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?
My colleague Rob Belanger and I thought we would look at some large, high-octane growth companies.
The screen
We sorted these North American companies larger than $1-billion in capitalization from the largest to the smallest.
The P/CF ratio (price to cash flow) compares the value of different companies. It represents the amount an investor is willing to pay for a dollar generated from a company's operations. A low number is preferred.
ROE (return on equity) shows whether a company is a profit creator or a profit burner, and if it is growing profits without pouring new capital into the business. It indicates how much profit the company generates with the money shareholders have invested. We are looking for a high number, and it had to be greater than 20 per cent for the past 12 months.
Our companies had to have increasing EPS (earnings per share) each quarter for the past 8 quarters. We are showing the EPS percentage gain from the quarter 24 months ago to the current quarter.
In addition, the share price had to increase over 20 per cent in the past 12 months.
What did we find?
Only two Canadian companies made our screen, yet they have the best P/CF. Home Capital Group operates through its federally regulated trust company Home Trust, offering deposit and mortgage lending. Linamar is world renowned for its precision machining expertise.
Sonic Corp. has a whopping ROE of 70. The company manages 3,500 drive-in restaurants in the United States, of which 13 per cent are company owned and 87 per cent are franchises.
Methode Electronics is a leading developer of custom engineered products in several industries, from human skin to automobiles. The company has increased its EPS more than 604 per cent in the past eight quarters.
The share price of Trinity Industries, which provides products and services to the energy and construction sectors, has gained 147.9 per cent in the past 12 months.
Do your own research or contact an investment professional before buying any of the companies listed here.