price to sales ratio

TransCanada and Canadian Utilities are both working on major new projects. Despite the huge size of these undertakings, their overall risk is low. That’s because government regulators will let the companies pass along most of the costs to their customers in the form of higher rates. This should let both firms keep paying their current dividends, or raise them. ATCO owns a majority interest in Canadian Utilities, so it also stands to profit from these projects. As well, Finning should benefit by selling construction equipment and repair services to TransCanada and Canadian Utilities....

ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $43 and ACO.Y [class II voting] $43; Shares outstanding: 57.9 million; Market cap: $2.5 billion; Price-to-sales ratio: 0.7; SI Rating: Above Average) is a Calgary-based holding company. ATCO’s main subsidiary is 52.3%-owned Canadian Utilities Ltd.. As a result of a recent reorganization, Canadian Utilities operates most of ATCO’s main utility and energy businesses....

FINNING INTERNATIONAL INC. $16 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.6 million; Market cap: $2.7 billion; Price-to-sales ratio: 0.5; SI Rating: Above Average) sells, rents and repairs heavy equipment made by Caterpillar Inc. This includes tractors, bulldozers and trucks. Finning’s major customers are mainly in the western Canadian mining, forest products and construction industries. The recession has driven down the prices of oil and metals. In response, many of Finning’s customers have cut or put off spending on new equipment. As well, some are conserving cash by delaying routine repairs and maintenance. Finning gets 40% of its revenue from services like these. In the three months ended June 30, 2009, Finning’s revenue fell 23.9%, to $1.2 billion from $1.5 billion a year earlier. Earnings dropped 28.9%, to $47.8 million, or $0.28 a share, from $67.2 million, or $0.39 a share....

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; SI Rating: Above Average) will buy the third party registered investment advisor servicing business of U.S. banking firm J.P. Morgan & Co. (New York symbol JPM). The deal should close in the second quarter of 2010. This business provides custody and clearing services to brokers and investment managers. It will strengthen Royal’s wealth-management operations in the U.S., which account for roughly 7% of the bank’s total revenue. Royal Bank is a buy....

GENNUM CORP. $4.07 (Toronto symbol GND; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.4 million; Market cap: $144.1 million; Price-to-sales ratio: 1.3; SI Rating: Average) makes chips and other electronic equipment that let television broadcasters store, edit and transfer video signals without losing picture quality. Many TV broadcasters are putting off buying new equipment due to lower advertising revenue. As a result, Gennum’s sales fell 36.1% in its third quarter, which ended August 31, 2009, to $21.4 million from $33.5 million. (Gennum reports its results in U.S. dollars, but its share price and market cap are in Canadian dollars). In response to the falling sales, Gennum recently announced plans to cut 10% of its workforce by the end of this year. Because of a related $5.5-million charge for severance and other costs, Gennum lost $4.3 million, or $0.12 a share, in the latest quarter. The company did not reveal how much these moves would save it, but it did say that they would improve this year’s profitability and cash flow. It earned $6.4 million, or $0.18 a share, a year earlier....

CGI GROUP INC. $13 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 306 million; Market cap: $4 billion; Price-to-sales ratio: 1.0; SI Rating: Extra Risk) is Canada’s largest provider of computer-outsourcing services. CGI helps corporations and government agencies automate certain routine functions, such as accounting and buying supplies. This lets its clients focus on their main businesses, and improve their efficiency. The company has over 100 offices in 16 countries. Canada accounts for roughly 60% of its revenue, followed by the U.S. (35%) and Europe (5%). BCE Inc. (Toronto symbol BCE) is CGI’s largest client, supplying roughly 12% of its annual revenue.

Long-term contracts cut CGI’s risk

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NVIDIA CORP. $15 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 547.8 million; Market cap: $8.2 billion; Price-to-sales ratio: 3.0; WSSF Rating: Average) designs video chips that make computer games run more smoothly and appear more lifelike. It outsources most of its production to chipmakers in Asia. Nvidia earned $37.7 million in its second quarter, which ended July 26, 2009. That’s down 49.4% from $74.5 million a year earlier. Earnings per share fell 46.2%, to $0.07 from $0.13. These figures exclude charges in both quarters for extra warranty payments related to defective chips. Sales fell 13.0%, to $776.5 million from $892.7 million. The company continues to spend around 25% of its revenue on research. It’s devoting most of this to new graphic chips for mobile devices. These should cut its reliance on computer sales. Nvidia holds cash of $1.5 billion, or $2.68 a share, and has little debt....

INTEL CORP. $20 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.6 billion; Market cap: $112 billion; Price-to-sales ratio: 3.3; WSSF Rating: Above Average) is the world’s leading computer-chip maker, with 80% of the market. The company is combining its operations into two main divisions. These will be organized by function instead of by product. The first, the Intel Architecture Group, will design chips for computers, cellphones and similar devices. The second, called the Technology and Manufacturing Group, will manage Intel’s manufacturing plants. Most chipmakers focus on either design or manufacturing, but not both. The reorganization would make it easier for Intel to split itself into two companies. However, any potential breakup is probably years away....

PETSMART INC. $22 (Nasdaq symbol PETM; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 125 million; Market cap: $2.8 billion; Price-to-sales ratio: 0.5; WSSF Rating: Above Average) sells pet food and supplies through 1,145 stores in the U.S. and Canada. It also provides veterinary and grooming services, and boards pets at its 156 PetHotels. In PetSmart’s second quarter, which ended August 2, 2009, its earnings rose 4.6%, to $39 million from $37.2 million a year earlier. Earnings per share gained 3.3%, to $0.31 from $0.30. Revenue rose 5.4%, to $1.3 billion from $1.2 billion. About 85% of the revenue gain came from the 70 stores and 35 PetHotels that PetSmart opened over the past year. Same-store sales rose 0.8%. Pet-service revenue, which accounts for 12% of the company’s overall sales, rose 10.2%. Because of the slow economy, PetSmart plans to open just seven to nine new stores in the second half of fiscal 2010. This will let the company focus on improving the profitability of its existing stores....

IDEXX LABORATORIES INC. $52 (Nasdaq symbol IDXX; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 58.6 million; Market cap: $3 billion; Price-to-sales ratio: 3.1; WSSF Rating: Average) makes equipment that veterinarians uses to detect diseases in animals. Idexx also makes systems that detect contaminants in water and milk. Because of the weak economy, fewer pet owners are taking their animals to veterinarians for routine screenings. This has hurt sales of Idexx’s systems and supplies. As well, Idexx gets 40% of its sales from outside the U.S. This leaves it vulnerable to a high U.S. dollar. These factors drove down Idexx’s earnings by 14.5% in the three months ended June 30, 2009, to $33.7 million from $39.4 million a year earlier. Earnings per share fell 12.7%, to $0.55 from $0.63, on fewer outstanding shares. Revenue was down 5.3%, to $265.7 million from $280.6 million. Idexx spends about 5% of its revenue on research....