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number cruncher

Inexpensive, profitable firms with lots of cash Add to ...

We look for value using a variety of metrics, including forward P/E and EPS growth

Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients. mike@mikebowmangroup.com

What are we looking for?

Growth at a reasonable price.

The screen

My colleague Rob Belanger and I started with North American companies that have a market capitalization over $250-million, and we sorted them in descending order.

Earnings per share (EPS) is generally considered to be the single most important variable in determining a company’s share price since it is an indicator of profitability. For our screen, all companies had to have minimum EPS growth of 10 per cent for each of the next two years, based on analysts’ consensus estimates.

In addition, the forward price-earnings (P/E) ratio of our companies, again based on analysts’ consensus estimates, had to be less than the sector average.

Also, at least 40 per cent of total assets had to be in cash. Cash positions indicate a degree of safety from a creditor’s viewpoint, and can provide needed funds in the event of an acquisition.

What did we find?

Nevada-based PDL BioPharma Inc. manages a portfolio of patents and royalty assets. More than 74 per cent of the company’s assets are in cash, and the P/E ratio is the lowest on our screen.

Groupon Inc. manages a website that provides discounted coupons usable at either local or national companies. Groupon leads in the one- and two-year EPS growth categories, and the P/E is the highest on our screen.

The smallest company is Gain Capital Holdings, which is a global provider of online trading services specializing in foreign exchange. The company is sitting on 70 per cent cash.

Two Canadian companies appeared on our screen. Nordion Inc. is a leading provider of medical isotopes and sterilization technologies. Evertz Technologies designs, manufactures and markets audio and video equipment for the Internet protocol television industry.

Contact an investment professional or conduct further research before investing in any of the securities listed here.

Companies showing strong earnings and growth potential

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