WHAT ARE WE LOOKING FOR?
We'll spend the week looking at Thomson ONE's Stock Reports Plus. This is a stock ideas feature inside Thomson Reuters' portfolio management tool used by institutional investors. The aim of the feature is not to provide an investable portfolio of stocks, but rather to give money managers some ideas to research further. In many ways, that makes it a perfect fit for this column.
TODAY'S SCREEN
We'll start with a fairly straightforward screen to look for Canadian-listed stocks with the lowest price-to-earnings ratios.
We'll stick to companies with market capitalizations greater than $1-billion. We'll also use forward P/Es. The obvious reason for using forward P/Es is that it gives us an idea of how much we're paying for expected future profits. But there is another handy reason.
Most company P/E ratios that you see are based on historical earnings as reported using generally accepted accounting principles. But historical P/Es can be distorted.
For instance, if a $10 stock booked profits of $2 a share last year, then its P/E ratio would be five. But what if the company actually booked $1 a share of profit from selling a division and $1 per share from ongoing operations? The operating P/E actually is 10 and the stock is more expensive than you might think if you haven't adjusted for the division's sale.
To get around this, you can look at P/E ratios based on analysts' earnings estimates. Analysts usually adjust their estimates so that they are based on continuing operations, so forward P/Es are a natural way of removing any accounting trip ups.
WHAT DID WE FIND OUT?
A lot of commodities companies are on this list, but there are also a couple of non-commodity income trusts, Yellow Pages Income Fund and Teranet Income Fund, that are worth taking a second look at given their high yields. Three of Canada's biggest six banks also pop up at the bottom of the list.
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Table: View result set 
