growth in current operating value (COV) – we want a company with improving fundamentals. We use discounted cash flow to derive the COV. The difference between the COV and a traditional DCF is that we assume the company will generate the same cash flow forever. In other words, we do not incorporate any growth component into the calculation. It is a way to evaluate the minimum value of a business; the parameters are determined automatically by our platform.

For informational purposes, we have also included price-to-earnings, three-year annualized growth in earnings per share, 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

Floor-and-ceiling strategy opens door to mispriced stocks

Ticker Name Price MKT. CAP ($MIL) ROC (%) P/B 3M PRICE RTN. (%) 2Y SALES GRTH. (%) 1Y COV GRTH. (%) P/E 3Y ANN. EPS GRTH. (%) 1Y PRICE RTN. (%) DIV. YIELD (%)
POW-T Power Corporation Of Canada 41.89 28340 18.2 1.3 7.2 53.2 31.0 10.6 22.4 56.2 4.3
EQB-T Equitable Group Inc. 144 2443 18.1 1.4 6.0 12.9 31.3 8.7 15.5 87.7 1.0
KL-T Kirkland Lake Gold Ltd. 51.8 13819 16.0 2.0 7.6 125.7 12.1 13.1 18.7 -19.8 1.8
GWO-T Great-west Lifeco Inc. 38.64 35921 15.8 1.6 9.2 56.7 18.2 11.1 10.6 45.2 4.5
SMU-UN-T Summit Industrial Income Rei 20.83 3506 15.5 1.4 30.0 74.5 50.7 3.9 109.7 63.4 2.7
ARX-T Arc Resources Ltd. 11.97 8665 14.7 1.5 14.0 80.8 44.4 47.9 -11.0 105.7 2.2
SLF-T Sun Life Financial Inc. 65.06 38099 13.7 1.7 2.1 21.4 10.9 11.5 13.0 18.6 3.4
IAG-T Ia Financial Corporation Inc 72.05 7743 13.3 1.2 6.2 34.3 8.1 9.8 7.5 55.1 2.7
TOU-T Tourmaline Oil Corp. 43.77 13063 11.5 1.4 22.9 83.8 35.0 9.6 36.3 172.0 1.6
WCP-T Whitecap Resources Inc. 7.06 4457 10.6 2.0 12.8 16.2 50.0 7.8 66.3 204.3 2.8

Source: Inovestor

Financial conglomerate Power Corp. of Canada has the highest three-year annual EPS growth on our list, at 22.4 per cent. (One of the public companies in which it owns a majority stake, Great-West Lifeco Inc., also made the screen). The jump of 31 per cent in Power Corp.’s current operation value is possibly related to the revised valuation of Wealthsimple Inc., one of its private investments, which surged from $1.4-billion to $5-billion between October, 2020, and May, 2021. Wealthsimple is well known for its robo-adviser and low-fee brokerage accounts.

Summit Industrial Income REIT has seen the largest three-month price increase (30 per cent) and three-year EPS growth (109.7 per cent) of our screen. Real estate investment trusts register fair value adjustments to reflect the increased value of their properties. For Summit, year to date, these adjustments already amounted to $693-million, which helps explain the jump in its unit price over the past three months. This year is exceptional, but Summit has shown constancy in reporting this kind of adjustment, with an average of $150-million a year in such adjustments in the past three fiscal years.

Natural gas producer Tourmaline Oil Corp. has achieved impressive two-year sales growth (83.8 per cent) and three-year annualized EPS growth (36.3 per cent) despite a challenging environment. Pension fund giant Caisse de dépôt et placement du Quebec said last week it will exit oil company investments next year, but will remain invested in companies involved in infrastructure such as pipelines and in natural gas activities. If oil becomes the next coal, so to speak, in the eyes of pension funds and other institutional investors, it could have an impact on oil producer share prices in the short-term. In this situation, natural gas companies could be an interesting alternative.

Although we did not filter stocks based on P/E and dividend yield, we note the median P/E of our list is 10.2, the median dividend yield is a respectable 2.7 per cent (not shown), and every stock pays a dividend.

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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Eight U.S. defensive dividend stocks for a frothy market

WHAT ARE WE LOOKING FOR?

Dividend-paying U.S.-listed stocks with lower risk.

The S&P 500 is up 19.5 per cent over the past six months and its price-to-earnings ratio now stands at 35.4, higher than the 1999 dot-com peak of about 33. Given the current valuation, investors may prefer to reduce their exposure to the U.S. market and/or select stocks that are fundamentally supported by a dividend.

