Visit this year's Top 1000 rankings of Canada's most profitable companies and find more tables, multimedia and analysis in Report on Business's full Top 1000 section.
Do Canadian stock markets parallel what's going on in the real economy or predict it? Last year was so grim in both realms that it was hard to tell. The S&P/TSX Composite Index declined by 11%, while American stocks finished the year close to where they started. In many respects, those results reflected actual economic performance—Canada stumbled into a recession in the first and second quarters, while the American economy kept plodding ahead.
The trouble with Canada is its former growth engine: resources. Last year, the price rout continued in a slew of global commodity markets—oil, gold, silver, base metals, lumber and more. As our annual Top 1000 ranking shows, the retreat carved huge chunks out of corporate bottom lines. A couple of oil and gas giants—Imperial and Cenovus—still earned hefty profits, but 10 others appear in the bottom 20 of the ranking. Many smaller producers and field services companies were also hammered, and the sector as a whole lost $41.5 billion.
The bleeding was just as frightening among mining companies. Six of Canada's eight largest gold producers finished in the bottom 20. Mind you, the price of bullion has since popped, and so have their share prices. Miners of base metals may also be past the worst.
Out in the rest of the economy, of course, consumers continue to bank, buy insurance, invest in mutual funds and ETFs, go to the supermarket, heat and cool their homes, and obsessively use their computers, TVs and smartphones. Dozens of perennial profit leaders among the Top 1000 that fulfill those needs had a solid 2015. And, yes, the Big Six banks continued to defy gravity and, as a group, posted record profits yet again.
Looking ahead, David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, doesn't expect Canadian stocks to shoot the lights out this year, but he says there are opportunities for investors. Much hinges on the price of oil. Rosenberg thinks the benchmark West Texas Intermediate crude price will settle in the $50-to-$60 (U.S.) range, provided the global supply glut is totally resolved.
That price isn't high enough to spur huge swaths of new investment in the oil patch, Rosenberg says, but it's sufficient to generate operating profits for exploration and production companies. It also helps the Big Six banks. They have started booking reserves against possible loan losses, but he says that, "at $50-plus for oil, a year from now, people may say the banks over-reserved."
Much of the rest of the economy will likely get a lift from a low Canadian dollar. The U.S. Federal Reserve raised its benchmark rate by a quarter-point from 0% last December, and Rosenberg says it may do that again this year. Higher U.S. rates will maintain downward pressure on the loonie, which helps Canadian exporters.
And what about the elephant in any forecast—sky-high consumer debt levels and a possible crash in the housing market? "That's been like waiting for Godot for the past five years," says Rosenberg. He doesn't expect a big reversal any time soon. Apart from the Fed, central banks in industrialized countries are in no mood to raise interest rates. Economic growth is too tepid.
For Canadian investors, those low rates mean government bonds yielding 2% or less. Solid dividend-paying stocks look a lot more attractive. Utilities, telcos, banks and other traditional widows-and-orphans stocks have dividend yields near 4%, plus the prospect of capital gains. Even many oil patch stocks now appear to have upside. It's tempting, to be sure—but better keep your seatbelts fastened.
The Top 1000 rankings in ROB Magazine and this website only provide a limited snapshot of data for the top 1000 companies in Canada. The most comprehensive database of Canadian corporate financial information is available for purchase in spreadsheet format here. This year we have improved on what we have offered in previous years in two separate packages based on whether your needs are research or sales prospecting. Find in-depth financial and contact information, total compensation for every CEO on the Top 1000 and more.