price to sales ratio

RIOCAN REAL ESTATE INVESTMENT TRUST $22 (Toronto symbol REI.UN; Units outstanding: 252.3 million; Market cap: $5.6 billion; Price-to-sales ratio: 6.3; Dividend yield: 6.3%; TSINetwork Rating: Average; www.riocan.com) operates 289 retail properties in Canada, mainly outdoor shopping malls. It also owns 28 malls in the U.S. through a joint venture it formed in 2009 with Cedar Shopping Centers Inc. (New York symbol CDR). RioCan owns 80% of this joint venture, and 14% of Cedar. The contribution from the new U.S. malls was the main reason why RioCan’s earnings rose 37.7%, to $39.2 million, in the three months ended September 30, 2010. A year earlier, the trust earned $28.4 million. Earnings per unit rose 33.3%, to $0.16 from $0.12, on more units outstanding. Cash flow per unit rose 20.0%, to $0.36 from $0.30. Revenue rose 14.6%, to $216.6 million from $189.0 million. RioCan pays monthly distributions of $0.115 a unit. The annual rate of $1.38 yields 6.3%. The trust paid out 95.4% of its cash flow in the past quarter. However, 16.0% of its investors prefer to receive new units instead of cash. On this basis, RioCan’s actual cash payout was a more reasonable 80.1% of its cash flow....

We advise most investors to confine their Finance-sector investments to Canada’s five big banks and other recommendations in our Conservative Growth Portfolio. However, if you can accept more risk, we also like Home Capital and Dundee. HOME CAPITAL GROUP INC. $48 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.7 million; Market cap: $1.7 billion; Price-to-sales ratio: 3.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.homecapital.com) is a mortgage lender that serves borrowers who don’t meet the more stringent criteria of larger, traditional lenders. In the three months ended September 30, 2010, Home Capital’s earnings rose 18.8%, to $45.4 million, or $1.31 a share. A year earlier, the company earned $38.2 million, or $1.10 a share. Low interest rates continue to fuel strong demand for residential mortgages and other loans. That lifted Home Capital’s revenue by 6.7%, to $133.8 million from $125.3 million. The company issued 17.8% more residential mortgages than in the year-earlier quarter. Non-residential mortgages rose 10.9%....

THE WESTAIM CORP. $0.55 (Toronto symbol WED, Aggressive Growth Portfolio, Finance sector; Shares outstanding: 580.6 million; Market cap: $319.3 million; Price-to-sales ratio: 1.8; No dividends paid; TSINetwork Rating: Speculative; www.westaim.com) owns Jevco Insurance Co., which sells insurance to high-risk drivers, as well as owners of motorcycles, snowmobiles and recreational vehicles. Jevco operates in Quebec and Ontario. The company bought Jevco for $264.2 million in March 2010. That’s why Westaim earned $5.9 million, or $0.01 a share, in the three months ended September 30, 2010. A year earlier, it lost $524,000, or $0.01 a share. However, Jevco faces strong competition from larger insurers. As well, its focus on high-risk drivers adds risk. Westaim is a hold, but only for highly aggressive investors.

TRANSCANADA CORP. $38 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 696.0 million; Market cap: $26.4 billion; Price-to-sales ratio: 3.2; Dividend yield: 4.2%; SI Rating: Above Average; www.transcanada.com) earned $374 million in the three months ended September 30, 2010. That’s up 11.6% from $335 million a year earlier. Earnings per share rose 10.2%, to $0.54 from $0.49, on more shares outstanding. These figures exclude gains and losses on contracts TransCanada uses to lock in prices on natural gas it has in storage. Revenue rose 3.9%, to $2.1 billion from $2.05 billion. Lower costs and higher production at the Bruce nuclear power complex in Ontario helped spur TransCanada’s earnings in the latest quarter. (The company owns 48.8% of the Bruce A reactors and 31.6% of the Bruce B reactors.) As well, TransCanada recently opened the first phase of its $12-billion U.S. Keystone pipeline, which pumps crude oil from Alberta to refineries in the U.S. Midwest. Keystone’s second phase should begin operating in the first quarter of 2011....

CENOVUS ENERGY INC. $32 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 752.0 million; Market cap: $24.1 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.5%; TSINetwork Rating: Extra Risk; www.cenovus.com) earned $0.21 a share in the quarter ended September 30, 2010, down 63.2% from $0.57 a year earlier. Cash flow per share fell 44.7%, to $0.68 from $1.23. Lower natural-gas production and prices were the main reasons for the declines. Unplanned outages at two refineries in the U.S. Midwest also hurt the company’s results; Cenovus and ConocoPhillips (New York symbol COP) each own 50% of these refineries. However, the partners are expanding the refinery in Illinois. That should make this facility more profitable, starting in late 2011. Cenovus is a buy.