THE SCREEN (you can add it to your screener section here)

We screened U.S. stocks focusing on the following criteria:

  • Market capitalization higher than US$2-billion;
  • Beta of 0.8 or less. A beta lower than one implies that the stock price should increase less during rising markets and should decline less in a falling market;
  • Three-year annual dividend growth higher than 5 per cent;
  • Five-year annual earnings per share growth higher than 7 per cent – we want the dividend growth to be backed by earnings per share growth;
  • Dividend yield higher than 2 per cent – we’re looking for companies with a larger yield than that of the S&P 500, which is currently 1.3 per cent;
  • StockPointer (SP) Risk Score lower than 40 – The risk score is scaled from zero to 100 where 100 is a high-risk company. 40 is considered low-to-medium risk. The score uses many criteria such as valuation risk perceived by our software, leverage and stability of profitability.

For informational purposes, we have also included P/E, five-year annual return of capital, 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. StockPointer is a decision-making tool covering Canadian and U.S. securities developed for retail investors and investment advisers. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks and American depositary receipts).

TICKER NAME PRICE MKT. CAP ($MIL) BETA 5Y ROC (%) SP RISK SCORE DIV. YIELD (%) 5Y EPS GRTH. (%) 3Y DIV. GRTH. (%) P/E 1Y PRICE RTN. (%)
PFE-N Pfizer Inc. 46.84 262257 0.77 13.5 23.0 3.3 15.2 5.0 20.2 37.6
WSO-N Watsco, Inc. 289.13 11200 0.75 15.9 34.6 2.7 13.0 11.3 32.2 25.1
PEP-Q Pepsico, Inc. 157.09 217098 0.80 11.9 36.0 2.7 10.7 7.4 26.4 8.9
ERIE-Q Erie Indemnity Company Class 180.87 8423 0.03 23.6 26.5 2.3 9.9 7.2 34.7 -14.3
CVBF-Q Cvb Financial Corp. 19.94 2710 0.73 10.3 24.8 3.6 9.8 8.7 12.7 13.0
PG-N Procter & Gamble Company 144.05 349998 0.59 12.3 31.5 2.4 9.3 5.2 25.3 6.0
TSN-N Tyson Foods, Inc. Class A 78.23 27993 0.75 12.0 19.9 2.3 8.7 14.0 12.1 27.1
PKG-N Packaging Corporation Of Ame 152.45 14480 0.73 13.3 31.0 2.6 7.3 12.2 22.8 46.4

WHAT WE FOUND

Pharmaceutical giant Pfizer Inc. has the highest five-year EPS growth on the list at 15.2 per cent, and second-lowest risk score, at 22.8. Its COVID-19 vaccine revenues, which everyone had thought would be non-recurring, are increasingly likely to continue, at least in the medium term. A growing body of research is suggesting a third injection may give additional protection against the virus for certain vulnerable populations, such as those in long-term care.

Watsco Inc., which distributes heating, air conditioning and refrigeration equipment, has the second-highest earnings growth (13 per cent) and return on capital (15.9 per cent) on our list. As a distributor, the company needs relatively little capital to operate, leaving space to pay dividends. In the long term, the company could benefit from more recurrent extreme temperatures, such as we saw in Western Canada this summer.

Food and beverage company PepsiCo Inc. has a solid income stream from its various consumables such as Pepsi, Lay’s, Doritos, Quaker Oats, Aquafina and Gatorade, to name a few. PepsiCo has repetitive sales, reputable brands and respectable earnings and sales growth – key characteristics that we look for in a defensive company.

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

Anthony Ménard is an investment analyst at Inovestor Asset Management.

 

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

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Nine Canadian stocks to play the consumer savings boom

These nine Canadian stocks are poised to absorb excess consumer savings.

WHAT ARE WE LOOKING FOR?

Canadian equities that generate plenty of free cash flow.

Canadian consumers are now saving 13.1 per cent of their income, compared with a savings rate of 3.6 per cent at the beginning of 2020. After jumping early in the COVID-19 pandemic, the savings rate began to decline last year, but it is still significantly higher than before the outbreak. The consumer discretionary sector is well positioned to receive this spare cash.

