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The approaching end of the first quarter of 2017 is a good time to identify stocks with the greatest increase in profit expectations. There are currently eight S&P/TSX composite stocks companies representing both rapidly improving earnings outlooks and attractive valuation levels.

The search for TSX stocks with the fastest-improving profit outlook began by ranking all benchmark stocks by percentage change in 2017 earnings estimates. To assess valuations, I tossed out all companies with trailing and forward price earnings ratios above the S&P/TSX composite average.

Eight stocks made the cut, and the details are listed in the accompanying table.

African diamond miner Lucara Diamond Corp. tops the list with a 260-per-cent change in analyst earnings expectations during the last three months. This big number is flattering, however, as the percentage improvement is from a low base. The increase only amounts to 6.5 cents a share. Lucara stock, trading near the $3 range, should be considered highly speculative.

The most interesting discovery in this exercise is the broad improvement in paper and forest stocks. There are three forestry stocks on the table – West Fraser Timber Co. Ltd., Interfor Corp. and Canfor Corp.

Of the three, West Fraser is the most likely candidate for further study. Consensus earnings estimates rose 72 per cent or 57 cents a share. Yet the company's trailing price-to-earnings ratio of 13.8 times compares favourably to the benchmark's 22.5 times. West Fraser's forward price to earnings ratio of 10.5 – the current stock price divided by consensus analyst profit expectations – is also well below the market average of 17.

Just Energy Group, with its 69.2-per-cent improvement in profit outlook, is the most attractive stock based on trailing price earnings. Labrador Iron Ore Royalty Co. is the most attractively valued based on expected earnings.

Investors should view stocks screens of this type as a basis for further analysis, as the results are not enough on their own to justify buy or sell decisions. Nonetheless, the data in the table, particularly the surprising prevalence of forestry stocks, provide ample motivation for a deeper look.

CompanySymbol3M Chg. In EPS Estimates %3M Chg. In EPS Estimates $P/E Ratio TTMFwd. P/E Ratio
Lucara Diamond Corp.LUC-T260.00.0711.88.9
West Fraser Timber Co Ltd.WFT-T72.00.5713.810.5
Just Energy Group Inc.JE-T69.20.1410.810.9
Interfor Corp.IFP-T59.40.1018.813.3
Labrador Iron Ore Royalty Co.LIF-T36.80.1715.27.5
Amaya Inc.AYA-T26.30.1118.78.3
Canfor Corp.CFP-T25.90.0915.915.4
Westshore Terminals InvestmentWTE-T21.90.1013.814.1
S&P/TSX composite index21.2n/a22.517.0

Source: Scott Barlow; Bloomberg