Category

Number Cruncher

Ten strongly profitable TSX stocks that investors may be overlooking

WHAT ARE WE LOOKING FOR?

Canadian stocks with strong profitability but whose unspectacular price movements may mean they’re not attracting much investor attention. We use the six-month price return to find stocks that may have been overlooked. A lack of buyers favours undervaluation.

THE SCREEN (access and save it on the Inovestor for Advisors platform)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization greater than $1-billion;
  • Return on capital (five-year mean) greater than 8 per cent – we’re looking for profitable companies;
  • Six-month price return between minus 5 per cent and 5 per cent – we want companies whose run-of-the-mill price movements are not attracting attention;
  • A price-to-earnings ratio that is less than 40 – we want a company that had a positive net income in the trailing 12-month period and we exclude companies with a stretched valuation.

For informational purposes, we have also included the one-month price return, one-year price return, five-year median price-to-earnings ratio, one-year earnings per share growth, annualized two-year EPS growth, 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. 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). For more details about these stocks, subscribe to the Inovestor for Advisors platform for free: inovestor.com/en-CA/store/

TICKER NAME PRICE MKT. CAP ($MIL) ROC (5Y MEAN, %) 1Y EPS GRTH. (%) 2Y EPS GRTH. (ANN., %) 1M PRICE RTN. (%) 6M PRICE RTN. (%) 1Y PRICE RTN. (%) P/E P/E (5Y MEDIAN) DIV. YIELD (%)
SJ-T Stella-jones Inc. 46.15 3020 12.0 51.0 30.9 -10.1 4.3 25.6 13.0 19.6 1.6
ATD.B-T Alimentation Couche-tard Inc 45.32 48870 12.5 34.4 20.4 8.1 3.2 -0.9 15.4 18.2 0.8
SVM-T Silvercorp Metals Inc. 7.68 1120 9.7 29.6 -12.9 7.9 3.4 -4.1 24.2 13.9 0.4
MRU-T Metro Inc. 58.39 14340 13.0 14.5 14.6 0.4 -1.5 3.1 17.7 18.5 1.7
JWEL-T Jamieson Wellness, Inc. 34.34 1380 8.3 13.3 18.0 -9.9 -2.0 -4.2 35.6 32.2 1.5
DOL-T Dollarama Inc. 55.75 17040 28.3 1.1 3.6 4.8 4.2 19.6 29.4 26.8 0.4
KL-T Kirkland Lake Gold Ltd. 52.43 14000 17.1 -7.4 31.4 4.3 0.0 -15.9 15.9 16.6 1.8
PKI-T Parkland Corporation 41 6170 9.0 -16.2 -18.4 4.1 -1.9 24.5 32.4 38.9 3.0
RCI.B-T Rogers Communications Inc. C 62.5 31680 8.4 -19.4 -10.2 1.4 3.1 16.6 19.9 17.9 3.2
CNR-T Canadian National Railway Co 134.21 95020 14.5 -19.9 -9.0 -1.3 -4.7 10.1 27.1 19.3 1.8

Source: Inovestor

The top 10 stocks that met our criteria are ranked by one-year EPS growth.

Stella-Jones Inc., a producer and marketer of pressure-treated wood products, has the highest one-year EPS growth and the lowest P/E of our list, at 51 per cent and 13 respectively. Given a median P/E of 19.6 in the past five-year period, the company gives the impression of having a noticeable margin of safety. Its major business segments, utility poles and railways ties, counting for approximately 60 per cent of its sales, recorded a sluggish 1 per cent organic growth. It is plausible that clients delayed their investments owing to high lumber prices. On the other hand, other divisions, including residential lumber, more than compensated by registering a 131 per cent organic growth as renovation and lumber prices continued to strengthen. In the next quarters, those divisions are likely to decline as the lumber prices normalize, but the core business could pick up, mitigating the impact.

Alimentation Couche-Tard Inc., the convenience store and gas station giant, had a difficult start to 2021 as the stock stumbled by 16.3 per cent in the year’s first two weeks. The company’s preliminary takeover discussions with French supermarket chain Carrefour SA were not particularly appreciated by investors – nor by France’s government, which opposed any deal. More generally, in recent years investors have been increasingly nervous about the long-term outlook for gasoline-powered vehicles. On May 10, the company issued $1-billion in green bonds to be used exclusively for environmentally friendly projects and community initiatives. The market seems to consider the issuance as a signal management has a long-term transition plan. The share price is up 8.1 per cent in the past month.

Grocery and drugstore owner Metro Inc. registered a steady annual growth of 14.5 per cent and 14.6 per cent (annualized) in the past two years. The pandemic has helped the company to generate higher sales and maintain its robust growth. Despite this, the stock is up only 3.1 per cent in the past year as the market expects a slowdown in revenue as restaurants reopen. Adding Metro to a portfolio would certainly be a contrarian move because the economy should be at full speed next year. Nevertheless, the market is a complex machine of anticipation: Buying at a reasonable price when few others are interested can generate a meaningful return on longer horizons – especially if expectations in the market switch in the meantime.

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.

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 10 TSX materials stocks are well-placed to benefit from commodities boom

WHAT ARE WE LOOKING FOR?

Canadian materials stocks with momentum and compelling fundamentals.

We use a momentum approach to focus on a sector strongly linked to the runup in commodities prices. We believe that stocks with strong fundamentals will continue to perform well for the foreseeable future.

