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Number Cruncher

Screens that break down the numbers from our investment reporters

Entry archive:

Only one Canadian bank is showing a clear rising trend in economic profit

Rizwan Shah

What are we looking for?

Following up on the results of the second quarter, we are now looking at the trend of economic profit for Canadian banks.

The screen

As a metric, economic profit (also known as “economic value-added,” or EVA), is a measure of the wealth returned to shareholders over time, which is different from accounting profit.

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These 20 Canadian companies are consistently profitable

IAN TAM

What are we looking for?

Steady Canadian companies showing consistent returns on equity.

The screen

Return on equity (ROE) is a key measure of profitability that shows a company’s ability to return value to shareholders. Companies with steady returns on equity are efficient in using their assets to generate returns. This week, I look for companies that show positive trends in ROE – and have also had a consistently positive ROE over five- and 10-year periods.

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These 12 stocks are for investors who think like owners (not traders)

CHARLES MARTIN

What are we looking for?

Sometimes investors seem to forget that a company’s shares represent a fractional ownership in an underlying business. They focus on short-term factors and trade excessively – rather than taking the longer-term approach of a business owner. Such trading can cause big fluctuations in stock prices that may not reflect the true value of the business.

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Undervalued U.S. stocks that show signs of sustainable growth

CRAIG McGEE

What are we looking for?

Undervalued U.S. companies with sustainable growth and upward momentum.

The screen

Two weeks ago we dug into the Canadian market in search of trending stocks with room to grow using the EMG (enterprise multiple to growth) ratio. Like the PEG ratio, EMG measures valuations relative to growth rates where we’re taking EV/EBITDA (total enterprise value divided by four quarters of earnings before interest, taxes, depreciation and amortization) and dividing by the sustainable growth rate (also known as reinvestment rate).

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Eight beaten-down Canadian stocks poised to bounce back

PETER ASHTON

What are we looking for?

Market drama related to a future Fed rate hike and concern in Europe about a possible “Grexit” has had a negative impact on many Canadian stocks. With the Greek situation poised for resolution and a growing consensus of a slow start to interest-rate increases in the United States, many hard-hit stocks may be poised to bounce back.

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Fifteen Canadian stocks with dividend staying power

IAN TAM

What are we looking for?

Canadian companies paying sustainable dividends.

The screen

One of the pitfalls of dividend investing is the fact that yield alone can be a deceiving metric.

A company with sustainable yields over the long term will need to support dividends with sufficient cash flow and earnings.

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Amid increasing market volatility, 12 stocks that may be oversold

Patrick Gattuso

What are we looking for?

Mid-cap companies in the United States and in Canada that are trading in a long-term uptrend but are considered oversold because of a recent short-term decline in price.

The screen

The S&P 500, Nasdaq and TSX have been trading in a sideways pattern since March because of increasing volatility and looming uncertainty in financial markets.

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These 20 U.S. stocks are creating shareholder wealth

NICK WINCH

What are we looking for?

The 20 companies in the S&P 500 that present the highest levels of economic profit (relative to company size).

The screen

As a metric, EVA, or economic value-added, is a measure of the economic profit generated by a business over a given time period. We look at economic profit, which may be different from accounting profit, as it illustrates how much value the company’s investments have created for the business.

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Eight telecom and utility stocks for dividend-hungry investors

TED DIXON

What are we looking for?

Looking at all the stocks on the TSX, we want to screen for the highest-ranking telecom and utilities names, two popular sectors for dividend-hungry investors. Rankings are determined by the INK Edge V.I.P. criteria (valuations, insider commitment and price momentum). This is the same approach we apply across the broad market to determine membership for the INK Canadian insider index, which is used by the Horizons Canadian Insider Index ETF (HII-T).

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Fifteen stocks that could benefit from a U.S. interest rate increase

IAN TAM

What are we looking for?

U.S. companies in interest-rate sensitive sectors.

The screen

Historically, when interest rates rise, stock pickers tend to gravitate toward interest-rate sensitive sectors such as financials (which benefit from lending at higher rates), consumer cyclicals (which benefit from increased consumer spending due to improving economic conditions) and industrials (which benefit from increase in production demand). In addition, companies with lower levels of debt will fare better since they are less affected by the rise in lending rates. This week, I look specifically at these three sectors and rank stocks based on the following factors:

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These small Canadian companies show strong revenue growth

RYAN GOTTSCHALK

What are we looking for?

Companies trading on the TSX Venture Exchange that are reinvesting capital back into their respective businesses and have seen strong revenue growth over the past year.

The screen

The TSX Venture Exchange is brimming with early-stage companies who seek financing, many of whom go on to become successful ventures and offer large returns for investors who are able to take on the additional risk. We look for companies that displayed a capital-expenditure-to-total-asset-value ratio of at least 30 per cent in 2014, and have seen incremental revenue growth of at least 10 per cent over the 2014 calendar year.

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Undervalued Canadian stocks that show signs of sustainable growth

CRAIG McGEE

What are we looking for?

Potentially undervalued Canadian companies with momentum and earnings to reinvest.

