In this week’s content analysis, we will recap on a transaction we made in our Canadian portfolio during our July 2nd rebalancing. Last Thursday, we sold Winpak Ltd. (WPK) partly due to the fact that the stock is now considered overvalued, both compared to its intrinsic value (P/IV = 1.7) and its future growth value (FGV = 50%). Hence, we replaced WPK by Stella-Jones Inc. (SJ), which is ranked 4th best company in the Canadian materials sector, large cap, with an SPscore of 64%. 
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Stella-Jones is a company that specialises in pressure treated wood products. This company is in full expansion with sales that have more than doubled in the past 5 years, going from $592M in 2011 to $1.33B in 2015. Its economic performance is also at its highest point in 5 years. The return on capital (ROC) was at 12.3% for the TTM ending in March 2015 and its performance spread (ROC- COC) was at 5.9%. Since 2011, the long term trend for SJ’s EVA is clearly positive and it seems like this trend has been accelerating since beginning 2014.
In terms of value, as of July 7th, Stella-Jones is trading at a P/IV ratio of 1.26. We consider this ratio reasonable for a company that has been able to constantly increase its intrinsic value, EVA and accounting indicators. Future Growth Value (FGV) is currently around 30.4%, and this reflects the premium to pay in regards to the current operating value (COV). Considering that SJ has maintained an annualized growth rate of 42.53% since 2011 for its COV, we consider the FGV premium of 30.4% acceptable.
To conclude on the accounting performance, SJ’s EPS has increased for each year since 2011, and the company also increased their dividends. While the current dividend yield is not that attractive at 0.75%, its 5-year annualized growth rate of 27.4% can’t be ignored.