THE SCREEN (access and save it on the Inovestor for Advisors platform)

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

  • Market capitalization higher than $500-million;
  • Momentum score higher than 60 – the momentum score (out of 100) tracks short- to medium-term price movements as well as momentum in terms of improving fundamentals;
  • StockPointer (SP) performance 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 is considered higher than average. This is our robust fundamentals criterion;
  • Three-month sales growth higher than 3 per cent – we’re looking for companies in a hot market.

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

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).

 

TICKER NAME PRICE MKT. CAP ($MIL) MOM. SCORE SP PERF. SCORE AVG. SCORE ROC (%) 3M SALES GRTH. P/B 1Y PRICE RTN. (%) DIV. YIELD (%)
CFP-T Canfor Corporation 31.39 3930 77 79.8 78.4 25.3 14.1 1.6 250.3 N/A
LIF-T Labrador Iron Ore Royalty Co 43.33 2770 70 85.9 78.0 19.2 8.7 4.7 122.8 7.6
CIA-T Champion Iron Ltd. 6.56 3330 80 66.2 73.1 43.9 17.6 4.8 223.2 N/A
IFP-T Interfor Corporation 34.77 2280 79 65.8 72.4 30.8 16.9 1.7 316.9 N/A
ITP-T Intertape Polymer Group Inc. 31.14 1840 77 65.8 71.4 10.2 3.7 4.7 180.8 2.5
CXB-T Calibre Mining Corp. 1.99 660 80 61.9 70.9 26.5 5.7 2.1 38.2 N/A
SJ-T Stella-jones Inc. 49.55 3240 63 77.9 70.5 13.5 4.5 2.4 53.1 1.5
WEF-T Western Forest Products Inc. 2.37 887 70 64.4 67.2 10.3 23.0 1.5 233.8 0.0
KNT-T K92 Mining, Inc. 7.51 1650 66 63.0 64.5 26.9 9.4 7.6 91.6 N/A
ORA-T Aura Minerals Inc 14.8 1080 65 61.5 63.3 20.3 19.8 4.0 212.9 7.1

WHAT WE FOUND

Ten companies made the list, which we have ranked by taking the average of momentum and SP performance scores. Here are three names of note:

Canfor Corp., an integrated forest products company, has the highest average score of our list standing at 78.4 with a balanced exposure to momentum and fundamentals with a score of 77 and 79.8, respectively. Lumber is probably the most high-profile commodity during this pandemic. A hot residential housing market and elevated construction starts, along with do-it-yourself renovators, have created a supply-demand imbalance as the construction industry enters its summer sprint. A bottleneck from the lack of sawmills only exacerbates the imbalance. With its sawmills across Canada, the United States and Sweden, Canfor is well equipped to navigate this disrupted market.

Labrador Iron Ore Royalty Corp.

has a juicy dividend yield of 7.6 per cent, which reflects the robust income stream from its royalties, and a dividend from its minority interest in Iron Ore Co. of Canada (a joint venture between Rio Tinto Group, Mitsubishi Corp. and Labrador Iron Ore.) The mining royalty company has solid fundamentals as shown by its SP performance score of 85.9, the highest of our screen. Iron ore prices have increased by 250 per cent in the past year as big producers such as Vale SA, Rio Tinto Group and BHP Group Ltd. cut their production by between 5 per cent and 20 per cent because of maintenance, as well as adverse weather in Australia. Combine this with strong demand from China’s steel sector and iron ore could very well continue its exceptional run.

Calibre Mining Corp. , a gold extraction company, has surprisingly high momentum with a score of 80. The price of gold has slipped about 10 per cent since August, but it is still 40 per cent higher than two years ago, creating an overall better environment for gold mining companies. The one-year price return is the lowest on our table, which suggests the impressive momentum score leans more toward Calibre’s fundamentals. The company has a return on capital of 26.5 per cent and a price-to-book of just 2.1, which are better than our list average of 22.7 per cent and 3.5, respectively.

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.

These 10 U.S. large-cap stocks demonstrate consistent, solid profitability

WHAT ARE WE LOOKING FOR?

U.S. large caps with high profitability, below-average risk and attractive valuations.

We use the economic performance index (EPI) and relative EPI to help us find stocks with a healthy adjusted profitability. Essentially, we are willing to tolerate a bit less profitability if the risk is lower or if the valuation is attractive. While we may not find the most profitable U.S. companies, we believe they will have other interesting characteristics that totally compensate for the slightly lower profitability.

THE SCREEN (access and save it on the Inovestor for Advisors platform)

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

  • Market capitalization higher than US$10-billion;
  • EPI of two or higher – this is the return on capital divided by the cost of capital;
  • Relative EPI of 0.6 or higher – this ratio uses the return on capital adjusted for its market capitalization divided by the cost of capital;
  • Positive three-month percentage change in the economic value-added (EVA) metric. The EVA gives us a sense of how much value the stock is adding for shareholders and is calculated by taking the net operating profit after tax and subtracting the cost of capital. We want a company with improving fundamentals;
  • One-year sales growth higher than 2 per cent – we want a company that manages to grow at least at the rate of inflation.

