Growth Stocks
Although growth stock picks can be highly volatile, they can make good long-term investments. They may be well-known stars or quiet gems, but they do share one common attribute—they are growing at a higher-than-average rate within their industry, or within the market as a whole, and could keep growing for years or decades.
And keep in mind that we focus on growth stocks, which have a good long-term history and favourable prospects. We downplay momentum stocks that tend to attract many investors simply because they are moving faster than the market averages, but are liable to fall sharply when their momentum fades.
There’s room for growth stock investing in your portfolio, but make sure you follow our TSI Network three-part Successful Investor strategy for your overall portfolio:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
Make better stock picks when you read this FREE Special Report, Canadian Growth Stocks: WestJet Stock, RioCan Stock and More.
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ATLANTIC TELE-NETWORK $74.34 (Nasdaq symbol ATNI; TSINetwork Rating: Speculative) (340- 777-8000; www.atni.com; Shares outstanding: 16.0 million; Market cap: $1.2 billion; Dividend yield: 1.6%) owns wireless and wireline (traditional telephone and Internet) operations in the U.S. Southwest, New England, New York State, Guyana, Bermuda and parts of the Caribbean islands.
The company continues to expand its wireless capacity and coverage. That’s paying off as customers use more mobile data for services like music downloads, mobile gaming and e-books.
As well, earlier this year, Atlantic entered the solar energy market by acquiring 28 solar farms in Massachusetts, California and New Jersey. The company paid $103 million for these assets ($64 million in cash and the assumption of $39 million of debt).
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The company continues to expand its wireless capacity and coverage. That’s paying off as customers use more mobile data for services like music downloads, mobile gaming and e-books.
As well, earlier this year, Atlantic entered the solar energy market by acquiring 28 solar farms in Massachusetts, California and New Jersey. The company paid $103 million for these assets ($64 million in cash and the assumption of $39 million of debt).
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GOODYEAR TIRE & RUBBER CO. $32.22 (Nasdaq symbol GT; TSINetwork Rating: Extra Risk) (330-796-2122; www.goodyear.com; Shares outstanding: 269.6 million; Market cap: $8.8 billion; Dividend yield: 0.7%) is the world’s largest tire maker, with 50 plants in 22 countries.
In the three months ended June 30, 2015, Goodyear’s revenue fell 10.4%, to $4.17 billion from $4.66 billion a year earlier. The rising U.S. dollar cut the contribution from the company’s foreign sales (particularly in Europe and Brazil) by $401 million.
Excluding one-time items, earnings rose 1.8%, to $229.0 million, or $0.84 a share, well ahead of the consensus estimate of $0.74. A year earlier, the company earned $225.0 million, or $0.80 a share.
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In the three months ended June 30, 2015, Goodyear’s revenue fell 10.4%, to $4.17 billion from $4.66 billion a year earlier. The rising U.S. dollar cut the contribution from the company’s foreign sales (particularly in Europe and Brazil) by $401 million.
Excluding one-time items, earnings rose 1.8%, to $229.0 million, or $0.84 a share, well ahead of the consensus estimate of $0.74. A year earlier, the company earned $225.0 million, or $0.80 a share.
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CHESAPEAKE ENERGY $7.34 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chk.com; Shares outstanding: 665.1 million; Market cap: $5.2 billion; No dividends paid) has eliminated its dividend to conserve cash in the face of low oil and gas prices. The company had been paying a quarterly dividend of $0.0875 a share. The cut will save it $240 million a year.
As well, Chesapeake will spend $3.5 billion to $4.0 billion on exploration and development in 2015, down from its earlier estimate of $4.0 billion to $5.0 billion. It spent $5.8 billion in 2014.
The stock now trades at just 1.3 times the company’s annual cash flow of $5.52 a share, based on the latest quarter.
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As well, Chesapeake will spend $3.5 billion to $4.0 billion on exploration and development in 2015, down from its earlier estimate of $4.0 billion to $5.0 billion. It spent $5.8 billion in 2014.
The stock now trades at just 1.3 times the company’s annual cash flow of $5.52 a share, based on the latest quarter.
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STANTEC INC. $31.87 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 94.0 million; Market cap: $3.1 billion; Dividend yield: 1.3%) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including oil and gas, transportation and construction.
