What are we looking for?
The very best EVA-generating companies in Canada.
The screen
We have screened for the 20 best companies in Canada as measured by EVA-per-share in the past year, while filtering for only those who have increased their EVA over the past 12- and 24-month periods.
So what, then, is EVA? As a metric, EVA, or economic value-added, is a measure of the economic profit generated by a business over a given time period. We look at economic profit, which may be different from accounting profit, as it illustrates how much value the company's investments have added to the business.
Intuitively, the economic value-added for a company is the difference between their profit and the cost of the investments made to produce that profit. A company with a positive EVA is one that we can qualify as "creating shareholder wealth." Increasing EVA across periods shows an improvement in economic performance.
More about StockPointer
StockPointer is a fundamental analysis tool based on an EVA (economic value-added) model to quickly and easily identify strong investment opportunities.
In addition to providing detailed reports on more than 6,500 companies (Canadian and U.S. stocks and ADRs), StockPointer also allows investors to create custom filters and portfolios.
What did we find?
Fairfax Financial and Constellation Software stand at the top in their capacity to create shareholder wealth. Very different companies, both have been able to derive very high levels of true economic profit for their shareholders over the past year.
DirectCash stands out as being the smallest company in the group by market cap, but also has the smallest price-to-book of the companies listed, and offers a 9 per cent dividend yield.
Investors are advised to do additional research prior to investing in any of the companies mentioned.
Nick Winch is an account manager for StockPointer at Inovestor Inc.