For informational purposes, we have also included five-year mean return on capital, most recent return on capital, five-year maximum drawdown, price-to-earnings ratio, dividend yield, one-year price return, and recent stock price. The five-year maximum drawdown is the largest percentage decline, from peak to trough, seen over the past five years. 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

U.S. large caps with high profitability, below-average risk and attractive valuations

TICKER NAME PRICE MKT. CAP ($MIL) EPI REL. EPI EVA GRTH. 3M (%) 1Y SALES GRTH. (%) ROC (5Y MEAN, %) ROC (%) 5Y MAX DRAWDOWN (%) P/E DIV. YIELD (%) 1Y PRICE RTN. (%)
CLX-N Clorox Company 190.73 23990 4.5 0.9 27.6 22.7 22.4 25.3 -25.1 20.0 2.3 -0.9
PGR-N Progressive Corporation 98.76 57790 4.4 1.2 98.2 9.3 25.3 38.8 -22.3 10.2 0.4 20.5
AZO-N Autozone 1495.84 32960 3.7 0.7 10.3 10.9 25.1 29.3 -42.1 19.0 0.0 51.4
VRTX-Q Vertex Pharmaceuticals 219.39 56780 3.6 0.6 18.0 50.3 22.2 28.7 -31.7 21.3 0.0 -19.7
REGN-Q Regeneron Pharmaceuticals 502.6 53840 3.2 0.9 63.4 8.1 22.8 23.5 -48.1 16.5 0.0 -11.5
BIO-B-N Bio-rad Laboratories 600.87 18570 2.7 0.6 30.2 10.1 9.3 19.4 -31.9 4.8 0.0 44.8
DG-N Dollar General 216.74 51860 2.6 0.8 12.9 21.6 12.6 16.2 -30.8 20.4 0.8 21.1
GIS-N General Mills 61.3 37390 2.4 1.3 46.2 11.1 10.9 12.1 -49.5 14.9 3.3 0.9
TGT-N Target 208.55 103990 2.3 0.6 32.3 19.8 12.4 16.7 -40.2 24.1 1.3 91.4
PKI-N Perkinelmer 133.16 14920 2.0 0.7 80.5 31.2 9.9 16.2 -34.4 20.5 0.2 57.6

Source: Inovestor

The 10 stocks that met our criteria are shown in the accompanying table, ranked by EPI.

Clorox Co. has the highest EPI of our screen, at 4.5. The cleaning products company saw share price gains – and extraordinary profitability – in the early stages of the pandemic, but the stock has fallen about 20 per cent since the end of July and trades at around the same price as a year ago. Similarly to other well-established U.S. companies such as Johnson & Johnson, Procter & Gamble Co. and Colgate-Palmolive Co., Clorox offers a strong consumer brand that has yielded consistent results in the past that are hard to ignore.

Progressive Corp., one of the biggest auto insurance companies in the U.S., has the second-highest EPI, at 4.4, and the second-highest relative EPI, at 1.2. This latter metric reflects a high return on capital of 38.8 per cent and a reasonable valuation based on its low P/E multiple of 10.2. The five-year maximum drawdown of only 22.3 per cent – the lowest on our list – suggests a resilient company. Moreover, Progressive has the highest three-month EVA change, at 98.2 per cent, and the highest five-year return on capital – 25.3 per cent.

AutoZone Inc., an auto parts retailer and distributor, ranks third on our list, with an EPI of 3.7, and solid profitability with a five-year mean return on capital of 25.1. Automobiles could very well be the next discretionary spending of choice for consumers, for three reasons: First, consumer savings are still well above prepandemic level, suggesting there is room for big purchases. Secondly, some discretionary car maintenance may have been delayed because of teleworking. Finally, the main alternatives for large discretionary spending related to the economy’s reopening, such as air travel, still seem less appealing in the near term.

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 is an investment analyst at Inovestor Asset Management.

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.

ESG-friendly Companies that Combine Quality, Growth and Value

WHAT ARE WE LOOKING FOR?

ESG-friendly, quality companies demonstrating growth at acceptable valuations.

Essentially, our search combines the three most used fundamental factors: quality, growth and value. The objective is to find a solid company that grows and has an reasonable valuation. We consider environmental, social and governance criteria as part of our qualitative analysis.

THE SCREEN (access and save it on the Inovestor for Advisors platform)

We screened Canadian stocks focusing on the following criteria:

  • Market capitalization higher than $5-billion;
  • StockPointer (SP) score of 70 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 solid.
  • PEG (price/earnings-to-growth) ratio below two – The ratio considers valuation and growth. It is the price-to-earnings ratio divided by the five-year mean of earnings per share growth.
  • ESG score lower than 22.1 – the current score of the S&P/TSX 60. The score uses Sustainalytics’s methodology to calculate unmanaged ESG risks. The score is the sum of the ESG risks. The score mostly varies between zero and 50, where zero stands for the most ESG-friendly company.

For informational purposes, we have also included the recent stock price, P/E ratio, five-year EPS growth mean, ESG scores, three-year dividend growth rate, one-year price return and dividend yield. Please note that some ratios may be shown as of the previous quarter’s end.

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

ESG-friendly companies that combine quality, growth and value

TICKER NAME PRICE MKT. CAP ($MIL) SP SCORE PEG P/E 5Y EPS GRTH. (%) ESG SCORE ENV. SCORE SOC. SCORE GOV. SCORE 3Y DIV. GRTH. (%) 1Y PRICE RTN. (%) DIV. YIELD (%)
MFC-T Manulife Financial Corporati 27.15 52710 72 0.41 9.3 22.6 19.4 1.7 7.5 10.1 11.0 109.3 4.1
QBR-B-T Quebecor Inc. Class B 35.48 8800 74 0.53 16.3 30.7 19.4 2.2 10.1 7.1 96.8 30.7 3.1
H-T Hydro One Limited 28.99 17320 72 0.60 9.8 16.3 16.3 3.4 7.8 5 4.8 38.1 3.5
TD-T Toronto-dominion Bank 82.42 149880 71 1.41 12.5 8.9 19.1 1.2 10.4 7.5 9.6 67.3 3.8
L-T Loblaw Companies Limited 66.59 22130 72 1.43 21.8 15.2 18.6 5 8.4 5.1 6.2 11.5 2.0
DOO-T Brp, Inc. 102.56 9020 73 1.59 42.4 26.7 14.4 0.1 7.6 6.7 -14.5 405.2 0.4
CP-T Canadian Pacific Railway Lim 474.27 63220 70 1.62 26.4 16.3 17 5.9 8.4 2.7 17.6 79.4 0.8
DOL-T Dollarama Inc. 51.25 15900 73 1.94 28.2 14.5 16.2 3.6 7.6 5.1 7.1 44.6 0.4

