In our last Number Cruncher, we discussed how Gildan Activewear Inc. (GIL:TSX), Finning International Inc. (FTT:TSX) & Dollarama Inc. (DOL:TSX) are Consumer Discretionary stocks that could benefit from interest rate cuts.
Gildan Activewear Inc’s SP Score remains unchanged at 73 compared to 90 days prior, comprising a Performance Score of 75 and a Risk Score of 26.7. Specifically, this company performs moderately in Value, Growth, Quality and Volatility. The company experienced a sluggish -0.3% annual sales growth while it’s 5-year average sales growth stands at 5.7%. The company seems to struggle to grow rapidely since the pandemic.
GIldan saw a decline of 18.2% in their earnings per share last year,but despite this difficult year, the company manged to grow EPS at 8.5% per year in the last five years showing the company capacity to deliver decent earnings growth despite moderate sales growth.
Gildan was hit hard by the pandemic as seen by our intrinsic value estimate. However, the company recoved some of its shine since 2022. Our intrisinc value estimate is greater than the share price, showing that the company valuation is modest given the company’s performance. However, the margin of satefy is still limited in an environment where many stocks are selling at reasonable multiples.
Finning International Inc’s SP Score rose by two points compared to 90 days prior, now standing at 73. The score is bolstered by a Performance Rating of 73.4 and a Risk Score of only 27. FTT stands out in the volatility (74) and quality (70) factors.
The annual sales growth shows solid momentum with a sales growth of 22.6% and a solid 5-year track record of 9.2%. This sales growth fueled earnings per share growth at a whopping 27.2% in the last year as well as 29.8% per share in the last 5 years.
The company exhibits consistent momentum, with both NOPAT and EVA experiencing robust growth in every quarter since Q1 2021. The expanding EVA underscores not only operational growth but also an increase in value creation for shareholders, which is highly favorable. On the other hand, the company’s share price exhibited a comparatively muted response to the fundamentals, potentially indicating an attractive entry point, especially if there is confidence in the company’s ability to sustain this trend.
Dollarama Inc. currently has an SP Score of 73, a one-point increase over the past 90 days. This score is based on an impressive performance score of 87.6 and a risk score of 31.8. This consumer discretionary stock scores above average on many factors, but its strongest ones being Quality at 79, but with Momentum and Volatility following at 73. However, the company exhibits a vulnerability in its valuation, receiving a value score of only 42.
The company attained a remarkable sales growth of 18.7% in the past year, outpacing its 5-year trend of 11%. Notably, earnings have a tendency to grow at 1.5 times the rate of sales growth, with earnings per share increasing by 27.8% in the last year and 17.7% over the past 5 years.
The company’s performance is solid, yet it is worthwhile to examine its vulnerability, particularly in terms of valuation. The initial graph illustrates the valuation on a capital basis, indicating the market’s assessment of Dollarama’s overall value, including equity and debt. Beneath it, the growth value assigned by our intrinsic value calculation is depicted, where a higher value corresponds to a greater valuation. In both instances, there is an upward trend in valuation since 2019, indicating that the market recognized the recent performance of the company. Consequently, the valuation is less appealing than it was in 2019.
If you have any questions about the article, feel free to contact Anthony:
amenard@inovestor.com
