Skip to main content
number cruncher

What are we looking for?

Well-priced consumer discretionary companies with positive earnings momentum and dividend growth.

With Citigroup announcing last week its expectation for oil prices to remain at or near current levels through the first three quarters of 2015, we are looking for resulting opportunities in other market sectors. The consumer discretionary sector is well positioned for 2015, as consumers may benefit from increased levels of disposable income.

The screen

We searched for the top consumer discretionary companies in North America with a minimum market cap of $500-million and looked at the following metrics:

Future growth value divided by market value of total capital (FGV/MV), a ratio that helps determine whether the stock is trading at a discount or premium to the current value of the company's operations. We filtered for a maximum premium of 30 per cent (negative values indicate a discount).

Positive earnings per share (EPS) change over both the past 12-month and 24-month periods.

A minimum dividend yield of 1 per cent, with a positive four-year dividend growth rate (annualized).

An economic performance index (EPI, return on capital divided by the cost of capital) greater than one. EPI helps identify companies that create the highest rate of economic profit and wealth creation for investors.

More about StockPointer

StockPointer is a fundamental analysis tool based on an EVA (economic value added) model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 6,500 companies (Canadian and U.S. stocks and American depositary receipts), StockPointer (stockpointer.ca) also allows investors to create personalized filters and build custom portfolios.

What did we find?

A concentration of Canadian companies currently trading at a discount. Of the six companies on the list with a negative FGV/MV ratio, five are Canadian. Looking at these five: BMTC Group has generated the strongest EPI over the past 12 months among this entire list; EnerCare Solutions Inc. pays the largest dividend; Canadian Tire Corp. Ltd., Cogeco Cable Inc. and EnerCare have all grown their EPS in each of the past two years.

The only U.S. company trading at a discount, Gannett Co., saw the largest EPS improvement in the past 12 months, while also maintaining excellent dividend growth.

Investors are advised to do additional research prior to investing in any of the companies mentioned.

Nick Winch is an account manager for StockPointer at Inovestor Inc.

North American consumer discretionary companies