price to sales ratio
Molson Coors and Andrew Peller continue to report slow sales because of the weak economy. However, both companies are finding innovative ways to expand their operations, and both continue to cut costs. These moves should help them maintain or increase their current dividends. MOLSON COORS CANADA INC. (Toronto symbols TPX.A $46 and TPX.B $46; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 185.6 million; Market cap: $8.5 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.5%; SI Rating: Average) is the world’s fifth-largest brewer by volume. Its top brands include Coors Light, Molson Canadian and Carling. The company continues to enjoy the benefits of two mergers: In February 2005, Molson merged with U.S. brewer Coors. In 2008, it combined its U.S. operations with those of SABMiller to form a new joint venture called MillerCoors. The savings from these two deals are helping the company compete with larger, multinational brewers....
TORSTAR CORP. $10 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.0 million; Market cap: $790.0 million; Price-to-sales ratio: 0.6; Dividend yield: 3.4%; SI Rating: Above Average) will participate in a restructuring of The Canadian Press (CP), which provides news and other content to Canadian newspapers, radio and TV stations. Right now, CP is a not-for-profit organization. Under this new plan, Torstar will join with CTVglobemedia (which owns The Globe and Mail) and Gesca (which owns La Presse) to convert CP into a regular corporation. Torstar did not say how much it will invest. However, the restructuring will improve CP’s long-term prospects and ensure that it continues to provide a wide variety of content to Torstar’s newspapers. Torstar is a buy.
MDS INC. $9.62 (Toronto symbol MDS; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 67.2 million; Market cap: $646.5 million; Price-to-sales ratio: 9.0; No dividends paid since October 2006; SI Rating: Extra Risk) supplies medical isotopes for cancer detection and research. The company gets most of these isotopes from the Chalk River nuclear reactor near Ottawa. Atomic Energy of Canada Ltd., which operates the reactor, shut it down in May 2009 after it discovered a water leak. Atomic Energy should restart the reactor by the end of July 2010. Meanwhile, the shutdown continues to hurt MDS’s revenue and earnings. In its second quarter, which ended April 30, 2010, MDS lost $52 million, or $0.51 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, it lost $6 million, or $0.06 a share. However, the latest earnings included a $27-million non-cash foreign-exchange charge....
CGI GROUP INC. $16 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 285.6 million; Market cap: $4.6 billion; Price-to-sales ratio: 1.3; No dividends paid; SI Rating: Extra Risk) continues to win new computer-outsourcing contracts. For example, the company recently signed a seven-year deal with Ontario’s Beer Store retail chain. Under the contract, CGI will help The Beer Store improve the efficiency of its distribution network. This will help the Beer Store expand its sales and earnings by avoiding shortages of top-selling beer brands. The company did not reveal the contract’s exact value, but it did say that it is a multi-million-dollar deal. As well, CGI will manage the Atlantic Lottery Corp.’s data centre and provide related support services. This seven-year deal is worth $125 million. These contracts are tiny next to CGI’s annual revenue of $3.8 billion. But long-term deals like these give it steady, predictable revenue streams. They also help CGI build customer loyalty, and sell more services to new clients....
AGRIUM INC. $59 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 157 million; Market cap: $9.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 0.2%; SI Rating: Average) has purchased 24 retail stores in Argentina. These stores sell fertilizers, seeds and a variety of other agricultural products to farmers. Agrium now has 56 stores in Argentina. It also bought a plant that makes herbicides, insecticides and other crop-protection products. Agrium did not say how much it paid for these businesses. However, they should add $57 million U.S. to its annual revenue of $9.3 billion U.S. Adding retail stores makes sense for Agrium, because its retail operations cut its exposure to volatile fertilizer prices. Agrium’s retail division supplied 30% of its 2009 profits....
