price to sales ratio

DUN & BRADSTREET CORP. $80 (New York symbol DNB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 52.0 million; Market cap: $4.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 1.7%; WSSF Rating: Average) is the world’s largest provider of credit reports on individual companies. Its database contains information on 150 million businesses in over 200 countries. Companies use these reports to make lending and buying decisions, and lower their credit losses. The company gets two-thirds of its revenue from credit reports. It gets the rest by selling other information products, including software that helps companies manage their customer data and web sites.

Aggressive cost cuts paid off

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CGI GROUP INC. $15 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 297.0 million; Market cap: $4.5 billion; Price-to-sales ratio: 1.2; No dividends paid; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing and information-technology services. It also operates in 15 other countries. Canada provided 57% of CGI’s revenue in its latest year, followed by the U.S./India (36%) and Europe/Asia (7%). CGI’s main businesses are: 1) Outsourcing: CGI takes over all or part of a client’s information-technology and related functions. That lets the client cut costs and gain ongoing access to the most current computer technology. Outsourcing accounts for 60% of CGI’s revenue. 2) Consulting: In addition to technical expertise, CGI aims to ensure that its consultants have knowledge of the business issues in their clients’ industries or sectors....

ROYAL BANK OF CANADA $56 (Toronto symbol RY; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.4 billion; Market cap: $78.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 3.6%; SI Rating: Above Average) is Canada’s largest bank, with total assets of $655.0 billion. Royal is seeing strong demand for loans because of low interest rates. As well, improving financial markets have helped its capital-markets division attract new business. This division, which Royal has steadily expanded in the past few years, helps companies raise capital by selling shares and issuing debt. It now provides 25% of the bank’s total revenue. In the year ended October 31, 2009, Royal’s revenue rose 34.9%, to $29.1 billion from $21.6 billion in the prior year. Earnings rose 6.7%, to $4.9 billion from $4.4 billion. However, earnings per share fell 3.0%, to $3.28 from $3.38, on 7% more shares outstanding. The 2009 figures exclude a $1-billion writedown of goodwill related to Royal’s U.S. operations. Its U.S. and international banking division supplies roughly 10% of its revenue....

TORONTO-DOMINION BANK $64 (Toronto symbol TD; Conservative Growth Portfolio, Finance sector; Shares outstanding: 858.8 million; Market cap: $55.0 billion; Price-to-sales ratio: 2.2; Dividend yield: 3.8%; SI Rating: Above Average) is the second-largest Canadian bank, with total assets of $557.2 billion. TD has now fully integrated Commerce Bancorp Inc. with its other U.S. banking operations. The bank paid $8.5 billion for Commerce in May 2008. It now operates as “TD Bank,” and has 1,028 branches from Maine to Florida. The U.S. banking business provides 16% of TD’s overall profits. If you include $276-million in integration costs and $576-million of writedowns of securities, TD’s earnings in the year ended October 31, 2009, fell 18.6%, to $3.1 billion from $3.8 billion in the prior year. Earnings per share fell 28.7%, to $3.47 from $4.87, on more shares outstanding. Revenue rose 21.8%, to $17.9 billion from $14.7 billion, as low interest rates spurred strong demand for new loans....

BANK OF NOVA SCOTIA $47 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $47.0 billion; Price-to-sales ratio: 1.9; Dividend yield: 4.2%; SI Rating: Above Average) is Canada’s third-largest bank, with total assets of $496.5 billion. Bank of Nova Scotia is the most international of the big-five banks. It gets about 30% of its earnings from its overseas operations, which are mainly in the Caribbean, Latin America and Asia. These businesses have struggled lately, as the global recession pushed up loan losses. But the rebounding world economy gives them long-term appeal. The bank earned $3.5 billion in the year ended October 31, 2009. That’s up 13.0% from $3.1 billion in the prior year. Earnings per share rose 8.5%, to $3.31 from $3.05, on more shares outstanding. If you exclude writedowns of securities, it would have earned $3.70 a share in 2009. Revenue rose 21.7%, to $14.5 billion from $11.9 billion....

BANK OF MONTREAL $54 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 550.5 million; Market cap: $29.7 billion; Price-to-sales ratio: 1.9; Dividend yield: 5.2%; SI Rating: Above Average) is the fourth-largest Canadian bank, with total assets of $388.5 billion. The bank earned $1.8 billion in fiscal 2009, down 9.7% from $2.0 billion in the prior year. Earnings per share fell 18.1%, to $3.08 from $3.76, on more shares outstanding. Excluding writedowns and other unusual items, the bank would have earned $4.02 a share in fiscal 2009. Revenue rose 8.4%, to $11.1 billion from $10.2 billion. That’s mainly because low interest rates continue to push up demand for mortgages and other loans....

CANADIAN IMPERIAL BANK OF COMMERCE $66 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 384.0 million; Market cap: $25.3 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.3%; SI Rating: Above Average) is Canada’s fifth-largest bank, with assets of $335.9 billion....

We’ve chosen CGI Group is our “Stock of the Year” for 2010. It differs from past #1 picks in that it’s not a dividend payer and we rate it as Extra Risk. But we’ve followed it a long time and feel it may have set off on a rise that lasts years beyond 2010. The company took its present form in September 1981, and first sold shares to the public for $0.81 each (adjusted for splits) in December 1986. In June 2002, we added CGI to the stocks we analyze in Stock Pickers Digest, our newsletter for aggressive investors. It was then trading at $8.75. In December 2007, we thought the company had matured enough to suit more conservative investors, so we moved it to The Successful Investor. The stock has gained 50% since then....

ENCANA CORP. $36 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.2 million; Market cap: $27.0 billion; Price-to-sales ratio: 1.9: Dividend yield: 2.3%; SI Rating: Average) was also in the running for our 2010 “Stock of the Year.” It would be a more traditional pick for us, with its dividend and higher rating, and we think it has a great long-term outlook. However, when we choose a Stock of the Year, we look for something with a reasonably sure outlook for the current year. This year, EnCana has a lot riding on the weather. EnCana’s natural-gas properties in Alberta, British Columbia, Colorado, Wyoming and Texas account for 4% of North America’s daily production....

Things are going well for Canada’s big five banks. Low interest rates continue to spur strong demand for new loans. As well, loan defaults should fall as the economy improves. Despite strong gains in their stock prices since last March’s lows, all five continue to trade at attractive multiples to earnings. Canadian and international banking regulators are working on new rules that will help the global banking industry avoid another credit crisis. In response, Canada’s banks are prudently conserving their cash instead of raising dividends. We feel the banks will resume their pattern of annual dividend hikes when the new rules take effect in 2011. Every investor should aim to hold at least two banks in the Finance segment of their portfolio. Bank of Nova Scotia, which has a strong presence in fast-growing regions, such as Asia and Latin America, remains our favourite for new buying....