What are we looking for?
Deep value stocks in Canada that also have reasonably strong balance sheets. These stocks are trading at what appear to be bargain prices and also have enough liquid assets to meet their immediate needs. That might make them attractive to investors who don’t mind the risk involved in bottom fishing.
How we did it
Craig McGee, senior consultant at CPMS Morningstar Canada, scoured the CPMS Canadian database for companies with:
-A market capitalization greater than $100-million.
-A share-price-to-tangible-book-value ratio no greater than 1. (Tangible book value excludes goodwill and other intangible assets so it provides a relatively conservative assessment of a company’s worth. Most companies trade well above their tangible book values.)
-A long-term-debt-to-equity ratio in the lowest half of the CPMS universe.
-A quick ratio greater than 1. (A company’s quick ratio is its current assets less its inventories, divided by its current liabilities. A high ratio indicates that a company is financially secure, at least for now, because it has lots of liquid assets on hand relative to its immediate needs.)
-Consensus earnings-per-share estimate revisions over the past 90 days that were positive or unchanged. This ensures that analysts aren’t predicting an immediate decline in profits.
More about Morningstar
Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia.
Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers.
CPMS data cover more than 95 per cent of the investable North American stock market.
What we found
A list of companies that you should approach with interest – but also caution. Companies that are trading below their tangible book values are often cheap for good reasons. While this screen tries to weed out obvious short-term problems, you should do your own research to ensure that you’re not buying a long-term loser.
Canadian deep value stocks with strong balance sheets
|1||Teranga Gold Corp.||TGZ-T||133|
|2||Chinook Energy Inc.||CKE-T||206|
|3||New Millennium Iron Co.||NML-T||114|
|4||Guyana Goldfields Inc.||GUY-T||207|
|6||BNK Petroleum Inc.||BKX-T||120|
|7||Alderon Iron Ore Corp.||ADV-T||145|
|8||Premier Gold Mines Ltd.||PG-T||300|
|9||Maxim Power Corp.||MXG-T||163|
|10||Indigo Books & Music||IDG-T||278|
Source: Morningstar Canada
|1||Teranga Gold Corp.||TGZ-T||133||0.32x||0.16x||1.11x||16.08%|
|2||Chinook Energy Inc.||CKE-T||206||0.59x||0.25x||1.25x||0.00%|
|3||New Millennium Iron Co.||NML-T||114||0.64x||0.00x||8.47x||5.00%|
|4||Guyana Goldfields Inc.||GUY-T||207||0.68x||0.00x||68.35x||5.17%|
|6||BNK Petroleum Inc.||BKX-T||120||0.72x||0.00x||2.98x||0.02%|
|7||Alderon Iron Ore Corp.||ADV-T||145||0.74x||0.00x||15.49x||32.50%|
|8||Premier Gold Mines Ltd.||PG-T||300||0.74x||0.02x||8.27x||20.00%|
|9||Maxim Power Corp.||MXG-T||163||0.75x||0.22x||1.55x||0.00%|
|10||Indigo Books & Music||IDG-T||278||0.86x||0.00x||1.04x||73.91%|
|11||Xtreme Drilling & Coil||XDC-T||295||0.86x||0.33x||1.51x||55.00%|
|12||Vecima Networks Inc.||VCM-T||105||0.86x||0.02x||3.54x||90.00%|
|13||Rubicon Minerals Corp.||RMX-T||395||0.86x||0.00x||9.80x||7.43%|
|14||Sprott Resource Corp.||SCP-T||362||0.93x||0.00x||2.83x||0.00%|
|15||Noranda Income Fund||NIF.UN-T||193||0.93x||0.23x||1.38x||0.00%|
|17||Gabriel Resources Ltd.||GBU-T||568||0.94x||0.00x||5.68x||0.00%|
|18||Clairvest Group Inc.||CVG-T||329||0.95x||0.00x||17.52x||0.00%|
|19||Equal Energy Ltd.||EQU-T||156||0.97x||0.27x||2.48x||69.74%|
|20||Allana Potash Corp.||AAA-T||115||1.00x||0.00x||5.33x||60.00%|