CAE INC. $9.71 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 256.5 million; Market cap: $2.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 1.2%; SI Rating: Average) makes military and airline flight simulators. It also runs commercial and military pilot-training schools in 20 countries. CAE’s shares have held up well, despite recent stock-market volatility. That’s because it has diversified its operations over the past few years. Military clients now supply 53% of CAE’s revenue. As well, steady revenues from pilot training account for two-thirds of its civilian business. These factors cut CAE’s reliance on new simulator sales for growth.
CAE still dominates its niche market
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KRAFT FOODS INC. $30 (New York symbol KFT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 1.7 billion; Market cap: $51.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 3.9%; WSSF Rating: Above Average) is the world’s second-largest food company, after Swiss-based Nestle. Kraft has 11 brands that each generate over $1 billion in yearly sales. Aside from Kraft (cheeses, pasta and salad dressings), these brands include Philadelphia (cream cheese), Maxwell House (coffee), Nabisco (biscuits), Oreo (cookies), Trident (gum) and Oscar Meyer (meats). Wal-Mart, the company’s biggest customer, accounted for 16% of its 2009 sales. In February 2010, Kraft bought 71.7% of U.K.-based Cadbury plc, and acquired the remainder in April 2010. Cadbury is a leading maker of confectioneries, including chocolate, candy and gum....
APACHE CORP. $92 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 337.3 million; Market cap: $31.0 billion; Price-to-sales ratio: 3.3: Dividend yield: 0.7%; WSSF Rating: Average) produces oil and natural gas from properties in the U.S., Canada, the U.K., Australia, Egypt and Argentina. It gets roughly 50% of its production from oil, and 50% from natural gas. The company recently paid $2.7 billion in cash and stock for Mariner Energy Inc., which produces oil and natural gas in the Gulf of Mexico and at onshore properties in Texas and New Mexico. Apache also bought Devon Energy Corp.’s (New York symbol DVN) oil and gas reserves on the Gulf of Mexico Shelf for $1.05 billion. The Gulf of Mexico now accounts for 26% of Apache’s production. Offshore drilling is riskier than onshore operations, but Apache has a long history of success in this region. As well, most of Apache’s projects are in shallow water, which is less risky than deepwater projects like the BP well....
ENCANA CORP. $33 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 741.7 million; Market cap: $24.5 billion; Price-to-sales ratio: 2.3; Dividend yield: 2.4%; WSSF Rating: Average) is a leading North American natural-gas producer. The company focuses on unconventional reserves, such as shale gas deposits. (Shale gas is natural gas that is trapped in rock formations. To extract it, companies must pump water and chemicals into the rock. This fractures the rock and releases the natural gas.) The company took its present form on December 1, 2009. That’s when the old EnCana Corp. split itself into two separate companies: the new Encana and Cenovus Energy. If you assume the split occurred at the start of 2009, Encana’s earnings per share fell 22.2% in the three months ended March 31, 2010, to $0.56 from $0.72 a year earlier. These figures exclude several unusual items, such as gains on hedging contracts that Encana uses to lock in its selling price for natural gas. Cash flow per share fell 15.1%, to $1.57 from $1.85. Revenue fell 3.7%, to $3.5 billion from $3.7 billion....
CENOVUS ENERGY INC. $28 (New York symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.7 million; Market cap: $21.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.7%; WSSF Rating: Extra Risk) operates three oil-sands properties in Alberta and one in Saskatchewan. It ships the tar-like oil (called bitumen) from these projects to refineries in Illinois and Texas. ConocoPhillips (New York symbol COP) owns 50% of these refineries, as well as 50% of the company’s two main oil-sands projects. Cenovus also owns conventional oil and gas properties. Cenovus believes its oil and natural-gas reserves will last 14.7 years. These large reserves mean that the company does not need to spend heavily on exploration. That cuts its risk. In the three months ended March 31, 2010, Cenovus earned $353 million, or $0.47 a share (all amounts except share price and market cap in Canadian dollars). That’s down 14.7% from $414 million, or $0.55 a share, a year earlier. Cash flow per share fell 3.0%, to $0.96 from $0.99. Lower natural gas prices and a drop in earnings at its refining operations were the main reasons for the declines....