What are we looking for?
Canadian companies that might benefit from a low dollar in the short term and have a strong relative valuation to their industry peers.
The screen
The loonie has taken a beating lately, and over the past five years has dropped almost 30 per cent against the greenback. The currency last traded close to 73 cents (U.S.) as oil prices continue to flutter between $45 and $55 a barrel.
While the dollar remains low in the short term, there may be ways to capitalize on its weakness. Just as Canadians lined up in droves to cross the American border to take advantage of the U.S. dollar's weakness back in 2007-08, more Americans may be looking to Canada to plan their vacations on a budget this year.
We screened for Canadian companies with market capitalizations of $150-million or more, with business descriptions that contained any one of the following key words: resort, gaming, casino, hotel, entertainment or season. We then screened for companies using the StarMine relative valuation industry ranking that had a rating equal to or greater than 75.
The StarMine relative valuation model incorporates six prominent valuation measures that are relevant to most securities: enterprise value (EV) to sales; EV to earnings before interest, taxes, depreciation and amortization (EBITDA); price-to-earnings; price-to-cash-flow; price-to-book; and dividend yield. For companies that do not pay dividends the model also considers share buyback activity.
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What did we find?
Six companies met our criteria for the screen and Great Canadian Gaming Corp. had the strongest relative valuation industry ranking at 94. The company operates gambling, entertainment and hospitality facilities in British Columbia, Ontario, New Brunswick, Nova Scotia and Washington State. It has about 20 gambling properties, including four racetracks and 10 casinos.
Investors are encouraged to do their own research before investing in any stocks listed.