THE SCREEN

We screened Canadian stocks in the sector focusing on the following criteria:

  • Market capitalization greater than $500-million;
  • Free-cash-flow-to-capital ratio higher than 10 per cent. We want a company that generates a large amount of free cash flow as a percentage of capital. A high ratio shows the company has plenty of cash to invest or distribute to shareholders;
  • Economic performance index (EPI) change higher than 0.10. The EPI is the return on capital divided by the cost of capital. A positive change in this value shows an improvement in the company’s risk-return profile;
  • A StockPointer (SP) risk score lower than 35. Developed by Inovestor, the SP risk score is scaled from 0 to 100, where 100 is a high-risk company and 35 is considered low to medium risk. The score uses many criteria such as valuation risk perceived by our software, leverage and stability of company profits.

For informational purposes, we have also included the EPI, P/E ratio, price-to-book ratio, one-year price return and dividend yield. Please note that some ratios may be reported as of end of the previous quarter.

WHAT WE FOUND

TICKER NAME PRICE MKT. CAP ($MIL) FCF / CAPITAL (%) EPI CH. 3M SP RISK SCORE EPI P/E P/B 1Y PRICE RTN. (%) DIV. YIELD (%)
TOY-T Spin Master Corp 46.44 4751 26.0 0.20 32.1 1.18 30.8 4.2 65.9
WJX-T Wajax Corporation 25.3 545 25.0 0.11 32.8 0.75 13.1 1.5 133.0 3.95
LNR-T Linamar Corporation 72.35 4735 19.7 0.23 21.1 1.03 13.4 1.1 73.2 0.88
RUS-T Russel Metals Inc. 34.2 2144 18.8 0.74 32.1 1.81 10.3 2.1 82.4 4.44
RCH-T Richelieu Hardware Ltd 43.47 2435 17.7 0.37 29.6 2.52 21.6 4.1 29.1 0.64
ZZZ-T Sleep Country Canada Holding 33.04 1217 15.7 0.34 28.5 2.33 14.5 3.3 65.0 2.36
HDI-T Hardwoods Distribution Inc. 35.62 758 12.0 0.13 26.5 1.51 17.1 2.4 78.1 1.12
UNS-T Uni-select Inc. 17.35 735 11.3 0.28 31.0 0.54 14.0 1.2 143.7
CTC-A-T Canadian Tire Corporation 196.88 11972 11.0 0.32 23.7 1.60 13.1 2.5 55.6 2.39

Children’s entertainment company Spin Master Corp. has the highest free-cash-flow-to-capital ratio on our list, at 26 per cent. The company has a strong portfolio of brands ranging from good old Etch A Sketch, to the well-established Paw Patrol and DC Universe figurines.

Spin Master faced difficulties before the pandemic with its supply management in Asia, and COVID-19 exacerbated fears of a supply crunch. Fortunately, the company now seems to be moving in the right direction. Spin Master reported second-quarter earnings on Aug. 4 and raised its forecast for 2021 sales growth from the low teens to the mid-teens.

Automotive original equipment manufacturer Linamar Corp. has a risk score of 21.1, the lowest of our screen, which reflect a low valuation risk, also shown by its low price-to-book ratio of 1.1 and P/E of 13.4. The microchip shortage is having an impact on the auto sector and it is still uncertain when the shortage will end.

On the bright side, used car prices are up 22.6 per cent year to date according to the CarGurus price index, largely owing to strong demand. High used car prices stimulate new car sales and dealers’ inventories are low. This could lead to robust sales for Linamar as dealers need to replenish their inventories of new cars. Linamar is scheduled to report second-quarter earnings on Aug. 11.

Mattress retailer Sleep Country Canada Holdings Inc. reported solid second-quarter earnings on Aug. 3, and appreciative investors bid up the share price by 15.5 per cent the next day. The company has benefited from a pandemic shift in consumer spending. This second quarter demonstrated the shift does not appear to be over. The company plans to invest in software to enhance inventory management and in the customer experience to maintain its growth.

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

Anthony Ménard is an investment analyst at Inovestor Asset Management. Inovestor for Advisors is a fundamental analysis research platform specializing in the economic value-added (EVA) approach.

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.

These 11 growing companies from the S&P 500 are becoming increasingly attractive

What are we looking for?

U.S. equities with improving valuations and fundamentals.

We look for a negative three-month price-to-earnings (P/E) ratio and a positive three-month current operating value (COV) change to discover stocks with an attractive signal. A divergence in these metrics implies paying less now for more value than just three months ago.