Source: Inovestor

Life insurer Manulife Financial Corp. has the most reasonable price relative to its growth, with a PEG ratio of 0.41, a result of its low P/E ratio of 9.3 and high EPS growth (five-year mean) of 22.6 per cent. Since the beginning of the year, the Government of Canada 10-year bond yield has increased by approximately one percentage point. Signs of a strong economic recovery tend to push bond yields higher. A rising yield environment tends to favour insurance companies because higher interest rates are inclined to generate higher fees.

Telecommunications company Quebecor Inc. achieved the highest five-year EPS growth of our list, at 30.7 per cent, while selling at a below-average P/E of 16.3. Note also its annual dividend growth of 96.8 per cent in the previous three-year period. The company announced on Feb. 25 that it will lift its quarterly dividend for 2021 by 38 per cent, continuing its streak of dividend hikes. Quebecor could benefit from reduced competition if Rogers Communications Inc.’s deal to purchase Shaw Communications Inc. goes through.

Hydro One Ltd., the electricity transmission and distribution utility serving Ontario, has an ESG score that is 26.2 per cent less than that of the S&P/TSX 60. The company has a virtual monopoly on the transmission of electricity, an essential good, which provides a high degree of stability to its operations. The company’s net income is inflated because of a favourable tax event in the past year, but it should not change its position in the table.

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.

 

Small caps poised for growth in a post-pandemic world

What are we looking for?

Small caps with solid fundamentals.

We believe small capitalization stocks, generally seen as more risky than large caps, will also be more likely than large caps to take advantage of renewed economic activity as the pandemic recedes in the months ahead.

The screen (access and save it on the Inovestor for Advisors platform)

We screened North American stocks focusing on the following criteria:

  • Market capitalization between $250-million and $1-billion;
  • StockPointer (SP) performance score of 75 or higher. 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;
  • Sales growth higher than 4 per cent over 24 months – we are looking for a company that can grow at a reasonable rate;
  • One-year return lower than 50 per cent – we are trying to eliminate companies with too much short-term price? momentum as they could be subject to mean reversion, that is, eventually revert to their long-term average levels.

For informational purposes, we have also included the recent stock price, price-to-earning ratio, one-year earnings per share growth 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, 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

 

TICKER NAME PRICE MKT. CAP ($MIL) SP PERF. SCORE 24M SALES GRTH. (%) 1Y PRICE RTN. (%) P/E 1Y EPS GRTH. (%) DIV. YIELD (%)
RAY-A-T Stingray Group, Inc. 7.09 520 82.1 48.9 17.8 20.9 -3.6 4.2
SIS-T Savaria Corporation 16.74 855 79.9 45.8 30.8 30.4 18.9 2.9
ITIC-Q Investors Title Company 163.77 310 79.4 51.3 -4.8 7.9 25.0 1.1
HIFS-Q Hingham Institution For Savi 245.00 516 78.0 23.3 27.3 11.9 30.2 0.8
FMNB-Q Farmers National Banc Corp. 13.83 390 77.9 27.5 -13.0 9.4 14.8 3.2
CSW-A-T Corby Spirit And Wine Limite 16.80 477 77.4 4.8 -0.8 15.3 16.6 5.0
RBNC-Q Reliant Bancorp Inc 21.77 355 77.0 91.0 0.1 10.9 39.2 2.2
AGM-N Federal Agricultural Mortgag 83.11 872 75.9 4.6 16.4 10.1 5.2 3.9
CCBG-Q Capital City Bank Group, Inc 24.50 411 75.8 42.1 -13.7 12.7 2.4 2.5
BFC-Q Bank First Corp 69.10 533 75.3 42.1 9.4 15.0 30.6 1.2
TVK-T Terravest Industries, Inc. 17.55 324 75.0 4.2 6.4 10.3 32.7 2.3

*Market cap and recent stock price figures are in native currency.

Music service provider Stingray Group Inc., based in Montreal, has the highest SP performance score of our list. Sales increased vigorously in the last two years partly because of a series of acquisitions. The stock price rose moderately in the last year as the broadcasting and commercial music segment held out, but the radio segment (mostly ads), which counts for 50 per cent of Stingray’s total revenues, fell 40 per cent on a nine-month basis. The company managed to protect its earnings per share despite this bleak time. As radio commercials and social activities return more to pre-pandemic levels, we expect investors to positively re-evaluate the company.

Laval, QC.-based, Savaria Corp., an accessibility and patient handling company, has increased its sales by 45.8 per cent in the past two years, thanks largely to the acquisition of Garaventa Lift, an elevator company. With the pandemic spotlight on long-term care and retirement residences, older people may be more inclined to consider adapting their house to their reality rather than move, which would benefit Savaria. The company announced on Feb. 4 it had acquired Swedish-listed Handicare Group AB, another patient handling company, to reinforce their already well-positioned business in this industry.


