What are we looking for?
Recently, we screened for Canadian growth companies trading at a discount. This week, we are applying the same filter to U.S. stocks.
The screen
We have screened our U.S. stocks universe (5,860 stocks) with the following criteria:
- A market capitalization of $5-billion (U.S.) or greater;
- A 12-month revenue growth of 10 per cent or greater;
- A 24-month revenue growth of 20 per cent or greater;
- An economic performance index, or EPI (return on capital divided by cost of capital) of at least 1.0. An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
- A return on capital of 10 per cent or greater;
- A negative future growth value. The FGV represents, in percentage, the portion of the total market value that exceeds the company’s current operating value. The higher the number, the higher the baked-in premium for expected growth is, and the higher the risk. A negative number reflects a discount.
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 7,500 companies (Canadian stocks, U.S. stocks and American depositary receipts), StockPointer also allows investors to create personalized filters and build custom portfolios.
What did we find?
Only eight companies match this list of criteria – fewer than the 10 companies we have found two weeks ago in our Canadian universe, which is four times smaller.
Charter Communications, the telecom behemoth that is now the second-biggest broadband provider in the United States, comes up as the highest wealth creator of this group with an EPI of 3.6. Its 12- and 24-month revenue growth rates are also through the roof, thanks to the M&A activities that happened between 2014 and 2016. These deals involved many telecom giants such as Comcast and Time Warner Cable.
RenaissanceRe Holdings is the smallest but also the most discounted stock of the list with an FGV of minus 68.4 per cent. RenaissanceRe has offices around the globe and specializes in catastrophe reinsurance. It also provides casualty and specialty reinsurance through its subsidiaries. The stock has delivered strong and steady returns to investors throughout the years with a low 0.49 beta (not shown in the table).
Investors are advised to do additional research prior to investing in any of the companies mentioned.
Jean-Didier Lapointe is a financial analyst for StockPointer at Inovestor Inc.