PRECISION DRILLING CORP. $9.04 (Toronto symbol PD; Aggressive Growth Portfolio, Resource sector; Shares outstanding: 275.7 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.9; No dividends paid since February 2009; TSINetwork Rating: Extra Risk; www.precisiondrilling.com) provides contract-drilling services to land-based oil and gas producers. Precision owns 353 drilling rigs, including 202 in Canada, 148 in the U.S. and three in Mexico and other countries. Precision recently converted from an income trust to a regular corporation. Investors received one common share for each trust unit they held. The change is in response to Ottawa’s new tax on income-trust distributions, which comes into effect on January 1, 2011.

Volatile revenue history

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TERADATA CORP. $41 (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector: Shares outstanding: 167.5 million; Market cap: $6.9 billion; Price-to-sales ratio: 3.7; No dividends paid; TSINetwork Rating: Average; www.teradata.com) makes computers and software that capture and store large amounts of a business’s data. Teradata then analyzes this information and identifies buying habits and trends. Teradata is taking advantage of the weak economy to hire new salespeople. That’s helping it enter new markets and offer more technology and services to its existing clients. These efforts should add $70 million to Teradata’s 2010 sales. As well, it continues to spend around 7% of its revenue on research. Resulting new products should also fuel its growth. In the three months ended September 30, 2010, earnings rose 19.0%, to $75 million from $63 million a year earlier. Earnings per share rose 22.2%, to $0.44 from $0.36, on fewer shares outstanding. Sales rose 15.1%, to $489 million from $425 million. The company has no debt, and holds cash of $741 million, or $4.42 a share....

HARTE-HANKS INC. $12 (New York symbol HHS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 63.6 million; Market cap: $763.2 million; Price-to-sales ratio: 0.9; Dividend yield: 2.5%; TSINetwork Rating: Average; www.harte-hanks.com) gets two-thirds of its revenue by selling direct-mail and other marketing services to a wide variety of clients. The remaining third comes from publishing free, advertising-supported newspapers in Florida and California. In August 2010, the company paid $12.9 million for Information Arts (UK) Ltd., which provides data warehousing services to businesses in Europe. Right now, Harte-Hanks gets 90% of its sales from North America, so expanding overseas lowers its risk. In the three months ended September 30, 2010, revenue rose 3.5%, to $216.7 million from $209.3 million a year earlier. That’s mainly because Harte-Hanks won a large contract. However, the extra costs related to this job, as well as adding Information Arts’ employees, caused earnings to fall 1.7%, to $13.8 million from $14.1 million. Earnings per share were unchanged at $0.22....

AGILENT TECHNOLOGIES INC. $36 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 346.0 million; Market cap: $12.5 billion; Price-to-sales ratio: 2.3; No dividends paid; TSINetwork Rating: Average; www.agilent.com) makes testing systems that help improve electronic products, such as cellphones and networking equipment. In May 2010, Agilent bought Varian Inc. for $1.5 billion. Varian makes a wide range of medical and drug-testing equipment, such as mass spectrometers that detect and measure substances in blood and other samples. Medical-equipment demand is less cyclical than testing products, so this move cuts Agilent’s risk. Thanks to Varian, Agilent earned $706 million, or $2.00 a share, in the year ended October 31, 2010. That’s up 152.1% from $280 million, or $0.80 a share, in fiscal 2009. These figures exclude costs to integrate the new operations. Revenue rose 21.5%, to $5.4 billion from $4.5 billion. The company spends around 11% of its revenue on research....

BUCKEYE PARTNERS L.P. $67 (New York symbol BPL; Income Portfolio, Utilities sector; Units outstanding: 51.6 million; Market cap: $3.5 billion; Price-to-sales ratio: 1.3; Dividend yield: 5.8%; TSINetwork Rating: Average; www.buckeye.com) operates over 8,700 kilometres of pipelines in the northeastern and midwestern U.S. These lines pump gasoline, jet fuel and other petroleum products. Buckeye also owns oil and natural-gas storage terminals and other related businesses. In the three months ended September 30, 2010, Buckeye earned $0.93 a unit, up 4.5% from $0.89 a year earlier. Revenue rose 73.5%, to $734.9 million from $423.4 million. The partnership is transporting more fuel due to the improving economy. As well, Buckeye’s fee income varies with fuel prices, and oil prices, in particular, have risen sharply. Buckeye recently agreed to buy an oil-products storage terminal in Puerto Rico from Royal Dutch Shell plc, for an undisclosed price. This is Buckeye’s first expansion into the Caribbean region. However, the partnership has signed long-term deals to store Shell’s fuel at the Puerto Rican terminal. That cuts the risk of this investment....