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What are we looking for?

The COVID-19 pandemic triggered a market fall almost a year ago that hit many Canadian companies. Central bank action spurred a recovery that was later boosted by positive vaccine results, which spurred a further stock-market rally that has pushed the average company traded on the Toronto Stock Exchange up 13.9 per cent over the past 12 months, in spite of the market crash in March, 2020.

We decided to examine one-year stock price performance of companies to see whether there were any that were left behind in the rally that could yet see a strong return in 2021.

The screen

To begin our analysis, we used FactSet’s Universal Screening tool to pull all publicly traded securities on the TSX. We excluded small-cap companies that have a $2-billion or lower market capitalization, as these tend to have limited sell-side analyst coverage and accordingly, fewer estimates.

Next, we narrowed down our screen by only including companies that are estimated to have higher 2021 sales and net income figures compared with 2019′s prepandemic levels. Additionally, they must be expected to earn a positive net income in 2021, as we want to avoid unprofitable companies. All estimates data are collected using FactSet Estimates, which represent the median sell-side broker consensus. Last, we only included securities that have had a negative one-year total return as an indication of stocks that have been left behind by the market rally.

This left us with 20 companies, which we ranked by their one-year total return, with lower values being ranked higher.

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What we found

Companies that missed the market rebound

RankCompanyTicker FactSet RBICS Sector Class.Mkt. Cap. ($ Mil.)1Y Ttl. Rtn. (%)2019 Reported Sales ($ Mil.)2020 Reported or Estim. Sales ($ Mil.)*2021 Estim. Sales ($ Mil.)2019 Reported Net Inc. ($ Mil.)2020 Reported or Estim. Net Inc. ($ Mil.)*2021 Estim. Net Inc. ($ Mil.)Div. Yld. (%)Recent Close ($)
1TC Energy Corp.TRP-TEnergy53,198.2-18.813,25513,07813,8353,9003,8544,1015.756.59
2CI Financial Corp.CIX-TFinance4,030.5-17.72,1192,0502,4565384755643.819.16
3SSR Mining Inc.SSRM-TNon-Energy Mat.4,611.7-12.58021,1361,9661302535750.021.00
4Loblaw Cos. Ltd.L-TCons. Non-Cycl.21,737.9-9.648,03752,47951,9701,5161,5201,7112.162.58
5George Weston Ltd.WN-TCons. Non-Cycl.14,765.1-9.350,10954,50353,6901989561,0492.396.90
6Emera Inc.EMA-TUtilities13,084.2-7.66,1116,1076,3536216477544.952.00
7Brookfield Bus. Ptnrs.BBU-UN-TFinance4,275.6-7.057,21848,07159,204117-2166070.654.10
8Fortis Inc.FTS-TUtilities24,038.7-6.78,7838,9359,3721,1151,1951,3133.951.50
9Saputo Inc.SAP-TCons. Non-Cycl.15,513.7-6.114,94414,48415,2046546908051.937.75
10Morneau ShepellMSI-TBusiness Svcs.2,204.5-5.98899791,0191956562.432.05
11Great-West LifecoGWO-TFinance28,856.2-5.857,29975,86479,6572,3592,9432,8465.631.10
12IGM Financial Inc.IGM-TFinance8,305.0-5.53,2333,0183,3007477648976.534.85
13Maple Leaf Foods MFI-TCons. Non-Cycl.3,015.4-5.33,9424,2574,484851171322.624.33
14Element Fleet Mgt.EFN-TFinance5,384.6-4.3988948993533703892.112.23
15Waste ConnectionsWCN-TBusiness Svcs.33,177.7-4.27,1426,8497,4079548671,0080.8126.20
16AltaGas Ltd.ALA-TUtilities5,557.0-2.45,4955,1135,7823243764235.019.88
17CGI Inc. GIB-A-TTechnology25,516.5-1.912,10012,16012,2731,2631,1181,3710.0100.57
18Open Text Corp.OTEX-TTechnology16,620.9-1.53,7974,1614,2073781,0501,1371.760.93
19Sun Life FinancialSLF-TFinance36,278.0-1.232,79243,33737,3572,6182,4043,4413.562.00
20Thomson ReutersTRI-TTechnology52,281.8-0.67,8467,8348,0808581,1141,2631.9105.17

Source: FactSet.

*Estimates were used for companies that have not reported their 2020 full-year earnings results yet.

Consumer non-cyclicals stood out at a sectoral level, representing four of our 20 total companies. This was surprising, because the companies on this list, such as Loblaw Cos. Inc., are considered essential services and may have benefited from the COVID-19 environment. The four non-cyclicals as a group continued to increase their net income during the pandemic in 2020, a trend that is expected to continue in 2021. Despite these strong growth numbers, the group’s average total return is minus 7.6 per cent over the past year. This may be owing to investors flocking toward high-flying technology companies and away from “boring” companies that have stable business models. These companies have proven their resiliency by continuing to boost both sales and earnings during one of the harshest economic events in recent history and may have been unfairly punished.

TC Energy Corp. topped our ranking and was the only energy company to make our list, with a one-year total return of minus 18.8 per cent. The oil and gas industry as a whole has exhibited declining sales and profits owing to the economic impact of COVID-19; however, this may not be representative of TC Energy’s fundamentals as it is expected to continue increasing both sales and earnings in 2021 by more than 5.5 per cent over 2020.

CI Financial Corp. came in at No. 2 with a one-year total return of minus 17.7 per cent. CI’s poor performance may be explained by challenges faced by the asset-management industry, such as the shift away from active investing and toward low-cost passive investing, which may negatively affect earnings. In 2021, CI is expected to substantially exceed its 2019 reported sales and net income figures of $2.1-billion and $538-million, respectively. The poor price performance may be overdone as CI is expected to continue growing regardless of COVID-19′s added headwinds.

SSR Mining Inc., a precious-metals exploration and production company, came in at No. 3 with a one-year total return of minus 12.5 per cent. SSR did not benefit from the broader stock-price appreciation in the precious-metals sector over the past year, which was driven by rising commodity prices. This may be owing to a slump in September after a completed merger with Alacer Gold Corp. and production guidance that did not meet investor expectations. SSR is expected to see a surge in both sales and profits in 2021, with an estimated $1.97-billion and $575-million, respectively. Hence, SSR may have further unrealized upside potential.

The information in this article is not investment advice. FactSet assumes no liability for any consequence relating directly or indirectly to any action taken based on the information contained above.

Arjun Deiva, CFA, is a vice-president at FactSet Canada’s consulting division.

Full disclosure: The author personally owns shares in Emera, Fortis, Loblaw and TC Energy.

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