What are we looking for?
Canadian growth companies creating wealth for their shareholders and trading at a discount.
The screen
We have screened our Canadian stocks universe (1,500 stocks) with the following criteria:
- A market capitalization of $1-billion or greater;
- 12-month growth in revenue of 10 per cent or greater;
- 24-month revenue growth of 20 per cent or greater;
- An economic performance index, or EPI (return on capital divided by cost of capital) of at least 1.0. An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
- A return on capital of 10 per cent or greater;
- A negative future growth value (FGV). The FGV represents, in percentage, the portion of the total market value that exceeds the company’s current operating value. The higher the number, the higher the baked-in premium for expected growth – and the higher the risk. A negative number reflects a discount.
More about StockPointer
StockPointer is a fundamental analysis tool based on an EVA (economic value-added) model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 7,500 companies (Canadian and U.S. stocks as well as American depositary receipts), StockPointer also allows investors to create personalized filters and build custom portfolios.
What did we find?
Ten companies match this list of criteria.
Enercare Inc., one of North America's largest home and commercial services and energy services companies, comes up as the most discounted stock of the list with a future growth value of minus 33.6 per cent. It also offers one of the best revenue growth rates over 12 and 24 months and the second-highest EPI of this list.
Magna International Inc., despite a very average market performance in 2015 and 2016 (year to date), has continued to increase its revenues while maintaining a high return on capital.
The stock is slowly recovering from its 52-week low from July and is still trading at a very low price-to-earnings ratio of 8.3 (not shown).
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.