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What are we looking for?

Today we highlight Canadian small-cap growth companies that have sound fundamentals.

The screen

We screened the Canadian stock universe by focusing on the following criteria:

  • Market capitalization between $200-million and $1-billion;
  • A current economic performance index (EPI) greater than one – this ratio is the return on capital to cost of capital. It gives shareholders an idea of how much return the company is generating on each dollar spent;
  • Positive 12-month sales growth;
  • A PEG, or price-earnings to growth, ratio between zero and two. This ratio compares the current price-to-earnings ratio with the average five-year earnings per share growth. For a stock to be fairly valued, the PEG ratio is one. For the stock to be undervalued, the PEG ratio would be lower than one, showing that the stock price does not fully reflect the earnings growth capability of the company.

For informational purposes, we have also included recent stock price, dividend yield and one-year return. Please note that some ratios may be reported at the end of the previous quarter.

More about Inovestor

Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios and easily communicate investment decisions with clients through client-friendly reports. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian stocks, U.S. stocks and American depositary receipts).

What we found

Magellan Aerospace Corp., an aerospace systems and components manufacturer based in Mississauga, is the largest company on our list by market cap. The PEG ratio is 0.8, which suggests that the earnings growth was stronger than what is reflected by the stock price – in other words, an attractive valuation. On the other hand, the company’s operations are efficient, as indicated by the EPI, which shows return on capital at 1.5 times the cost of capital.

TerraVest Industries Inc., an Alberta-based manufacturer whose products include fuel-containment vessels and wellhead processing equipment for the oil and gas industry, is one of the smallest companies on our list by market cap. It has a PEG ratio is 0.6, putting the stock at an attractive price point. In addition, the sales grew strongly, at 34.6 per cent, over the past 12 months.

Investors are advised to do further research before investing in any of the companies that are listed below.

Select Canadian-listed small caps

CompanyTickerMkt. Cap. ($ Mil.)PEG Ratio (%)EPIDiv. Yld. (%)Sales 12M Chg. (%)Recent Price ($)IY Rtn. (%)
Magellan Aerospace Corp.MAL-T975.000.81.52.12.716.460.6
Martinrea International Inc.MRE-T846.500.11.31.51.910.68-21.2
Wesdome Gold Mines Ltd.WDO-T781.010.31.30.019.85.6974.0
Goeasy Ltd.GSY-T768.560.51.42.424.153.522.1
Clairvest Group Inc.CVG-T768.330.22.40.2520.650.857.9
Wall Financial Corp.WFC-T758.180.22.34.1230.222.59-14.5
Extendicare Inc.EXE-T743.091.81.16.42.18.43-16.0
Pure Multi Family REITRUF-UN-T733.980.41.25.413.79.585.3
Heroux-Devtek Inc.HRX-T720.341.31.4n/a25.22031.2
Canfor Pulp Products Inc.CFX-T645.980.22.51.75.69.94-61.7
Pollard Banknote Ltd.PBL-T630.511.41.50.613.123.9815.3
Richards Packaging Inc. FundRPI-UN-T476.480.62.13.59.14418.3
Absolute Software Corp.ABT-T330.771.11.93.57.77.898.8
Hardwoods Distribution Inc.HDI-T275.190.71.72.59.512.95-26.0
Sylogist Ltd.SYZ-X242.701.54.63.011.111.02-11.7
Terravest Industries Inc.TVK-T228.380.62.03.134.613.0331.6
Points International Ltd.PTS-T202.271.141.3-10.814.77-35.1

Source: Inovestor for Advisors

Noor Hussain is an analyst and account executive for Inovestor Inc.

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