Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

Getty Images/iStockphoto

What are we looking for?

U.S.-listed companies that have strong – and growing – profitability that also appear to be trading at reasonable valuations.

More on the screen

Story continues below advertisement

Craig McGee, senior consultant at CPMS Morningstar Canada, helped us out last week on a similar screen for Canadian names. This week, he filtered the CPMS U.S. database for the top 20 stocks using the following criteria:

-a return on capital ratio greater than industry average;

-a positive change over the most recent four quarters in return on capital versus the previous four quarters;

-a ratio at or below the industry average when dividing enterprise value (debt plus common and preferred equity less cash) by earnings before interest, taxes, depreciation and amortization;

-a price-to-earnings ratio less than the historical median of at least the past five years;

-a return on equity ratio greater than the historical median of at least the past five years;

-a market cap greater than $500-million (U.S.).

Story continues below advertisement

Stocks were ranked using an equal weighting of industry relative ROC and industry relative EV/EBITDA.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia. Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers. CPMS data cover more than 95 per cent of the investable North American stock market.

What we found

This list was limited to no more than three stocks per industry so that we could expose some profitable and inexpensive stocks across several sectors. Well-known names Transocean Ltd. and Louisiana-Pacific Corp. barely crack the top 20, while Hawthorne, N.Y.-based Taro Pharmaceutical and egg producing giant Cal-Maine Foods Inc. of Jackson, Miss., top our list. Taro, incidently, recently appointed a new chairman as well as a new CEO.

"The results of the strategy helped us unearth wealth-creating companies that may also be attractively valued," Mr. McGee said. As with last week's screen, following a well-diversified and disciplined approach like this can be a good way to generate investment ideas focusing on long-term capital appreciation.

Story continues below advertisement

As always, use this screen as just a starting place for further research before buying any of stocks listed here.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies