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?
North American companies that show strict growth and value characteristics, without cutting employment costs.
The screen
My colleague Rob Belanger and I started with every company listed in North America with a market capitalization of more than $1-billion. Only 18 passed our stringent screen, and we have sorted them from the largest to smallest.
All the companies had to have increased the number of employees over the past two years, and decreased the amount of debt over the past two years.
Earnings per share (EPS) is generally considered to be the single most important variable in determining a company's share price since it is an indicator of profitability. It is defined as the net income minus any dividends paid out on preferred shares, divided by the average number of outstanding shares. To make our list, companies had to have increased their EPS growth by at least 5 per cent per quarter over the past eight quarters.
Operating profit margin (OPM) is a measurement of what portion of revenue is left over after paying for variable costs, such as wages and inventory. If a company has an operating margin of 20 per cent, it means that it makes 20 cents before interest and taxes for every dollar of sales. All companies had to have increased their OPM by at least 5 per cent per quarter for the past eight quarters.
Return on equity (ROE) 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. To be included, companies had to have an ROE greater than 15 per cent.
What did we find?
Quebec-based pharmacy operator Jean Coutu Group has the highest EPS growth, the largest amount of debt reduction, and the second-highest ROE. The highest ROE belongs to Massachusetts-based TJX Cos. Inc., owners of HomeSense and Winners.
Dow Chemical Co., which manufactures more than 6,000 products in 36 countries, has the highest OPM growth and a very high EPS growth.
Tractor Supply has added more staff, as a percentage, than any other company on the list. The company has more than 1,200 farm and ranch retail stores in the United States.
Contact an investment professional or conduct further research before investing in any of the securities mentioned here.