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Number Cruncher

In the value hunt, these bargain stocks measure up Add to ...

What are we looking for?

Value, Canadian-style. We want to find stocks that appear cheap by several standard measurements.

How we did it

Craig McGee, senior consultant at Morningstar Canada, scoured the CPMS Canadian database for companies that are trading for low multiples of their earnings. He wanted to find stocks with price-to-earnings (P/E) ratios that are lower than the market average, based both on the profits they’ve already reported as well as the earnings that analysts expect them to report in the future.

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In addition, he wanted to turn up stocks that are cheap in comparison to their cash flow and in terms of their book value. He also looked for companies for which analysts have raised their earnings estimates.

To ensure adequate diversification, he allowed no more than five stocks per sector in the portfolio.

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

The CPMS Canadian Value strategy has enjoyed an outstanding few months. Year-to-date, it’s up 10.9 per cent while the TSX Composite Total Return Index is up only 6.7 per cent. Going back to Dec. 31, 1985, the strategy has generated an annualized return of 15.3 per cent vs. 8.1 per cent for the index.

That’s a huge degree of outperformance considering that there’s nothing particularly revolutionary about the approach. All the yardsticks it uses to measure value are popular, long-time favourites of value hunters. It appears that bargains sometimes do hide in plain sight – at least for patient investors.

 

Value stocks with growing profits

Company Symbol Price to trailing EPS Price to forward EPS
Agrium Inc. AGU-T 9.4x 10.1x
Atco Ltd. ACO.X-T 11.7x 11.6x
CIBC CM-T 9.8x 9.3x
Cdn. Tire Corp. Ltd. CTC.A-T 11.3x 10.3x
Cott Corp. BCB-T 15.2x 9.3x
Davis + Henderson Corp. DH-T 12.1x 10.7x
Dundee Precious Metals DPM-T 11.2x 8.5x
Empire Company Ltd. EMP.A-T 11.6x 11.1x
Genworth MI Canada Inc. MIC-T 6.5x 6.8x
Inmet Mining Corp. IMN-T 10.7x 10.9x

Source: Morningstar Canada

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  • CTC.A-T
  • BCB-T
  • DH-T
  • DPM-T
  • EMP.A-T
  • MIC-T
  • IMN-T
  • LB-T
  • LNR-T
  • MG-T
  • NA-T
  • NSU-T
  • QBR.B-T
  • RIM-T
  • SPB-T
  • WJA-T
  • WN-T
  • AGU-T
  • ACO.X-T
  • CM-T
Live Discussion of CTC.A on StockTwits
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Live Discussion of BCB on StockTwits
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Live Discussion of DH on StockTwits
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Live Discussion of DPM on StockTwits
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Live Discussion of EMP.A on StockTwits
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Live Discussion of MIC on StockTwits
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Live Discussion of IMN on StockTwits
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Live Discussion of LB on StockTwits
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Live Discussion of LNR on StockTwits
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Live Discussion of MG on StockTwits
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Live Discussion of NA on StockTwits
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Live Discussion of NSU on StockTwits
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Live Discussion of QBR.B on StockTwits
More Discussion on QBR.B-T
Live Discussion of RIM on StockTwits
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Live Discussion of SPB on StockTwits
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Live Discussion of WJA on StockTwits
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Live Discussion of WN on StockTwits
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Live Discussion of AGU on StockTwits
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Live Discussion of ACO.X on StockTwits
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Live Discussion of CM on StockTwits
More Discussion on CM-T

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