Expected returns for all the stocks on the S&P/TSX composite index

The final month of the first quarter is off to a spectacular start.

On March 1, the S&P/TSX composite index surged 239 points, or 1.3 per cent, with a broad-based rally. The number of stocks that advanced was more than double the number of stocks that declined. The S&P/TSX composite index is now just 1 per cent away from setting a new record closing high.

A positive earnings reporting season has provided downside support and upside momentum to the Index. According to a Refinitiv report issued on Feb. 26, 67 per cent of the companies in the S&P/TSX composite index that have reported their quarterly results have beat expectations, 5 per cent have reported in-line result, and 28 per cent of companies have missed the Street’s earnings projections.

The Financials sector stands out with 81 per cent of companies reporting better-than-expected earnings. As a result, many financial stocks saw their target prices and earnings expectations increased.

Looking at the Big 5 banks, the Bank of Montreal saw its average target price rise to approximately $113 from roughly $98 three months ago, Toronto-Dominion Bank rose to nearly $81 from $71 and Royal Bank shares increased to over $120 from the $108 level. The average target price for shares of Canadian Imperial Bank of Commerce is in the high $120s from $114.30, and Bank of Nova Scotia’s target is now over $77 from $67.71 at the beginning of December.

Once companies report their quarterly earnings results in the weeks ahead, earnings expectations, multiples, and target prices could be adjusted meaningfully depending on the reported earnings and management’s earnings outlook.

It’s important to keep in mind high target prices that imply unbelievable returns may be just that - unrealistic. When a stock price falls, analysts may maintain their bullish expectations, inflating the projected potential return. In addition, an outlier (extreme target price) can skew the average target price to the upside or downside, particularly when there are a limited number of analysts covering the company. Don’t let a huge projected gain lure you into a position – it is critical to look at the company and industry fundamentals.

Listed below is a complete list of all 219 companies in the S&P/TSX composite index grouped by sector and ranked based on their expected price returns (excluding dividend or distribution income), according to Refinitiv data. The closing price is as of March 1 and the expected returns are based on these closing prices. All other data is as of Feb. 28.

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