In the three months ended June 30, 2015, Stantec’s acquisitions and the stronger U.S. dollar boosted its revenue by 12.0%, to $593.9 million from $530.3 million a year ago. However, earnings fell 2.6%, to $43.2 million, or $0.46 a share, from $44.3 million, or $0.47. The decline came from fewer oil and gas projects and the cost of integrating recently purchased firms.
Meantime, Stantec continues to grow through acquisitions. One of its latest is VI Engineering, a 30- person electrical-engineering firm based in Houston. VI’s clients include MidAmerican Energy, Statoil, Public Service Electric and Gas, Valero Refining, Bayer and Enterprise Products Partners.
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In the three months ended June 30, 2015, Stantec’s acquisitions and the stronger U.S. dollar boosted its revenue by 12.0%, to $593.9 million from $530.3 million a year ago. However, earnings fell 2.6%, to $43.2 million, or $0.46 a share, from $44.3 million, or $0.47. The decline came from fewer oil and gas projects and the cost of integrating recently purchased firms.
Meantime, Stantec continues to grow through acquisitions. One of its latest is VI Engineering, a 30- person electrical-engineering firm based in Houston. VI’s clients include MidAmerican Energy, Statoil, Public Service Electric and Gas, Valero Refining, Bayer and Enterprise Products Partners.
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MITEL NETWORKS $10.41 (Toronto symbol MNW; TSINetwork Rating: Extra Risk)(613-592-2122; www.mitel.ca; Shares outstanding: 120.0 million; Market cap: $1.2 billion; No dividends paid) develops and markets products centred on business telephone systems, including technology that integrates land lines and mobile phones. The company also offers call centre and videoconferencing products.
In the three months ended June 30, 2015, Mitel’s revenue rose slightly, to $292.3 million from $291.7 million a year earlier (all figures except share price and market cap in U.S. dollars).
Earnings per share fell 14.3%, to $0.18 from $0.21, as the stronger dollar lowered the value of the company’s international sales. However, the latest earnings matched the consensus estimate.
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In the three months ended June 30, 2015, Mitel’s revenue rose slightly, to $292.3 million from $291.7 million a year earlier (all figures except share price and market cap in U.S. dollars).
Earnings per share fell 14.3%, to $0.18 from $0.21, as the stronger dollar lowered the value of the company’s international sales. However, the latest earnings matched the consensus estimate.
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ACI WORLDWIDE $22.65 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative)(402- 390-7600; www.tsainc.com; Shares outstanding: 117.8 million; Market cap: $2.7 billion; No dividends paid) reported revenue of $265.8 million in the three months ended June 30, 2015, up 4.3% from $254.8 million a year earlier. The company earned $0.26 a share, up sharply from $0.12. Cost-cutting measures helped improve the latest quarterly results.
ACI’s growth by acquisition has increased its goodwill and intangible assets to $1.0 billion, or a high 37.0% of its market cap.
The company is well positioned to benefit from the global shift toward online payments. However, the stock trades at a high 30.2 times ACI’s forecast 2015 earnings of $0.75 a share. Any major problems integrating its acquisitions could sharply cut that estimate.
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ACI’s growth by acquisition has increased its goodwill and intangible assets to $1.0 billion, or a high 37.0% of its market cap.
The company is well positioned to benefit from the global shift toward online payments. However, the stock trades at a high 30.2 times ACI’s forecast 2015 earnings of $0.75 a share. Any major problems integrating its acquisitions could sharply cut that estimate.
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FAIR ISAAC CORP. $87.87 (New York symbol FICO; TSINetwork Rating: Average)(415-472-2211; www.fairisaac.com; Shares outstanding: 31.1 million; Market cap: $2.8 billion; Dividend yield: 0.1%) makes FICO Scores, the program that dominates the market for software businesses use to evaluate customer creditworthiness. Fair Isaac also profits by selling programs that help credit card issuers control fraud and analyze cardholders’ spending patterns.
In its fiscal 2015 third quarter, which ended June 30, 2015, Fair Isaac’s revenue rose 5.9%, to $209.3 million from $197.6 million a year earlier. Sales at its applications division (61% of the total) fell 2.1% on weaker demand for marketing and fraud-detection software. However, sales of credit-scoring programs (27%) jumped 23.0%, while sales of analytics software (12%) gained 18.1%.
