What are we looking for?
Canadian companies offering robust and rising economic performance. We are looking for a positive and rising EVA (economic value-added) figure, which represents the economic profit created in excess of the cost of capital. To calculate EVA, we simply subtract the cost of capital from the return on capital, and multiply the result by the total invested capital.
The screen
We searched into our universe of Canadian stocks by looking at the following metrics:
- Market cap of $2-billion or greater;
- A return on capital of 10 per cent or greater;
- A positive change in the return on capital over the past 12 months;
- A positive EVA per share;
- An increasing EVA per share over 12 and 24 months;
- All companies must pay a dividend.
The debt-to-equity ratio is displayed for informational purposes.
More about StockPointer
StockPointer is a fundamental analysis tool based on an EVA model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 6,500 companies (Canadian and U.S. stocks and American depositary receipts), StockPointer (stockpointer.ca) also allows investors to create personalized filters and build custom portfolios.
What did we find?
Nineteen Canadian companies fit the above criteria. Constellation Software, Dollarama and Ritchie Bros. Auctioneers earn the top three spots for return on capital growth rates over the past 12 months.
While Constellation Software and Dollarama employ higher leverage ratios to boost their growth, that is not the case for Ritchie Bros., which has the second lowest debt-to-equity ratio (8 per cent) of the list. It also offers a decent dividend yield of 2.46 per cent.
Winpak Ltd., a Winnipeg-based company operating in the packaging segment, is the only one of this list that has no long-term debt.
If you're looking for high dividend payers, Power Corp., Agrium, Power Financial and CI Financial all offer dividend yields above 4 per cent.
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.