Investors Title Co.,
a title insurance provider headquartered in Chapel Hill, N.C., trades at a modest price earnings ratio of 7.9. The company has profited from the booming U.S. residential real estate market over the past two years, achieving 51.3 per cent higher sales over that period, and 25 per cent higher EPS in the past year. If teleworking persists, the strong residential market could very well remain. Despite impressive results, the market appears to be particularly cautious: The company’s stock still trades about 20 per cent below its all-time high of US$204, reached in March, 2018.

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.

 

Eight profitable North American stocks with tempting valuations

What are we looking for?

Companies with strong profitability and below-average valuations.

Companies with high multiples tend to have high expectations. At some point these expectations may exceed the company’s capabilities and result in a poor investment outcome. We believe that analyzing companies with solid profitability and reasonable valuations is an effective way to limit this risk and uncover attractive securities.

The screen (you can find it here on the Inovestor’s platform)

We screened North American stocks focusing on the following criteria:

· Market capitalization higher than $1-billion;

· Five-year mean return on capital higher than 10 per cent. We want a company with solid long-term profitability;

· Free-cash-flow-to-capital higher than 12.5 per cent. We want a company that generates a high amount of free cash flow as a percentage of capital. It shows the company has plenty of capital to invest or to redistribute to shareholders;

· A price-to-book ratio lower than two. We want a company that sells at a reasonable price based on shareholders’ equity;

· A positive price-to-earnings ratio lower than 20. We don’t want to pay too much for the company’s profits.

For informational purposes, we have also included recent stock price, trailing 12-month return on capital, dividend yield and one-year return. Please note that some ratios may be reported 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).

What we found

Home furnishings retailer Leon’s Furniture Ltd. generates a whopping 33.4-per-cent free cash flow as a percentage of capital. The stock is also inexpensive based on the price-to-earnings ratio of 11.1. With the lockdowns, individuals have necessarily cut back spending on social activities. Interest rates, meanwhile, have dropped substantially. Combined, these elements support the purchase of durable goods. This could explain the company’s above-trend return on capital.

Juice producer Lassonde Industries Inc. is a resilient company as evidenced by its five-year mean return on capital, which, at 14.1 per cent, is about equal to its most recent return on capital. The company’s earnings reports over the past year have been exceptional, owing largely to its market segment: retail consumers. It could be an interesting defensive choice in case of lower-than-expected economic growth or further COVID-19 restrictions.

Lumber, finishing products and pulp producer Canfor Corp. saw its stock price rise by 84.5 per cent in the past year as lumber prices soared by more than 75 per cent. The company is highly cyclical. An investor who believes that the economy will expand vigorously and who has a high risk tolerance may consider the stock to enhance portfolio returns.

Although the screener is for North American companies, it’s notable that five out of eight companies are Canadian, even with this country’s more limited universe of stocks. Valuation criteria (P/E and P/B) would seem to limit the number of U.S. companies, suggesting value investors may want to concentrate their search efforts in the North American market to Canadian-listed names.

 

TICKER NAME PRICE MKT. CAP ($MIL) FCF/CAPITAL (%) RTN. ON CAPITAL – 5Y MEAN (%) P/E P/B RTN. ON CAPITAL (%) 1Y PRICE RTN. (%) DIV. YIELD (%)
LNF-T Leon’s Furniture 21.00 1660 33.4 10.2 11.1 1.7 11.2 23.8 3.0
BIG-N Big Lots** 50.82 1885 20.7 10.2 3.2 1.5 14.1 82.4 2.4
LAS-A-T Lassonde Industries 172.00 1193 18.1 14.1 11.6 1.6 14.2 15.2 1.5
UHS-N Universal Health Services 129.10 10971 17.9 10.2 12.6 1.8 10.4 -12.3 0.6
CFP-T Canfor Corp 23.67 2964 15.1 11.0 17.0 1.6 9.8 84.5 0.0
DISCK-Q Discovery Comm Inc 32.89 16478 14.4 20.6 13.5 1.6 19.0 14.8 0.0
WTE-T Westshore Terminals Investment Corp 17.34 1125 13.3 17.8 8.6 1.5 16.0 -3.5 3.7
IFP-T Interfor Corp 24.04 1617 13.0 11.7 18.1 1.6 14.3 58.6 0.0

*Market cap and stock price figures are in native currency
**Please note that some figures for Big Lots are inflated by a capital gain caused by a sale-leaseback transaction of distribution centres.

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

Anthony Menard is an investment analyst at Inovestor Asset Management.

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Nine Companies Creating Shareholder Wealth

What are we looking for?

Companies showing momentum in their fundamentals as well as low volatility.

We mix two well-known metrics in the financial world to create our screener. We want a positive change in the economic value-added (EVA) figure, which tends to coincide with a positive stock return. We also use beta to find low-volatility stocks that should produce, on average, a better risk-adjusted return.

The Screen (available here on the Inovestor’s platform)
We screened Canadian companies, focusing on the following criteria:

  • A market capitalization higher than $1-billion;
  • A positive three-month change in the EVA metric between 5 per cent and 75 per cent – the EVA gives us a sense of how much value the stock is adding for shareholders and is calculated by taking the net operating profit after tax and subtracting the cost of capital;
  • A 24-month change in the EVA metric between 15 per cent and 200 per cent – we want a positive change in EVA in the medium-term;
  • A one-year return on capital higher than 7 per cent – we want a company with decent profitability;
  • Sales growth over 24 months higher than 4 per cent. Sales growth provides the opportunity to a company to expand and generate higher EVA in the long-term;
  • A beta lower than one – this gives us an idea of how closely the company mimics the market’s fluctuations. A beta of less than one would indicate the stock is less volatile than the market at large. This is our low-volatility factor.

