Kelly Brown is an investment analyst at Longview Asset Management Ltd. in Toronto.
What are we looking for?
Companies in Canada available at a low multiple of price-to-trailing-earnings (P/E).
Independent studies have demonstrated that selecting companies based on a value metric such as a low P/E will result in a portfolio that is likely to outperform the market averages over the next 12 months.
A low P/E can sometimes signify slow earnings growth or a balance sheet with too much debt – so we also filter out companies with these characteristics.
Before ranking companies by lowest P/E, my colleague Alvin Lau and I used the S&P Capital IQ Screener to exclude companies with:
- compound earnings growth of less than 5 per cent per annum for the last five years;
- a balance sheet with greater than 30 per cent debt to total capital;
- a market capitalization lower than $100-million.
More about S&P Capital IQ
S&P Capital IQ offers a comprehensive set of tools for fundamental analysis of global securities as well as idea generation and work flow management. Its Web- and Excel-based platform provides access to both real-time and historical information on companies, markets, transactions and people around the world.
What did we find?
Successful investors use a variety of tools to identify companies that are high quality and trade at attractive prices. This particular screen produced 40 results, from which we selected the top quartile based on a low P/E ratio. All companies in this quartile have a P/E of less than 13. The average five-year earnings-per-share (EPS) growth rate is 14.9 per cent per annum. The average debt-to-total capital is 16.1 per cent.
Of course, none of these companies is guaranteed to outperform, but screens such as this can be a useful tool for improving your chances of beating the relevant index. Investors should perform additional research before making an investment.
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TSX-listed stocks with low price-earnings ratios
|First Quantum Minerals Ltd.||FM-T||17.03||8,112|
|Major Drilling Group Int'l Inc.||MDI-T||7.53||596|
|Imperial Oil Ltd.||IMO-T||39.52||33,497|
|Total Energy Services Inc.||TOT-T||13.75||423|
|Bird Construction Inc.||BDT-T||13||553|
|Canadian Oil Sands Ltd.||COS-T||19.49||9,444|
|Magna International Inc.||MG-T||59.03||13,823|
|Pacific Rubiales Energy Corp.||PRE-T||20.2||6,513|
|Empire Company Ltd.||EMP.A-T||66.21||4,499|
|Dorel Industries Inc.||DII.B-T||42.8||1,362|
Source: Longview Asset Management, S&P Capital IQ
|First Quantum Minerals Ltd.||FM-T||17.03||8,112||19.50%||6.70%||4.2x|
|Major Drilling Group Int'l Inc.||MDI-T||7.53||596||14.50%||7.80%||7.7x|
|Imperial Oil Ltd.||IMO-T||39.52||33,497||5.10%||9.10%||8.9x|
|Total Energy Services Inc.||TOT-T||13.75||423||7.40%||18.20%||9.2x|
|Bird Construction Inc.||BDT-T||13||553||11.10%||20.10%||9.3x|
|Canadian Oil Sands Ltd.||COS-T||19.49||9,444||5.30%||28.40%||9.5x|
|Magna International Inc.||MG-T||59.03||13,823||15.80%||4.40%||9.6x|
|Pacific Rubiales Energy Corp.||PRE-T||20.2||6,513||52.60%||24.50%||11.8x|
|Empire Company Ltd.||EMP.A-T||66.21||4,499||12.10%||21.40%||12.1x|
|Dorel Industries Inc.||DII.B-T||42.8||1,362||5.20%||20.80%||12.5x|