price to sales ratio

TELUS CORP. (Toronto symbols T $33 and T.A $32; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 318.0 million; Market cap: $10.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 5.8%; SI Rating: Above Average) provides telephone services in British Columbia, Alberta and eastern Quebec. It also sells wireless services through a nationwide network. The company expects its revenue to rise by 2% to 5% in 2010, to between $9.8 billion and $10.1 billion. Most of the gain will come from its wireless division, which contributes half of Telus’s revenue and earnings. This division recently upgraded its networks to handle a wider variety of cellphones, including Apple’s popular iPhone smartphone. Telus should also profit as more people use their cellphones to send email, access the Internet and download software. That’s good news for Telus, since it earns higher fees for Internet access than regular phone calls. Moreover, the company’s wireless upgrades will help it capture more roaming fees from foreign tourists and business travellers who use their phones while in Canada....

BCE INC. $29 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $22.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 6.0%; SI Rating: Above Average) provides telephone and Internet services in Ontario and Quebec. It also sells wireless and satellite TV services across Canada. BCE is starting to see the benefits of a restructuring plan that it began in July 2008. Under the plan, the company cut jobs, relocated employees and sold extra real estate. These moves should save BCE $400 million annually by the end of this year. In 2009, BCE’s earnings rose 6.5%, to $1.9 billion from $1.8 billion in the prior year. Per-share earnings rose 11.1%, to $2.50 from $2.25, on fewer shares outstanding. These figures exclude restructuring costs and other unusual items. Revenue rose 0.4%, to $17.74 billion from $17.66 billion....

AGRIUM INC. $67 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 157 million; Market cap: $10.5 billion; Price-to-sales ratio: 1.1; Dividend yield: 0.2%; SI Rating: Average) makes fertilizers from natural gas at 10 plants in North America and Argentina. It also produces other fertilizers, such as potash and phosphate, from mines in Ontario, Alberta, Saskatchewan and Idaho. Agrium sells its products to industrial users and individual farmers through 1,000 retail stores in Canada, the U.S., Argentina and Chile. Agrium’s retail outlets cut its reliance on bulk fertilizer sales. Thanks to rising fertilizer prices, Agrium’s sales rose 204.5%, from $3.3 billion in 2005 to $10.0 billion in 2008 (all amounts except share price and market cap in U.S. dollars). However, sales fell 9.0%, to $9.1 billion on lower 2009 fertilizer prices....

POTASH CORP. OF SASKATCHEWAN INC. $112 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 296.0 million; Market cap: $33.2 billion; Price-to-sales ratio: 7.8; Dividend yield: 0.4%; SI Rating: Average) is the world’s largest fertilizer producer. It has six potash mines in Saskatchewan and one in New Brunswick. Five of its mines have reserves of between 60 and 97 years. Potash Corp.’s sales rose 145.5%, from $3.8 billion in 2005 to $9.4 billion in 2008 (all amounts except share price and market cap in U.S. dollars). That’s mainly because potash prices climbed from $143 a tonne in 2005 to $449 a tonne in 2008. Thanks to the higher prices, Potash Corp.’s earnings soared from $1.63 a share (or a total of $542.9 million) in 2005 to $11.01 a share (or $3.5 billion) in 2008. Cash flow per share rose 411.9%, from $2.53 in 2005 to $12.95 in 2008....

The outlook for fertilizers is bright. Rising populations in developing countries will prompt farmers to increase food production. As well, more countries are turning to biofuels, such as ethanol from corn, to cut air pollution and fossil-fuel use. However, fertilizer prices have become highly volatile in the past few years. To cut your risk, we recommend low-cost producers that can withstand and take advantage of these price swings. For example, Potash Corp.’s large reserves will last decades. That means it won’t have to spend large sums on exploration. Agrium needs natural gas to make its products, so it will benefit from new gas discoveries in North America. POTASH CORP. OF SASKATCHEWAN INC. $112 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 296.0 million; Market cap: $33.2 billion; Price-to-sales ratio: 7.8; Dividend yield: 0.4%; SI Rating: Average) is the world’s largest fertilizer producer. It has six potash mines in Saskatchewan and one in New Brunswick. Five of its mines have reserves of between 60 and 97 years....

Canada’s big telephone companies have faced strong competition from cable companies for years. This experience will help them deal with three new entrants in the wireless field. One of these new competitors, Wind Mobile, is already operating. Two more, Mobilicity and Public Mobile, should launch later this year. Meanwhile, all four major phone companies are using their steady cash flows to expand and improve their wireless and high-speed Internet networks. That will fuel their long-term growth, and let them keep paying or raise their current dividends. BCE INC. $29 (Toronto symbol BCE; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 767.2 million; Market cap: $22.2 billion; Price-to-sales ratio: 1.3; Dividend yield: 6.0%; SI Rating: Above Average) provides telephone and Internet services in Ontario and Quebec. It also sells wireless and satellite TV services across Canada....

CGI GROUP INC. $14 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 292.7 million; Market cap: $4.1 billion; Price-to-sales ratio: 1.1; No dividends paid; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. In CGI’s first quarter, which ended December 31, 2009, its earnings rose 13.0%, to $80.7 million from $71.4 million a year earlier. Earnings per share rose 17.4%, to $0.27 from $0.23, on fewer shares outstanding. These figures exclude unusual tax refunds. Revenue fell 8.7%, to $913.0 million from $1.0 billion. CGI gets 40% of its revenue from outside of Canada, so the higher Canadian dollar hurt the company’s overall revenue. However, CGI won $1.6 billion of new contracts in the latest quarter. Its order backlog of $11.4 billion is three times its annual revenue. CGI Group, our #1 stock for 2010, is a buy.

BANK OF NOVA SCOTIA $46 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $46.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.3%; SI Rating: Above Average) is paying an undisclosed sum for 10% of Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank). The deal should close in the third quarter of 2010. VietinBank is one of several state-owned banks in Vietnam. Bank of Nova Scotia’s expertise with similar-sized banks in China and Thailand will help VietinBank modernize and expand its operations. As well, this investment will help Bank of Nova Scotia establish a presence in Vietnam as the country liberalizes its economy. Bank of Nova Scotia is a buy.

RIOCAN REAL ESTATE INVESTMENT TRUST $18 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 242.3 million; Market cap: $4.4 billion; Price-to-sales ratio: 5.5; Dividend yield: 7.7%; SI Rating: Average) has mainly focused on outdoor shopping malls in Canada since it became a real estate investment trust in 1993. RioCan recently announced its first investment in the U.S. The trust will form a joint venture with Cedar Shopping Centers, Inc. (New York symbol CDR). RioCan will pay Cedar $181 million U.S. for 80% of this venture, which will hold seven of Cedar’s malls in Massachusetts, Pennsylvania and Connecticut. RioCan will also hold a 15% interest in Cedar. The deal will close in March 2010. This is a big investment for RioCan in relation to its 2009 earnings. To put the purchase price in perspective, the trust earned $113.9 million, or $0.49 a unit, in 2009. Still, this purchase only represents 4% of its market cap....

Maple Leaf Foods has recovered nicely since it fell to $6.54 in October 2008 following a listeriosis outbreak and a massive recall of meat products. Since the recall, the company has been settling lawsuits and investing in new food-safety equipment and procedures. These costs have weighed on its recent earnings. However, Maple Leaf’s long-term outlook is improving, thanks to its focus on more profitable products. It will also gain from subsidiary Canada Bread’s recent cost cuts. We still prefer Maple Leaf to Canada Bread for new buying. MAPLE LEAF FOODS INC. $11 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 131.0 million; Market cap: $1.4 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.5%; SI Rating: Average) is Canada’s largest food-processing company. Its products include fresh and prepared meats and poultry, mainly under the Maple Leaf and Schneider brands. Maple Leaf also owns 89.8% of Canada Bread....