The stocks are ranked by five-year mean return on capital. For informational purposes, we have included recent stock price, dividend yield and one-year return. Please note that some ratios may be reported at 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) EVA CH. 24M  (%) EVA CH. 3M (%) 24M SALES CH. (%) BETA RTN. ON CAPITAL (%) RTN. ON CAPITAL – 5Y MEAN 1Y PRICE RTN. (%) DIV. YIELD (%)
ENGH-T Enghouse Systems Limited 66.56 3680 85.4 13.2 44.2 0.89 23.6 23.4 60.7 0.8
RCH-T Richelieu Hardware Ltd 37.27 2105 51.4 69.0 7.8 0.76 18.1 16.9 40.0 0.7
TIH-T Toromont Industries Ltd. 90.21 7425 20.5 10.0 4.5 0.81 13.4 16.1 31.5 1.4
CP-T Canadian Pacific Railway Lim 421.8 56732 39.8 7.8 10.6 0.86 16.3 14.7 34.6 0.9
JWEL-T Jamieson Wellness, Inc. 35.53 1416 160.7 18.4 22.9 0.30 16.1 11.4 37.3 1.4
IFC-T Intact Financial Corporation 143.7 20552 49.3 34.4 16.1 0.81 11.4 10.3 5.6 2.3
L-T Loblaw Companies Limited 64.30 22860 34.2 74.1 9.1 0.03 7.5 8.4 -10.5 2.1
NPI-T Northland Power Inc. 46.31 9389 77.7 16.9 27.8 0.87 9.1 6.2 67.6 2.6
FNV-T Franco-nevada Corporation 169.45 32336 64.1 17.0 51.6 0.36 7.6 4.8 32.6 0.7

What we found

Software and services company Enghouse Systems Ltd. posted impressive financial results over the 24-month period in terms of sales and EVA change. The company has the highest return on capital over the past year as well as over the past five-year period. The share price rose 50 per cent in the first half of 2020, but has since given back some of this gain. It has declined by about 15 per cent since its record high of $80 on Sept. 2. With this pullback, the current price could offer an opportunistic entry point.

Hardware distribution company Richelieu Hardware Ltd. posted a massive uptick in its three-month EVA change. Moreover its short-term ROC is higher than its five-year average, another signal of momentum.

Toromont Industries Ltd., a construction equipment and power systems specialist, might seem less dynamic than the first two ideas at first glance, if comparing its one-year return on capital to its five-year corresponding figure. We think this is perfectly normal for a cyclical company at this time of the economic cycle. The market anticipates the changing cycle as the stock is up more than 25 per cent year-to-date regardless of lower revenues and earnings per share (not shown). The company has the third-highest long-term ROC and we anticipate the lower one-year ROC figure will converge rapidly to its long-term profitability.

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

Seven Growth Stocks That Are Reasonably Priced

What are we looking for?

Growth stocks outperformed value by a huge margin over the past 10 years. And while higher valuations are often seen as problematic for growth companies, let’s put that into perspective. Today, we look for U.S. and Canadian large caps with a growth-at-a-reasonable-price (GARP) tilt.

The screen

We screened U.S. and Canadian companies focusing on the following criteria:

· Market capitalization higher than $25-billion;
· Economic performance index (EPI) higher than 2.5 – this is the ratio of return on capital to cost of capital. We look for businesses with a sizable risk-adjusted return on capital;
· StockPointer (SP) Performance Score of more than 75. The score, which can range between zero and 100, mainly considers risk-adjusted return on capital and free cash flow per share;
· PEG ratio below three – this is our growth-at-a-reasonable-price (GARP) factor, which considers valuation and growth. It uses the price-to-earnings ratio divided by the five-year earnings growth mean (while mean is similar to average, this method puts more weight on extreme values)
· 12-month sales growth higher than 4 per cent – we are looking for a company showing sales momentum in the past year;
· 24-month growth in net operating profit (NOP) of more than 10 per cent. We want a company showing strong improvement of its operations in the past two-year period;
· Most recent return on capital lower than 50 per cent – we exclude companies with an unsustainable ROC (a really high ROC is often temporary, owing to a short-term boost from unusual items);

For informational purposes, we have also included recent price-to-earnings ratio, five-year earnings growth mean, dividend yield, one-year price return and recent stock price. Please note that some ratios may be 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).

What we found

TICKER Company RECENT PRICE ($) MKT CAP ($MIL.) NOP CH. 24M (%) SP PERF. SCORE RTN ON CAPITAL (%) EPI SALES CH. 12M (%) PEG Ratio P/E Ratio 5Y EPS Growth Mean (%) 1Y PRICE RTN. (%) DIV. YIELD (%)
HD-N Home Depot, Inc. 266.71 287100 18.8 91.0 38.6 3.8 8.5 1.5 24.4 16.2 12.4 2.3
INTU-Q Intuit Inc. 314.68 82390 50.8 90.5 27.2 2.6 13.2 1.1 45.5 40.0 22.7 0.8
CLX-N Clorox Company 207.25 26120 14.1 86.0 23.3 3.8 8.2 2.6 28.2 10.9 41.0 2.1
FAST-Q Fastenal Company 43.23 24820 14.4 86.0 26.9 2.7 5.3 2.8 29.6 10.5 16.4 2.3
CSU-T Constellation Software Inc. 1398.59 29640 37.4 82.5 30.3 3.8 15.3 2.8 65.4 23.3 7.0 0.4
ORLY-Q O’reilly Automotive, Inc. 436.6 31990 24.5 77.7 29.2 3.4 9.4 1.0 19.5 19.9 -0.1 0.0
TROW-Q T. Rowe Price Group 126.66 28680 23.7 77.2 28.1 2.6 6.5 1.2 14.2 12.2 8.3 2.8
CPRT-Q Copart, Inc. 110.36 26040 51.8 77.0 27.5 2.7 8.0 1.3 37.6 28.0 33.1 0.0

The top three on our list using this approach, ranked by SP performance score, are Home Depot Inc.Intuit Inc. and Clorox Co.

