What are we looking for?
Stocks with earnings momentum.
Earnings season is once again upon us, and with it arrives the quarterly parade of beats and misses that will fuel stock movements over the coming weeks.
With stock market benchmarks in the United States and Canada at or near record highs, and with equities still the investment of choice in a low-yield environment, the attention paid to corporate profits is inexhaustible.
In second-quarter results, investors will be looking for an earnings rebound after a tough winter weighed on prior-quarter profits.
So we went looking for Canadian companies that are entering the latest reporting season poised to build on earnings strength.
How did we do it?
We limited the search to Canadian-listed companies with market capitalizations of at least $200-million.
The companies are sorted by their growth in basic earnings per share over the past year, which had to be positive.
We compared that measure to the company’s one-year change in share price, which also had to be greater than zero. But share price growth had to be less than growth in EPS over that period, one possible indication that investors had not fully valued earnings growth.
Eligible companies also had to have beaten the Street last quarter by posting earnings that exceeded consensus estimates.
And finally, companies posting negative average annual growth in profit margin over the prior five years were excluded.
What did we find?
This list of 18 stocks represents a diverse group of Canadian companies across a variety of industries with some earnings momentum behind them.
Well represented on this list are energy and IT names – both sectors have been top three performers within the S&P/TSX composite index over both last year and this year to date.
The financial sector also filtered through this screen quite well, although our list includes none of the Big Five banks – all of which have risen in share price by around 30 per cent over the last year, exceeding profit growth.
To determine which of these stocks might be due for a lift from earnings, investors should conduct their own research.
Companies with growing earnings per share
|Company||Ticker||1-Yr. EPS Grwth (%)||1-Yr. Price Chg. (%)||EPS Surprise Prev. Qtr. (%)||Five-Yr. Profit Margin Grwth (%)||Mkt. Cap ($-Mil.)|
|Canaccord Genuity Group Inc.||CF-T||242.9||100.4||16.8||24.2||1238.05|
|Canadian Natural Resources||CNQ-T||200.0||57.0||6.1||3.7||53629.48|
|CGI Group Inc.||GIB.A-T||102.7||21.6||4.7||0.8||11707.90|
|Guardian Capital Group Ltd.||GCG.A-T||100.0||28.7||54.5||27.4||550.30|
|Vermilion Energy Inc.||VET-T||88.7||36.9||9.8||12.5||7643.39|
|Algonquin Power & Utilities||AQN-T||77.8||12.0||25.0||5.1||1675.62|
|National Bank of Canada||NA-T||68.6||22.8||1.1||3.0||14935.30|
|Redknee Solutions Inc.||RKN-T||66.7||61.0||337.5||34.5||588.01|
|Solium Capital Inc.||SUM-T||54.0||48.8||21.6||13.3||369.93|
|Contrans Group Inc.||CSS-T||41.7||34.3||11.9||18.1||505.58|
|Husky Energy Inc.||HSE-T||24.1||21.6||19.5||5.4||33468.88|
|Com Dev International||CDV-T||16.7||5.4||29.6||4.0||330.02|
Follow Tim Shufelt on Twitter: