price to sales ratio

Utility stocks have more appeal than they used to, mainly because low interest rates have made bonds less appealing. (See later in this issue for our full analysis of why utilities are a better choice than bonds for your portfolio.) We see all five of these electrical-power utilities as buys. That’s because they offer an attractive mix of safety, income and growth. As well, they have maintained or raised their dividends, despite the recession and stock-market downturn. CANADIAN UTILITIES LTD. (Toronto symbols CU (class A non-voting) $47 and CU.X (class B voting) $47; Income Portfolio, Utilities sector; Shares outstanding: 125.9 million; Market cap: $5.9 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.2%; SI Rating: Above Average) distributes electricity and natural gas in Alberta. It also operates 19 power plants: 15 in Canada, two in the U.K., and two in Australia, As well, Canadian Utilities sells engineering services to other utilities. ATCO Ltd. (see right) owns 52.3% of the company....

INDIGO BOOKS & MUSIC INC. $18 (Toronto symbol IDG; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 24.5 million; Market cap: $441.0 million; Price-to-sales ratio: 0.5; Dividend yield: 2.2%; SI Rating: Average) will face stronger competition from online bookseller Amazon.com now that the federal government will let Amazon build a warehouse in Canada. This warehouse will lower Amazon’s distribution costs, and let it cut the prices of the books it sells though its Canadian web site. However, Indigo’s inventory and distribution costs have also fallen. That’s because it recently upgraded its computer systems. These savings should help it match any price cuts by Amazon. As well, its new Kobo e-book reader is cheaper than Amazon’s Kindle. Indigo is a buy.

BCE INC. $30 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $23.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 5.8%; SI Rating: Above Average) is buying back 20 million, or about 3%, of its outstanding shares this year. Share buybacks raise earnings per share and other per-share calculations. Buybacks like this typically occur in small amounts over a year. However, BCE recently bought four million shares at market prices from a private seller, instead of through a stock exchange. It will count these shares toward its target of 20 million. BCE is a buy.

MOLSON COORS CANADA INC. (Toronto symbols TPX.A $45 and TPX.B $45; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 185.5 million; Market cap: $8.3 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.1%; SI Rating: Average) is the world’s fifth-largest brewer by volume. Its top brands include Coors Light, Molson Canadian and Carling. The company gets 49% of its gross profit from Canada, followed by the U.S. (41%) and the U.K. (10%). In February 2005, Canadian brewer Molson Inc. merged with U.S.-based Adolph Coors Co. The cost savings from the merger continue to help the company compete with large international brewers....

BANK OF NOVA SCOTIA $52 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $52.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.8%; SI Rating: Above Average) is expanding its operations in Thailand. Right now, it owns 49% of Thailand’s Thanachart Bank. Thanachart has agreed to buy rival Siam City Bank. When the deal closes later this year, the combined bank will have more than 660 branches, 2,100 automated-teller machines and 18,000 employees. That will make it Thailand’s fifth-largest bank. Bank of Nova Scotia will contribute $650 million to maintain its 49% stake in the merged bank. That’s 66% of the $988 million, or $0.91 a share, that Bank of Nova Scotia earned in the three months ended January 31, 2010. However, this new investment should add roughly $0.10 a share to the bank’s annual earnings....

ARBOR MEMORIAL SERVICES INC. $25 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.6 million; Market cap: $265.0 million; Price-to-sales ratio: 1.0; 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 first quarter, which ended January 24, 2010, its earnings rose 12.8%, to $5.3 million, or $0.49 a share. A year earlier, it earned $4.7 million, or $0.44 a share. Revenue rose 9.9%, to $64.1 million from $58.3 million. Arbor raised fees for funeral services by an average of 4.0%. That offset a 3.3% drop in the number of services performed. The company also sold more cemetery plots, and earned higher income on its investment portfolio....

GENNUM CORP. $7.15 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.4 million; Market cap: $253.1 million; Price-to-sales ratio: 2.6; Dividend yield: 2.0%; SI Rating: Average) makes equipment that stores, manipulates and transfers video signals. It also makes chips that improve the flow of data inside computer networks. In its first quarter, which ended February 28, 2010, Gennum’s revenue rose 52.5%, to $29.5 million from $19.4 million a year earlier (all amounts except share price and market cap in U.S. dollars). The company mainly sells its products to television broadcasters, and the improving economy is giving these clients more money to spend on new equipment. Demand for its data-communication products is also rising. Higher sales were the main reason why Gennum earned $0.12 a share (or a total of $4.0 million) in the latest quarter. It lost $0.02 a share (or $844,000) a year earlier. Gennum spent $8.3 million (or 28.2% of its sales) on research. That’s up 11.6% from $7.5 million (or 38.6% of sales) in the year-earlier quarter. It has also deferred $1.8 million in research costs to future periods, and will write them off once it starts selling the resulting new products. However, there’s no guarantee of success. That increases the risk of a future writedown....

BOMBARDIER INC. (Toronto symbols BBD.A $5.40 and BBD.B $5.39, Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.7 billion; Market cap: $9.2 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.9%; SI Rating: Extra Risk) is the world’s third-largest commercial-aircraft maker, behind Boeing and Airbus. Its aerospace division supplies roughly half of its revenue. The other half comes from its transportation division, which is the world’s largest maker of passenger railcars and commuter trains. Bombardier’s revenue rose 33.4%, from $14.8 billion in 2006 (its fiscal year ends January 31) to $19.7 billion in 2009 (all amounts except share price and market cap in U.S. dollars). However, its 2010 revenue fell 1.8% to $19.4 billion. That’s because it received fewer aircraft orders. This decline more than offset stronger railcar sales....

WAL-MART STORES INC. $56 (New York symbol WMT; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 3.8 billion; Market cap: $212.8 billion; Price-to-sales ratio: 0.5; Dividend yield: 2.2%; WSSF Rating: Above Average) is the world’s largest retailer. The company has over 8,400 stores in the U.S. and 14 other countries, including over 2,700 supercentres, which sell groceries as well as general merchandise. Groceries now account for about half of Wal-Mart’s U.S. sales. The company’s sales rose 30.7%, from $312.4 billion in 2006 to $408.2 billion in 2010 (Wal-Mart’s fiscal year ends January 31). Earnings rose 29.0%, from $11.0 billion in 2006 to $14.2 billion in 2010. Earnings per share rose 39.2%, from $2.63 in 2006 to $3.66 in 2010, on fewer shares outstanding. Wal-Mart’s large size lets it negotiate better prices with its suppliers. That gives it a big advantage over its competitors. The company has also invested heavily in computer systems that track its customers’ buying patterns. This information helps Wal-Mart quickly adjust its inventories to respond to changing trends....

H&R BLOCK INC. $17 (New York symbol HRB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 329.2 million; Market cap: $5.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.5%; WSSF Rating: Above Average) is the world’s largest provider of income-tax-preparation services. It also provides accounting services to businesses, as well as banking services to consumers. The slow economy and high unemployment are prompting more tax filers to turn to tax-preparation software or free online-processing services. That’s cutting into revenue at H&R Block’s traditional tax-preparation business. As well, the weak economy is hurting demand for its accounting services from businesses. As a result, H&R Block’s revenue fell 5.9%, to $934.9 million, in the three months ended January 31, 2010. Its revenue was $993.4 million a year earlier. Earnings fell 19.8%, to $53.6 million, or $0.16 a share, from $66.8 million, or $0.20 a share....