Home improvement retailer Home Depot is an excellent example of how long-term growth can generate massive returns for investors. It has the highest return on capital and performance score of our list. The PEG ratio is in the middle of the pack and this company is also of premium quality based on its long-term historical growth. This more than justifies the higher PEG ratio than some others on our list.

Software developer Intuit Inc. has a P/E of 45.5, but the valuation is one of the cheapest if we consider the PEG ratio. This case illustrates that a P/E ratio can mean nothing if it is not compared with historical growth statistics. Intuit premium valuation is supported by its superior SP Performance Score, its 12-month sales growth and its 24-month NOP growth.

Clorox Co., a maker of disinfectant products and other household items that have been in high demand during the pandemic, has had a massive tailwind in the past three quarters. (Its fiscal first-quarter earnings, reported Monday, topped Wall Street’s forecasts, with sales up 27.2 per cent compared with the year-ago period.) In the short term, we can expect health measures to contribute to sales even if a vaccine makes it to the market. Its high EPI can be attributed to its strong retail brands and market dominance. More than 80 per cent of the company’s sales are generated from brands that hold the No. 1 or No. 2 market share positions in their respective categories. While the return on capital is lower than other candidates, that is a small price to pay for its incredible stability.

Investors are advised to do further research before investing in any of the companies shown here.

For more details about these growth stocks, please subscribe the Inovestor for Advisors platform for free here.

Christian Godin is a portfolio manager at Inovestor Asset Management.

Signs of Elevated Risk in Lofty Tech Stock Valuations

What are we looking for?
The tech rally shouldn’t be a surprise considering this year’s work-from-home environment. The health and safety measures put in place by government authorities around COVID-19 forced consumers to change their habits to include more tech products in their lifestyle. But do tech stocks justify their lofty valuations?

For perspective, we compare today’s results with a similar screen of tech stocks we did two years ago (tgam.ca/IT-Inovestor).

The screen
Here is a link for our screener

We screened U.S. tech companies focusing on the following criteria:

·Positive 12-month change in the economic value-added (EVA) metric – a positive figure shows us that the company’s profits are increasing at a faster and greater pace than the costs of capital. The EVA gives us a sense of how much value this stock is adding for shareholders and is calculated by taking the net operating profit after tax and subtracting the capital expense;

·Positive EVA and EVA growth on a per-share basis over 12 months;

·Economic performance index (EPI) – the ratio of return on capital to cost of capital – must be greater than one;

·Average five-year return on capital must be greater than 10 per cent and the 12-month change in return on capital must be positive (not shown);

·Future growth value/market value (FGV/MV) and the 12-month change in FGV. The FGV/MV ratio represents the proportion of the market value of the company that is made up of future growth expectations rather than the actual profit generated. The higher the percentage, the higher the baked-in premium for expected growth and the higher the risk;

·Beta – this gives us an idea of how closely the company mimics the market’s fluctuations. A beta of less than one would indicate the stock is less volatile than the market at large.

For informational purposes, we have also included recent stock price, dividend yield and one-year return (as of last month’s end). Please note that some ratios may be reported at end-of-previous quarter.

TICKER Company RECENT PRICE ($) MKT CAP ($MIL.) 12M EVA CHG. EVA/S Ch. 12M EVA per Share EPI Beta FGV Ch. 12M DIV. YIELD (%) 1YR PRICE RTN.(%) FGV ($M) ROC (Avg 5 Y) FGV / MV
ZM-Q Zoom Video Communications, I 482.23                        136,191 N/A N/A 0.81 3.8 0.5 78.7 0.0 526.4              133,352 12.4 97.9%
VEEV-N Veeva Systems Inc Class A 275.56                           41,798 6.7 0.2 0.82 1.6 0.9 38.3 0.0 80.6                38,458 15.1 92.0%
MSCI-N Msci Inc. Class A 348.16                           29,308 1.0 0.1 5.54 2.4 1.0 25.4 0.9 57.7                24,021 18.7 82.0%
ADBE-Q Adobe Inc. 478.99                        232,045 35.8 1.8 5.29 2.4 0.8 32.7 0.0 73.0              187,498 17.0 80.8%
TYL-N Tyler Technologies, Inc. 350.72                           14,302 14.4 0.4 2.59 1.5 0.7 36.6 0.0 34.8                11,158 14.8 78.0%
MSFT-Q Microsoft Corporation 206.19                     1,580,000 30.0 0.7 2.89 1.9 0.9 25.9 1.1 50.4          1,149,583 13.3 72.8%
CDNS-Q Cadence Design Systems, Inc. 105.32                           29,876 161.3 1.8 2.21 1.9 1.0 11.4 0.0 60.6                19,209 12.2 64.3%
JKHY-Q Jack Henry & Associates, Inc 161.56                           12,454 11.2 0.2 2.90 2.1 0.9 13.6 1.1 11.6                  7,933 21.5 63.7%
UI-N Ubiquiti Inc. 165.26                           10,998 72.9 1.7 5.26 5.2 0.9 4.9 1.0 39.8                  6,727 34.8 61.2%
LOGI-Q Logitech International S.a. 77.78                           13,558 194.5 1.6 2.16 2.8 0.5 13.5 1.1 90.8                  6,155 13.4 45.4%
GRMN-Q Garmin Ltd. 94.93                           18,398 79.1 0.8 2.52 1.8 0.9 6.3 2.6 12.2                  7,649 14.4 41.6%

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).

