WHAT ARE WE LOOKING FOR? Growth and lots of it. Today we'll look for Canadian stocks that have the strongest outlook for earnings and revenue growth, based on consensus expectations from analysts. Let's hope there are still some growth companies around given how analysts have been slashing earnings estimates. TODAY'S SCREEN We'll use the screening tool available from Thomson. We'll look for stocks that have at least 20-per-cent expected revenue and share profit growth for this year and next. We'll add a minimum market capitalization of $250-million. We'll rank stocks by the greatest expected profit growth for next year. We'll also throw in price-to-earnings ratios so that you can get a feel for how expensive these stocks are. SO WHAT DID WE TURN UP? We ran this screen back in October and many of the same names showed up again. We went back and looked at how the list of stocks from October has done and found that as a group (26 stocks made the cut back then) they were down an average 9 per cent (not including one takeover). The S&P/TSX composite was down about 5 per cent over the same time. The stocks that have stayed on the list (11 of them) have actually done better than the market, rising 0.4 per cent, but if you look at the performance of them, the best have been gold or oil stocks. This is a small test study, but it shows that you can't rely on growth alone when buying stocks. Growth can be sexy, but valuation, momentum, macro events and other analysis has to be considered.
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