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number cruncher

What are we looking for?

Efficient, growing companies.

The screen

My colleague Rob Belanger and I started with companies in North America that have increased the number of employees over the past two years.

We then whittled our list down to only those that have decreased their debt over that same time frame.

Operating margin is a measurement of what portion of a company's revenue is left over after paying for variable costs such as wages and inventory. If a company has an operating margin of 10 per cent it means that it makes 10 cents before interest and taxes for every dollar of sales. We only included those companies that had a positive operating margin over the past eight quarters.

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 a company's profitability. It is defined as the net income minus any dividends paid out on preferred shares, divided by the average number of outstanding shares. Our companies had to have a positive EPS growth over the past two years.

We sorted our companies based on the return on equity, which measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Companies had to have an ROE greater than 15 per cent.

What did we find?

CGI Group Inc. was founded in Canada in 1976 and has extensive operations in North America and in 40 other countries around the world. Leading all the companies on our screen in two categories, CGI has increased the employee head count by 134 per cent over the past eight quarters, and also has increased the operating margin by more than 114 per cent.

Keurig Green Mountain Inc. has been in the news lately, recalling seven million units, and also announcing its new Keurig Cold System. The Vermont-based company has decreased its debt by more than 65 per cent in the past two years.

Facebook Inc. is valued at $214.4-billion (U.S.) and has about the same amount of monthly users as China has people – approximately 1.35 billion. It is no surprise the company has grown its EPS by 620 per cent in the past two years.

Leading the ROE column is Gilead Sciences Inc., which discovers, develops and commercializes medicines that treat HIV/AIDS, cancer and respiratory and cardiovascular conditions.

Investors should contact an investment professional or conduct further research before buying any of the firms listed here.

Michael Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high-net-worth clients.

Efficient, growing North American companies