What we found

The current market environment for tech stocks is more challenging than in late 2018: We see higher valuations and decreasing EVA per share growth compared with our previous screen. More companies show an extreme FGV/MV, signalling elevated risk, and the average EVA growth is 91 per cent, compared with 146 per cent two years ago.

Zoom Video Communications Inc. has been one of the big winners during this upheaval. The communications technology company certainly has a good EPI, while its three-month sales growth (not shown) is an incredible 190.4 per cent. That said, its EVA per share of 81 US cents for a stock trading in the US$480 range definitely doesn’t support the current valuation.

Computer software company Adobe Inc. is one of two names on this list that made our screen two years ago (the other was Jack Henry & Associates). Adobe’s valuation based on the FGV/MV is lower than in 2018 (80.8 vs. 84.5). The company also has the second-highest 12-month change in EVA per share on our list. This indicates a strong improvement of its profitability. In this case, the valuation can be justified by strong financial performance and doesn’t seem disconnected with its fundamentals based on historical data.

Investors are advised to do further research before investing in any of the companies shown here.

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

 

SEVEN U.S. CONSUMER DISCRETIONARY WITH SIZEABLE LONG-TERM RETURN ON CAPITAL

What are we looking for?

In the second quarter, fiscal and monetary interventions were massive and to some extent, stronger than the shock from the COVID-19. As a result of these interventions, U.S. consumers’ disposable income is 6% higher than it was in January, leaving them with more money than before the crisis.

The economy appears to be recovering quickly with U.S. retail sales growing at 1.1% year-over-year favoring cyclical stocks. We will look at U.S. large caps operating in the consumer discretionary sector. These are serious candidates where consumers could spend their extra cash.

The screen (click here to access the screen through Stockpointer)

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

  • Market capitalization higher than 15 billion;
  • StockPointer (SP) Performance Score of more than 75 – The score mainly considers risk-adjusted return on capital and free cash flow per share. The score varies between zero and 100;
  • Return on capital (5Y mean) higher than 12% – We look for a firm with a considerable return on capital. Consumer discretionary stocks have profited from the last economic boom so we can set a high return on capital;
  • Positive 3 month change in sales – We want a business whose sales have not been hit too hard by the COVID-19;
  • Positive 1Y dividend growth – We look for a company that didn’t stop to increase its dividend.

    For informational purposes, we have also included recent, stock price, dividend yield, one-year price return, net operating profit (NOP) change over 24 months, return on capital and earnings per share growth (5Y-mean);

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.) SP PERF. SCORE RTN ON CAPITAL 5Y-MEAN (%) SALES CH. 3M (%) 1Y DIV. GROWTH (%) NOP CH. 24M EPS GROWTH 5Y-MEAN RTN ON CAPITAL (%) DIV. YIELD (%) 1Y PRICE RTN. (%)
HD-N Home Depot, Inc. 271.64 292160 90.0 30.4 1.7 25.4 20.3 15.3 35.5 2.2 29.4
ORLY-Q O’reilly Automotive, Inc. 465.18 34470 77.7 26.7 4.9 0.0 24.5 19.9 29.2 0.0 21.9
AZO-N Autozone, Inc. 1182.22 27620 76.5 26.4 0.0 0.0 7.6 13.0 28.8 0.0 8.6
TSCO-Q Tractor Supply Company 148.1 17120 88.5 18.2 9.7 9.4 43.4 14.9 23.2 1.1 35.8
LOW-N Lowe’s Companies, Inc. 152.78 115350 88.0 16.2 2.7 14.6 23.1 16.2 20.4 1.4 52.1
COST-Q Costco Wholesale Corporation 340.91 150520 82.7 13.1 1.6 12.3 30.1 9.9 14.2 0.8 24.1
DG-N Dollar General Corporation 195.29 49160 84.1 13.0 6.6 10.9 22.6 16.5 14.0 0.7 42.1

What we found

Home improvement retailer Home Depot has an impressive performance score of 90. The 5Y return on capital is also incredible at 30%. In the long run, we expect the company will manage to increase its sales around the GDP growth level while adding small amount of capital. The increase in free cash flow will allow to increase the dividend. The various restrictions related to the pandemic may have pushed consumer to renovate their house during their spare time. The company reports their Q2 on August 18th before market opening.

Auto parts & equipments retailer O’reilly Automotive has a robust return on capital of 26.7%. Its short-term sales grew by 4.9% despite the pandemic during Q2 showing strong execution by management while facing important demand by consumers. Individuals may have used their cars more for vacations as other options were limited. The company generated an impressive annual EPS growth of almost 20% in the last 5-year period. The company doesn’t pay a dividend, but it returned $1.1B to shareholders through buybacks.

Farm supply and home improvement retailer Tractor Supply Co. has a trailing twelve month return on capital of 23.1% which compares positively to its 5Y mean of 18.2%. It increased its sales by 9.7% in the last 3 months and realized a NOP growth of 43.4% over 24 months showing great momentum both in the short and medium-term. The dividend growth is lower than other firms figuring on the list, but the company chose to strengthen its balance sheet by adding $1.1B in cash and cash equivalents compared to the previous Q2. An understandable decision considering the circumstances.

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