price to sales ratio
IGM FINANCIAL INC. $40 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 261.7 million; Market cap: $10.5 billion; Price-to-sales ratio: 4.3; Dividend yield: 5.1%; SI Rating: Above Average) reported that its clients redeemed $244.1 million of investments in August 2010, mainly because of recent stock-market volatility and the uncertain economy. Still, on August 31, 2010, IGM had $118.6 billion of assets under management. That’s up 3.5% from $114.7 billion a year earlier. IGM’s fees rise and fall with the value of the mutual funds and other securities it manages, so the company’s revenue and earnings benefit when the value of these assets rises. IGM Financial is a buy.
One part of our three-part investment program is to invest mainly in well-established companies. (The other two parts are to spread your money across the five main economic sectors and avoid stocks in the broker/public-relations limelight.) Well-established stocks, like the three we analyze below, cut your risk during times of economic uncertainty. All three are leaders in their niche markets. That helps them attract and retain customers. As well, their strong balance sheets would let them buy weaker competitors and expand their market shares. Moreover, despite their recent gains, they are reasonably priced in relation to earnings. FINNING INTERNATIONAL INC. $22 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.0 million; Market cap: $3.8 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.2%; SI Rating: Above Average) sells, rents and repairs heavy equipment, such as tractors, bulldozers and trucks, made by Caterpillar Inc. Finning’s major customers are in the mining, forest-products and construction industries in western Canada, the U.K. and South America....
ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $53 and ACO.Y [class II voting] $52; Income Portfolio; Utilities sector; Shares outstanding: 58.2 million; Market cap: $3.1 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.0%; SI Rating: Above Average) is selling its travel-agency business, which supplies less than 2% of the gas and electric utility operator’s total revenue....
ARBOR MEMORIAL SERVICES INC. $24 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.6 million; Market cap: $254.4 million; Price-to-sales ratio: 0.9; Dividend yield: 1.8%; SI Rating: Average) owns 41 cemeteries, 26 crematoria, five reception centres and 82 funeral homes in eight provinces. In Arbor’s third quarter, which ended July 25, 2010, its earnings rose 8.5%, to $6.4 million, or $0.61 a share, from $5.9 million, or $0.55 a share, a year earlier. Revenue jumped 31.3%, to $81.0 million from $61.7 million. Sales of cemetery plots and headstones jumped 53.1%. That’s because the new harmonized sales tax in Ontario and B.C. prompted customers in those provinces to make their purchases before the tax took effect on July 1, 2010. Arbor Memorial Services is a hold.
CGI GROUP INC. $15 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 279.5 million; Market cap: $4.2 billion; Price-to-sales ratio: 1.1; No dividends paid; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. It also operates in 15 other countries. Canada provided 60% of CGI’s revenue in its latest fiscal quarter, followed by the U.S. (35%) and Europe (5%). CGI follows what it calls a “Build and Buy” strategy. The “Build” part refers to expanding relationships with its existing clients and attracting new ones. The company’s outsourcing contracts typically last 5 to 10 years. That gives it steady, predictable revenue streams. The “Buy” part of the company’s strategy involves making acquisitions. CGI cuts the risk of growing by acquisition by purchasing smaller companies that enhance its products, or expand its geographic reach....
THE WESTAIM CORP. $0.56 (Toronto symbol WED; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 580.6 million; Market cap: $325.1 million; Price-to-sales ratio: 1.5; No dividends paid; SI Rating: Speculative) completed its $286.3-million purchase of Montreal-based Jevco Insurance Co. on March 26, 2010. Jevco sells insurance to high-risk drivers, as well as owners of motorcycles, snowmobiles and recreational vehicles. Westaim earned $5.5 million, or $0.01 a share, in the three months ended June 30, 2010. It lost $4.5 million on its personal auto-insurance business due to higher accident claims in Ontario. However, its commercial vehicle insurance business earned $7.5 million in the latest quarter. Before the Jevco purchase, Westaim had no operations. As a result, it lost $514,000, or $0.01 a share, in the year-earlier quarter. Westaim is a hold.
DUNDEE CORP. $12 (Toronto symbol DC.A; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 71.2 million; Market cap: $854.4 million; Price-to-sales ratio: 0.7; No dividends paid; SI Rating: Average) is a holding company with subsidiaries in three main areas: wealth management, real estate and resources. In the three months ended June 30, 2010, Dundee earned $51.2 million, or $0.64 a share. That’s up 71.5% from $29.9 million, or $0.39 a share, a year earlier. In the latest quarter, Dundee realized a $45.7-million gain on the sale of securities. A year earlier, these gains totalled just $120,000. That was the main reason for the higher earnings. Dundee is a hold....
ANDREW PELLER LTD. $8.26 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.9 million; Market cap: $123.1 million; Price-to-sales ratio: 0.5; Dividend yield: 4.0%; SI Rating: Above Average) is Canada’s second-largest wine producer, after Vincor Canada. Peller operates wineries in British Columbia, Ontario and Nova Scotia. It also imports wines from other countries and sells home winemaking kits. In its first quarter, which ended June 30, 2010, Peller’s sales fell 0.8%, to $64.5 million from $65.0 million a year earlier. The company continues to benefit from the launch of new products and steady demand for its premium brands. However, lower export ales and weaker demand for home winemaking kits offset these gains. Peller earned $4.0 million, or $0.28 a share, in the latest quarter. That’s up 21.0% from $3.3 million, or $0.23 a share, in the year-earlier quarter. If you exclude gains on hedging contracts that the company uses to lock in foreign-exchange rates, earnings would have risen by 31.5%....
METRO INC. $45 (Toronto symbol MRU.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 105.8 million; Market cap: $4.8 billion; Price-to-sales ratio: 0.4; Dividend yield: 1.5%; SI Rating: Average) operates roughly 660 grocery stores in Quebec and Ontario. Its major banners include Metro, Metro Plus, Super C and Food Basics. As well, Metro operates 267 drug stores, including 81 inside its supermarkets. The company also owns roughly 23% of Alimentation Couche-Tard Inc. (Toronto symbol ATD.B), which operates over 6,000 convenience stores in Canada and the U.S. Couche-Tard is a recommendation of Stock Pickers Digest, our publication for aggressive investors. This investment accounts for about 5% of Metro’s annual earnings.
Big purchase still paying off
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Newell Rubbermaid took its present form in 1999, when Newell Companies bought Rubbermaid Inc. That doubled the size of the old Newell, which felt it needed to get bigger to improve its negotiating position with big retailers like Wal-Mart. Even now, Wal-Mart still accounts for 12% of the company’s sales. The combined company went on to buy several other businesses over the next few years. These acquisitions included Gillette’s stationery operations, and the maker of Vise-Grip hand tools. However, big purchases like these rarely go as smoothly as expected. That’s been the case with Newell, which continues to streamline its operations. Recently, it closed plants and got out of low-margin businesses, particularly plastic-resin products that expose it to volatile oil prices. The company is also expanding into more-profitable products, such as children’s car seats and strollers....