The screen

In spite of increasing volatility, there have been some pockets of the market that been experiencing increasing expectations and building momentum. In the search for trending stocks with room to grow, my colleague Lawrence Ullman and I looked to the EMG (enterprise multiple to growth) ratio. Similar to the PEG ratio, EMG compares valuations with growth levels. In this case, we’re taking EV/EBITDA (total enterprise value divided by four quarters of earnings before interest, taxes, depreciation and amortization) and dividing by the sustainable growth rate (also known as reinvestment rate) in order to take growth prospects into account.

More »

Seven jewels among dividend growth stocks

PETER ASHTON

What are we looking for?

Canadian stocks with strong dividend yields and a track record of dividend growth and stock price appreciation.

With Canadian interest rates at historic lows and the prospect of flat (or possibly declining) interest rates, the options available for Canadian income investors are few. With bonds and GICs yielding less than 2 per cent over a one- to five-year time horizon, dividend growth stocks are perhaps one of the few bright spots in the investing landscape for the income investor.

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These nine Canadian stocks combine price momentum and value

IAN TAM

What are we looking for?

Canadian companies showing positive price changes over the past nine months, but which remain relatively well valued.

The screen

Since the S&P/TSX composite index came off its record high in early September, 2014, the index has experienced some significant volatility (mostly because of oil prices). This isn’t to say that there weren’t some clear-cut winners. In fact, 70 of the 240-plus stocks in the S&P/TSX composite posted gains of greater than 10 per cent over the past nine months.

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Eighteen food company stocks that show profitability and efficiency

CHARLES MARTIN

What are we looking for?

Billionaire investor Bill Ackman of Pershing Square Capital Management disclosed last week a stake in Nomad Foods, an acquisition vehicle for other food businesses, which could signal that more consolidation in the industry may be near. With that in mind, today we turn our attention to restaurant and food processing companies that are both profitable and efficiently run.

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These 14 stocks show strong returns at a reasonable price

CHARLES MARTIN

What are we looking for?

Companies that offer high return on equity relative to their price-earnings ratio.

The screen

With equity indexes trading at near-record levels, it is tough to find great bargains in the United States and Canadian markets these days. I’m looking at companies that are compounding their returns at a high rate while trading at reasonable earnings multiples.

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Technical analysis: BCE, Telus sending positive signals

MONICA RIZK and RON MEISELS

What are we looking at?

Canadian and U.S. telecom and utilities stocks.

The screen

We limited our pool to the S&P/TSX 60 and S&P 100 indexes.

To find the most promising, we looked at each stock’s 40-week moving average (40wMA). This is the average closing price for the stock over a period of 40 weeks. Charting the moving average week by week gives us a sense of investors’ behaviours; are investors growing more (or less) enthusiastic about the company’s outlook and are they more (or less) likely to purchase the stock?

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These 20 stocks offer growth at a reasonable price

IAN TAM

What are we looking for?

Reasonably valued, predictable, growth stocks in the U.S. markets.

The screen

The term GARP (growth at a reasonable price) has long been known to investors who search for companies that show growth in earnings but remain reasonably valued. This investment style is often associated with one of the investing greats, Peter Lynch, who managed the Fidelity Magellan Fund from 1977 to 1990, during which time he drastically outperformed the market.

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These health care stocks show strong earnings momentum

RYAN GOTTSCHALK

What are we looking for?

Companies that historically contradict the traditional “sell in May and go away” investor adage and are exhibiting strong earnings momentum heading into the summer months.

The screen

The “sell in May” saying is shorthand, of course, for equity holders to sell their positions in May ahead of historically low returns throughout the summer months. Looking at historical S&P 500 returns from 1965 to 2014 in Thomson Reuters Eikon, the effect of this axiom can be seen with index returns averaging only 0.1 per cent from May to September while returning an average of 7.9 per cent from October to April.

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These 20 stocks show earnings stability, lower price volatility

CRAIG MCGEE

What are we looking for?

Better investment outcomes in the Canadian market by tracking companies with more predictable earnings and less volatile price activity.

The screen

Uncertainty has been mounting in local and international markets around rising valuations, currency volatility, low or negative bond yields and mixed messages around growth expectations. Many investors have been preparing for extended periods of turbulence, looking for ways to protect capital while still participating in upward-moving markets. Investment firms have been very successful attracting assets recently by launching low volatility funds, though most select and weight positions by using a single measure of trailing price volatility – beta, for example (a beta of less than 1.0 means that the security has been less volatile than the market).

More »

Number Cruncher Contributors

Ted Dixon, CFA

E-mail this writer

Ted Dixon is co-founder of INK Research. INK stands for Insider News and Knowledge and through www.inkresearch.com is Canada's first on-line financial news and research service providing investor insight into what public company executives and significant shareholders are doing with their ownership interests.

Follow Ted on Twitter @TedDixon

Charles Martin, CFA

E-mail this writer

Charles Martin, CFA, works in the Financial and Risk unit of Thomson Reuters and specializes in asset management.

Craig McGee, CFA

E-mail this writer

Craig McGee, CFA, is a portfolio manager with The Ullman Group at Richardson GMP in Toronto.

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