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What are we looking for?

Canadian-listed stocks with high analyst sentiment in a rising interest rate environment.

The screen

Since March, the Bank of Canada has increased the country’s interest rates seven times to combat the rapid rise in inflation. In theory, equity markets should have seen a large decline, given there were several rate hikes in a short period of time. However, Canada’s main index, the S&P/TSX Composite, has seen only a slight decline on a total return basis, dropping 3.9 per cent since the first rate increase on March 2. The central bank has also hinted the rate increases may be nearing the end. With uncertainty in markets, it’s been difficult to consider where to invest in equities.

Today we use StarMine’s Analyst Revisions Model (ARM) to analyze analyst sentiment over the past 60 days, which encompass the two most recent rate increases. The model’s inputs include analyst revisions to estimates and recommendations, putting more weight on analysts that have been historically more accurate and timely with projections.

  • First, we screen for Canadian listed stocks with a market capitalization greater than $3-billion.
  • Next, we screen for companies with an Analyst Revisions Model score of 80 or higher. The ARM score is a percentile (1-100) ranking of stocks based on changes in analyst sentiment. The model looks at changes to sell-side analysts’ estimates of earnings, revenue, and earnings before interest, taxes, depreciation and amortization (EBITDA), as well as changes in the buy/hold/sell recommendations of those analysts. The ARM is highly predictive of stock price movement.
  • Lastly, we screen for companies that have had positive increases to their ARM score over the past 60 days.

More about Refinitiv

Refinitiv, a London Stock Exchange Group business, is one of the world’s largest providers of financial market data and infrastructure, serving more than 40,000 institutions worldwide. Refinitiv provides information, insights, and technology that drive innovation and performance in global financial markets, enabling the financial community to trade smarter and faster, overcome regulatory challenges, and scale intelligently.

What we found

Nine stocks with positive analyst sentiment

CompanyTickerMkt. Cap. ($ Mil.)"ARM Score"ARM Score (60D Chg.)"Div. Yld. (%)"1Y Ttl. Rtn. (%)"Recent Price($)"
Descartes Systems GroupDSG-T7,920.38030n/a-5.693.38
Fortis Inc.FTS-T26,514.287264.0-3.054.98
Ritchie Bros AuctioneersRBA-T8,561.593181.8-7.277.19
Finning International Inc.FTT-T5,327.597172.810.234.54
Choice Properties REITCHP-UN-T4,824.481115.36.514.66
Dream Industrial REITDIR-UN-T3,083.681106.3-23.412.03
Definity Financial Corp.DFY-T4,607.98791.449.739.60
Primo Water Corp.PRMW-T3,377.48661.8-2.220.92
Sigma Lithium Corp.SGML-X4,450.8985n/a266.443.05

Source: Refinitiv

The screen, which is ranked by the change in StarMine’s Analyst Revisions Model 60-day score, produced nine companies. Here are two to highlight:

Descartes Systems Group Inc. DSG-T is a Waterloo, Ont.-based technology company specializing in on-demand software. It saw the largest ARM score enhancement, moving up 30 points in 60 days, increasing the company’s score to 80. Descartes released its third-quarter financial results on Dec. 7, reporting earnings a share of 31 cents, which was 12 per cent better than expected. This surprise has caused analysts to revise upward forward-looking EPS figures, improving the company’s ARM score.

Finning International Inc., FTT-T a Caterpillar equipment dealer, saw a 17-point improvement to its ARM score over 60 days, moving the score to 97, the highest score on our list. The largest change in score occurred following its earnings announcement on Nov. 7. The Vancouver-based company reported improvements to EPS, EBITDA and revenue, causing analysts to revise future projected values upward for each figure. Finning has beaten earnings estimates over six consecutive quarters, including EPS, which in the most recent earnings release was almost 33 per cent better than consensus.

Investors are advised to do their own research before trading in any of the securities shown.

Erik Foo, CFA, is a proposition sales specialist at Refinitiv, covering research and portfolio management sales.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 19/04/24 4:00pm EDT.

SymbolName% changeLast
Descartes Sys
Fortis Inc
Rb Global Inc
Finning Intl
Choice Properties REIT
Dream Industrial REIT
Definity Financial Corporation
Primo Water Corp
Sigma Lithium Corp

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