The company earned $32.3 million, up 10.3% from $29.2 million. Earnings per share jumped 20.5%, to $1.00 from $0.83, on fewer shares outstanding. Fair Isaac spends around 12% of its revenue on research, which lets it produce innovative products that keep it ahead of the competition.
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In its fiscal 2015 third quarter, which ended June 30, 2015, Fair Isaac’s revenue rose 5.9%, to $209.3 million from $197.6 million a year earlier. Sales at its applications division (61% of the total) fell 2.1% on weaker demand for marketing and fraud-detection software. However, sales of credit-scoring programs (27%) jumped 23.0%, while sales of analytics software (12%) gained 18.1%.
The company earned $32.3 million, up 10.3% from $29.2 million. Earnings per share jumped 20.5%, to $1.00 from $0.83, on fewer shares outstanding. Fair Isaac spends around 12% of its revenue on research, which lets it produce innovative products that keep it ahead of the competition.
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BROADRIDGE FINANCIAL SOLUTIONS $55.76 (New York symbol BR; TSINetwork Rating: Average) (201-714-3000; www.broadridge.com; Shares outstanding: 119.9 million; Market cap: $6.7 billion; Dividend yield: 2.2%) serves the investment industry in three main areas: investor communications, securities processing and transaction clearing. The company processes 90% of all proxy votes in the U.S. and Canada.
Without one-time items, Broadridge earned $171.5 million in its fiscal 2015 fourth quarter, which ended June 30, 2015. That’s up 18.6% from $144.6 million a year earlier. Earnings per share rose 20.7%, to $1.40 from $1.16, on fewer shares outstanding.
Revenue gained 4.9%, to $929.6 million from $885.9 million. The company continues to add new clients and is doing a good job of holding on to existing ones. Recurring fee revenue rose 7% in the latest quarter and accounted for 65% of the total.
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Without one-time items, Broadridge earned $171.5 million in its fiscal 2015 fourth quarter, which ended June 30, 2015. That’s up 18.6% from $144.6 million a year earlier. Earnings per share rose 20.7%, to $1.40 from $1.16, on fewer shares outstanding.
Revenue gained 4.9%, to $929.6 million from $885.9 million. The company continues to add new clients and is doing a good job of holding on to existing ones. Recurring fee revenue rose 7% in the latest quarter and accounted for 65% of the total.
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DOREL INDUSTRIES $34.73 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-934- 3034; www.dorel.com; Shares outstanding: 32.3 million; Market cap: $1.2 billion; Dividend yield: 4.6%) makes a number of items, including readyto- assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and sporting goods, mainly bicycles.
In the three months ended June 30, 2015, Dorel’s sales rose 2.1%, to $669.6 million from $655.8 million a year earlier (all amounts except share price and market cap in U.S. dollars).
Even with the higher sales, earnings fell 16.2%, to $16.6 million, or $0.51 share, from $19.8 million, or $0.61 a share. The high U.S. dollar cut $0.23 a share from the company’s international earnings.
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In the three months ended June 30, 2015, Dorel’s sales rose 2.1%, to $669.6 million from $655.8 million a year earlier (all amounts except share price and market cap in U.S. dollars).
Even with the higher sales, earnings fell 16.2%, to $16.6 million, or $0.51 share, from $19.8 million, or $0.61 a share. The high U.S. dollar cut $0.23 a share from the company’s international earnings.
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WESTJET AIRLINES $24.67 (Toronto symbol WJA; TSINetwork Rating: Extra Risk)(1-877-493-7853; www.westjet.com; Shares outstanding: 125.8 million; Market cap: $3.1 billion; Dividend yield: 2.3%) serves 93 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets.
In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 22 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.
The Canadian airline market remains highly competitive, especially with Air Canada expanding its Rouge budget airline to serve more leisure destinations in Europe, the Caribbean, Mexico and the U.S. However, WestJet is now taking delivery of its Boeing 767 widebody aircraft. That will let it compete with Air Canada internationally; it could add more cities in Europe, as well as South America or Asia.
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In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 22 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.
The Canadian airline market remains highly competitive, especially with Air Canada expanding its Rouge budget airline to serve more leisure destinations in Europe, the Caribbean, Mexico and the U.S. However, WestJet is now taking delivery of its Boeing 767 widebody aircraft. That will let it compete with Air Canada internationally; it could add more cities in Europe, as well as South America or Asia.
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