What are we looking for?
Large-cap TSX-listed stocks that have become more attractive over the past quarter.
From Shopify on July 27 to Dollarama on Sept. 9, we can officially say that Canadian earnings season is over. This is an ideal time to review the performance of companies over the past quarter on a comparable basis.
We define the attractiveness as the trade-off between performance and risk. Our StockPointer (SP) score aggregates a performance and risk score and will help us to identify companies that stand out from the crowd.
The screen (add this screener here)
We screened Canadian stocks focusing on the following criteria:
- Market capitalization higher than $10-billion;
- SP score higher than 50 – the score mainly considers risk-adjusted return on capital, earnings per share growth and free cash flow per share. The score varies between zero and 100. A score of 50 implies an average company;
- Three-month SP score growth higher than 5 per cent – our SP score is calculated daily, therefore Friday’s sell-off is integrated in the displayed values.
For informational purposes, we have also included price-to earnings, five-year annualized earnings per share growth, five-year average free-cash-flow-to-capital, one-year price return and dividend yield. Please note that some ratios may be shown as of end of previous quarter.
More about Inovestor
Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios and easily communicate investment decisions with clients through client-friendly reports.
What we found
| TICKER | NAME | PRICE | MKT VALUE ($ MIL.) | 3M SP SCORE GRTH. (%) | SP SCORE | P/E | 5Y ANN. EPS GRTH. (%) | 5Y FCF TO CAPITAL (%) | 1Y PRICE RTN. (%) | DIV YLD. (%) |
| CVE-T | CENOVUS ENERGY INC. | 21 | 40942 | 20.4 | 65 | 10.2 | -2.4 | 4.6 | 55.8 | 2.0 |
| SHOP-T | SHOPIFY, INC. CLASS A | 39.1 | 49378 | 18.6 | 51 | n/a | NM | 1.7 | -80.1 | n/a |
| BIP-UN-T | BROOKFIELD INFRASTRUCTURE PARTNERS L.P. | 53.81 | 24647 | 10.6 | 73 | 46.7 | 22.7 | -0.1 | 13.7 | 3.6 |
| IMO-T | IMPERIAL OIL LIMITED | 57.09 | 36348 | 10.0 | 77 | 7.2 | 19.8 | 7.0 | 36.6 | 2.5 |
| ARX-T | ARC RESOURCES LTD. | 16.34 | 10845 | 9.2 | 71 | 7.9 | 9.6 | 3.2 | 41.2 | 2.9 |
| SU-T | SUNCOR ENERGY INC. | 36.95 | 50914 | 9.0 | 73 | 5.6 | 32.2 | 3.5 | 29.6 | 5.3 |
| CU-T | CANADIAN UTILITIES LIMITED CLASS A | 39.45 | 10618 | 8.9 | 61 | 19.1 | -0.7 | -2.7 | 15.2 | 4.5 |
| NTR-T | NUTRIEN LTD. | 112.7 | 60985 | 8.3 | 65 | 7.2 | N/A* | N/A* | 25.2 | 2.2 |
| AEM-T | AGNICO EAGLE MINES LIMITED | 53.09 | 24197 | 7.8 | 69 | 22.0 | 9.0 | -1.1 | -22.7 | 4.1 |
| BEP-UN-T | BROOKFIELD RENEWABLE PARTNERS LP | 46.92 | 12908 | 7.7 | 56 | n/a | NM | -0.9 | -1.6 | 3.6 |
| QSR-T | RESTAURANT BRANDS INTERNATIONAL INC | 75.31 | 23026 | 6.2 | 69 | 21.2 | 11.4 | 1.9 | -12.2 | 3.9 |
*Five-year EPS growth not meaningful for SHOP, BEP-UN. **Less than five years’ data available for EPS growth, FCF-to-capital for NTR
Source: Inovestor
Oil sands producer and refiner Cenovus Energy Inc. has the highest three-month SP score growth at 20.4 per cent. It is also the company with the highest one-year price change, at 55.8 per cent. While its EPS track record is unimpressive with a minus 2.4 per cent annualized growth, the company was able to generate free cash flow to capital at an average of 4.6 per cent a year in the past five years, the second highest of our screen, after Imperial Oil Ltd.
Shopify Inc., an e-commerce platform, has seen its SP score rise by 18.6 per cent. The company low and inconsistent profitability explains its SP score of only 51. The stock price has plummeted by about 80 per cent in the past year as the craze for technology companies transformed into a fear of the impact of inflation on the sector. In this case, the SP score increase reflects the share price drop being greater than the decline in the company’s fundamentals. While challenging times may be ahead, this could be a potential entry point for long-term investors.
Brookfield Infrastructure Partners LP, a manager of global infrastructure, experienced SP score growth of 10.6 per cent in the past quarter, bringing the SP score to 73, the second-highest (along with Suncor Energy Ltd.) on our screen. Infrastructure is known as an inflation hedge and relatively stable in any environment. The one-year share price increase of 13.7 per cent seems to bear that out, easily outperforming the return of minus 9.7 per cent return for the S&P/TSX Composite Index for the same period.
Investors are advised to do further research before investing in any of the companies listed in the accompanying table.
