price to sales ratio
HOME CAPITAL GROUP INC. $43 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.5 million; Market cap: $1.5 billion; Price-to-sales ratio: 3.0; SI Rating: Average) provides residential mortgages and credit cards to borrowers who do not meet the stricter criteria of traditional banks. Its customers include the self-employed and immigrants with limited credit history. Despite its focus on riskier borrowers, Home Capital’s screening process keeps its loan losses manageable. Even so, bad loans rose to 1.2% of its total loans in the third quarter of 2009 from 0.7% a year earlier. However, that’s an improvement over 1.3% in the previous quarter. In the three months ended September 30, 2009, Home Capital’s earnings rose 36.9%, to $38.2 million, or $1.10 a share. A year earlier, the company earned $27.9 million, or $0.81 a share. Revenue rose 7.1%, to $125.3 million from $117.0 million....
Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, but it’s unlikely they will soon surpass last year’s highs. Still, oil is a good hedge against inflation. We feel that the best way to cut your risk in the volatile resource sector is through well-established oil producers like these three. Their large reserves should last decades. Moreover, they focus on politically stable North America. SUNCOR ENERGY INC. $37 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $59.2 billion; Price-to-sales ratio: 1.7; SI Rating: Average) is Canada’s largest oil producer following its purchase of Petro-Canada on August 1, 2009. Petro-Canada shareholders received 1.28 Suncor common shares for each Petro-Canada share they held....
TELUS CORP. (Toronto symbols T $33 and T.A $31; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 318 million; Market cap: $10.2 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) earned $280 million in the three months ended September 30, 2009. That’s down 2.1% from $286 million a year earlier. Earnings per share fell 1.1%, to $0.88 from $0.89, on fewer shares outstanding. Revenue fell 1.6%, to $2.41 billion from $2.45 billion. Higher demand for data services, such as accessing email and web sites, continues to lift revenue at Telus’s wireless division, which accounts for roughly half of the company’s revenue. That helped offset falling revenue at its traditional telephone business, which provides the remaining half of Telus’s revenue. Telus’s wireless revenue should get a further boost now that the company is selling the hugely popular Apple iPhone smartphone. As well, Telus is attracting new customers with its Telus TV service, which uses high-speed Internet technology to transmit signals over existing telephone wires. The company continues to pay quarterly dividends of $0.475 a share, for an annualized yield of 5.8% (6.1% for the non-voting “A” shares). Telus has also improved its dividend reinvestment plan. Common and non-voting shareholders can now reinvest their dividends for new non-voting shares at a 3% discount to the market price. Previously, Telus did not offer a discount....
SNC-LAVALIN GROUP INC. $49 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.1 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.1; SI Rating: Average) earned $0.68 a share in the three months ended September 30, 2009. That’s up 13.3% from $0.60 a year earlier. Higher profits from certain engineering and construction projects were the main reason for the gain. However, revenue fell 15.6%, to $1.4 billion from $1.7 billion. That’s mainly because of a slowdown in big new construction projects because of the weak economy. As well, overseas markets account for about 40% of SNC’s revenue. That makes it more vulnerable to the rising Canadian dollar. SNC-Lavalin is a hold.
TECK RESOURCES LTD. $34 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 588.7 million; Market cap: $20.0 billion; Price-to-sales ratio: 2.3; SI Rating: Extra Risk) is a leading producer of metallurgical coal, a key ingredient in steelmaking. It also mines copper, zinc, lead, gold, silver, molybdenum and other metals. The company continues to lower its debt following its $13.6-billion purchase of Fording Canadian Coal Trust last year. It has already repaid a $5.8 billion U.S. bridge loan, and $1.3 billion U.S. of a $4-billion U.S. term loan. As a result, Teck’s long-term debt is now $7.6 billion (Canadian), or a manageable 38% of its market cap. The company holds cash of $1.1 billion, or $1.84 a share....