The screen

We screened Standard & Poor’s 500 stocks focusing on the following criteria:

· Three-month price-to-earnings (P/E) change lower than 5 per cent. We want a company with downtrending valuation;

· Positive three-month current operating value (COV) growth. We want a company with improving fundamentals. The COV is based on discounted cash flow with no growth. The parameters are determined automatically by our platform. It is an approach to evaluate the minimum value of a business;

· Three-month sales growth higher than 4 per cent. We want a growing company;

· Economic performance index (EPI) higher than 1.25. This is the return on capital divided by the cost of capital. A value higher than one demonstrates a company’s ability to create value for its shareholders.

For informational purposes, we have also included the P/E ratio, three-year median P/E ratio, one-year price return, market capitalization and dividend yield. Please note that some ratios may be reported 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. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks and American depositary receipts).

TICKER NAME PRICE MKT. CAP ($MIL) P/E CH. 3M (%) COV GRTH (%) 3M SALES GRTH. (%) EPI P/E P/E (3Y MEDIAN) DIV. YIELD (%) 1Y PRICE RTN. (%)
NFLX-Q Netflix, Inc. 535.98 237645 -23.3 4.3 5.6 1.6 63.1 84.6 N/A 2.0
NKE-N Nike, Inc. Class B 161 254219 -17.7 8.9 15.8 2.6 44.2 46.3 0.7 66.9
ETSY-Q Etsy, Inc. 195.09 24549 -11.5 3.8 18.7 2.1 50.3 63.5 N/A 86.6
ABMD-Q Abiomed, Inc. 324.77 14703 -7.9 0.9 4.3 1.6 65.0 62.0 N/A 22.8
FDX-N Fedex Corporation 296.4 78647 -7.0 4.3 6.7 1.4 15.2 26.5 1.0 89.7
AMZN-Q Amazon.com, Inc. 3719.34 1874547 -6.9 5.6 8.6 2.4 69.4 77.8 N/A 19.8
ABT-N Abbott Laboratories 119.74 212756 -6.1 17.0 7.9 1.6 37.3 52.2 1.5 28.6
PKI-N Perkinelmer, Inc. 153.96 17254 -5.9 35.7 17.3 2.7 16.0 38.7 0.2 47.3
QCOM-Q Qualcomm Inc 141.43 159674 -5.7 6.1 10.2 2.2 19.9 25.7 1.9 54.9
CINF-Q Cincinnati Financial Corpora 118.87 19138 -5.3 94.8 30.9 2.6 6.2 13.8 2.1 69.6
CDNS-Q Cadence Design Systems, Inc. 138.5 38540 -5.2 2.6 4.4 1.5 58.0 43.2 N/A 39.8

What we found

The leading streaming service, Netflix Inc. had the largest P/E decline in the past three months while registering 4.3 per cent growth in its COV. Many players have joined the streaming party over the past few years: Amazon Prime, Disney+, HBO and many others. But Netflix still has the largest content library and continue to fuels it with aggressive investments by acquiring or developing new series and movies.

The company spent US$11.8-billion on its content last year alone despite COVID-19 disruption in the film industry. Since 2018, Netflix’s gross margin has increased by 1 per cent each year, meaning a dollar spent on content has produced more and more additional revenue. As the saying goes: Content is king.

The multinational sporting goods company Nike Inc. had a strong year as consumers rushed to buy sports equipment during the pandemic. In its most recent quarter, the company again beat analyst estimates with diluted earnings of 93 U.S. cents a share versus 51 U.S. cents expected.

Over time, Nike has allied itself with many professional athletes who have contributed to the brand’s recognition. This recognition by consumers can be seen in the EPI of 2.6. Customers are potentially willing to pay more for Nike’s products than competing ones, which creates value for its shareholders. The company’s robust short-term results forced our algorithm to readjust its assumptions resulting in a 8.9-per-cent increase in the COV in just there months.

Etsy Inc. and Amazon.com Inc. have similar profiles. Etsy connects buyers and sellers, and offers mostly handmade and vintage items on its platform, while Amazon follows the equivalent process, but with a much wider variety of products. Amazon also has a huge division offering cloud computing services.

Both companies have benefited from the shift in consumer habits toward e-commerce. Is their growth borrowed or has the pandemic accelerated the transition to online shopping?

Close to a year and half after the start of the pandemic, Etsy’s three-month sales growth of 18.5 per cent and Amazon’s 8.5 per cent expansion show no signs of going backward. But both companies are also selling below their historical P/E ratios: 50.3 today for Etsy, versus 63.5 historically, and 69.4 for Amazon, versus 77.8 in the past. The lower valuations may indicate the market is not convinced growth can continue at the rates seen in recent years.

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

Anthony Ménard is an investment analyst at Inovestor Asset Management.

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

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.