Warren Buffett’s Berkshire Hathaway recently offered $44 billion U.S. for 77% of U.S.-based railway Burlington Northern Santa Fe. (Berkshire already owns 23%.) This lifted the shares of other big railways, including CN and CP. Despite the jump, both still trade at reasonable multiples of their earnings. As well, both are cutting costs. This will help their earnings grow as the economy recovers. CANADIAN NATIONAL RAILWAY CO. $57 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 470.1 million; Market cap: $26.8 billion; Price-to-sales ratio: 3.5; SI Rating: Above Average) operates the largest freight-rail network in Canada. It also serves 16 U.S. states. The recession continues to hurt demand for rail service. CN’s earnings fell 12.7% in the third quarter of 2009, to $446 million from $511 million a year earlier. Earnings per share fell 12.1%, to $0.94 from $1.07. These figures exclude unusual items, mainly income-tax recoveries to reflect adjustments made to prior years. As well, CN gets half of its revenue from its U.S. operations, so the U.S. dollar’s rise since last year added $0.03 a share to its latest earnings. Revenue fell 18.3%, to $1.8 billion from $2.3 billion....
CAE INC. $8.75 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 255.6 million; Market cap: $2.2 billion; Price-to-sales ratio: 1.4; SI Rating: Average) recently won $55 million of orders for new flight simulators from several new customers, including Malaysia Airlines, Kenya Airways and New Zealand’s Mount Cook Airlines. CAE has sold 10 flight simulators in its current fiscal year, which ends March 31, 2010. It’s now halfway to its forecast of 20 simulators. CAE also announced $75 million in new military-related contracts. These deals are small in relation to CAE’s $1.7 billion of annual revenue. But the company’s strong reputation should continue to help it attract new business. CAE is a buy.
LOBLAW COMPANIES LTD. $30 (Toronto symbol L; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 274.2 million; Market cap: $8.2 billion; Price-to-sales ratio: 0.3; SI Rating: Above Average) continues to expand its “Joe Fresh” line of low-cost clothing and fashion accessories. The company generally sells these products at its larger, warehouse-type stores, which have more room for clothing and general merchandise than its regular supermarkets. Earlier this year, Loblaw starting selling Joe Fresh cosmetics. The company recently launched Joe Fresh Bath, a new line of personal-care products, such as bath lotions and hand soaps. Private brands like Joe Fresh and President’s Choice give Loblaw an advantage in Canada’s highly competitive food-retailing market. The company feels Joe Fresh will eventually contribute $1 billion to its annual sales of over $30 billion....
ANDREW PELLER LTD. $8.36 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.9 million; Market cap: $124.6 million; Price-to-sales ratio: 0.5; SI Rating: Above Average) will sell its Granville Island craft-brewing subsidiary to Molson Coors Canada for an undisclosed sum. The sale will close in early 2010, and will let Peller focus on its main business — its wineries in Ontario, Nova Scotia and B.C. Meanwhile, the company earned $1.8 million, or $0.12 a share, in its second quarter, which ended September 30, 2009. That’s down 15.5% from $2.1 million, or $0.14 a share, a year earlier. If you disregard non-cash gains and losses on the hedging contracts the company uses to cut its exposure to foreign-exchange and interest rates, earnings would have dropped 40.7%, to $1.6 million from $2.7 million. However, sales rose 1.8%, to $67 million from $65.8 million. The company recently launched new low-priced and premium wines. These should continue to spur sales. Andrew Peller is a buy.
TIM HORTONS INC. $31 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 180.7 million; Market cap: $5.6 billion; Price-to-sales ratio: 2.5; SI Rating: Average) is one of Canada’s largest fast-food restaurant chains. Its 2,971 outlets mainly serve coffee and donuts. It also has 556 stores in the U.S., mostly near the Canadian border. Franchisees own 99% of the company’s outlets. Tim Hortons was a wholly owned subsidiary of U.S.-based Wendy’s International Inc. (now part of Wendy’s/Arby’s Group Inc., New York symbol WEN) until March 2006. That’s when it completed an initial public offering of common shares at $27.00 each. In September 2006, Wendy’s handed out its remaining 82.75% stake to its own shareholders as a special dividend.