price to sales ratio

BANK OF NOVA SCOTIA $44 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 1.0 billion; Market cap: $44 billion; Price-to-sales ratio: 1.8; SI Rating: Above Average) is Canada’s third-largest bank, with total assets of $485.9 billion. Rising stock markets continue to help the bank’s trading division. In the three months ended July 31, 2009, the division’s earnings jumped 58.3%, to $470 million from $297 million a year earlier. The Canadian banking division’s earnings rose 8.0%, to $500 million from $463 million. This was largely because of two purchases the bank made last year: it paid $2.3 billion for 37.6% of CI Financial Corp. (Toronto symbol CIX), one of Canada’s leading mutual-fund companies, and $500 million for online broker E*Trade Canada. These additions helped push up the bank’s overall revenue by 11.9%, to $3.8 billion from $3.4 billion....

BANK OF MONTREAL $51 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 549.9 million; Market cap: $28 billion; Price-to-sales ratio: 1.7; SI Rating: Above Average) is the fourth-largest Canadian bank, with total assets of $415.4 billion. Despite the recession, Bank of Montreal is setting less money aside to cover bad loans. In the three months ended July 31, 2009, the bank allocated $417 million for future loan losses, down 13.8% from $484 million a year earlier. Lower loan-loss provisions at its main Canadian personal and business lending operations offset higher provisions at its U.S. division, particularly for commercial real-estate loans and residential mortgages. Thanks to the lower provisions, Bank of Montreal’s earnings rose 6.9%, to $557 million from $521 million a year earlier. However, earnings per share fell 1.0%, to $0.97 from $0.98, because of an 8.7% rise in the number of outstanding shares. Revenue rose 8.4%, to $3 billion from $2.7 billion....

CANADIAN IMPERIAL BANK OF COMMERCE $61 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 382.7 million; Market cap: $23.3 billion; Price-to-sales ratio: 1.7; SI Rating: Above Average) is Canada’s fifth-largest bank, with total assets of $335.9 billion. In August 2005, CIBC set aside roughly $3 billion to settle a class-action lawsuit related to its involvement with failed energy company Enron Corp. Last year, it recorded a $486-million tax benefit related to this. The Canada Revenue Agency is now challenging this deduction. If CIBC wins, it will recognize a further tax gain of $214 million. If it loses, it will have to pay $826 million. To put these figures in context, CIBC’s earnings jumped to $434 million, or $1.02 a share in the three months ended July 31, 2009. That’s much higher than the $71 million, or $0.11 a share, it earned a year earlier. But if you exclude unusual items, such as writedowns of securities, earnings per share actually fell 21.9%, to $1.29 from $1.65....

RIOCAN REAL ESTATE INVESTMENT TRUST $17 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 234.2 million; Market cap: $4 billion; Price-to-sales ratio: 5.4; SI Rating: Average) is Canada’s largest real-estate income trust, with properties in all 10 provinces. RioCan specializes in big-box outdoor malls, and owns 247 retail properties, 13 of which are under development. Most are in suburban areas, where land is generally cheaper than in towns and cities. The trust also owns office buildings and residential complexes. These represent 4% of its net leasable area of 36.2 million square feet. RioCan’s revenue rose 31.3%, from $581.7 million in 2004 to $763.8 million in 2008, mainly due to strong interest from retailers for big-box-style malls. These malls now account for 45% of RioCan’s holdings....

Real estate investment trusts (REITs) may get more attractive in the next year or so as income trusts start to disappear. Ottawa will start taxing income-trust distributions in 2011. As a result of this change, many trusts will convert to regular corporations and pay corporate taxes. That will give them less cash to distribute to shareholders. REITs will remain exempt from the income-trust tax, as long as they get most of their cash flow from properties in Canada. It’s likely that income-seekers will look to REITs to replace income trusts and provide a hedge against inflation. Real estate is a cyclical business, and rental income from the underlying properties can suddenly dry up during economic slowdowns. To cut your risk, you should focus on well-established REITs with long histories of maintaining their distributions during cyclical downturns....

SUNCOR ENERGY INC. $35 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $56 billion; Price-to-sales ratio: 1.0; SI Rating: Average) replaces Petro-Canada on our Conservative Growth Portfolio. On August 1, 2009, Petro-Canada shareholders received 1.28 shares of Suncor for each share they owned, while Suncor investors got one share of the new company for each Suncor share they held. The new company is now Canada’s largest oil company by market cap, and the fifth largest in North America. It has 7.5 billion barrels of proven and probable reserves. Oil sands account for about 80% of these. It also has 19 billion barrels in contingent reserves. Its daily production of 710,000 barrels of oil equivalent consists of roughly 80% oil and 20% natural gas....

Canada’s big five banks are still dealing with high loan losses, but they have enough capital to absorb them without having to issue more shares. This should also let them keep providing above-average dividend yields. 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) is Canada’s largest bank, with total assets of $659.9 billion. In its third quarter, which ended July 31, 2009, Royal’s earnings rose 23.7%, to $1.6 billion, or $1.05 a share, from $1.3 billion, or $0.92 a share, a year earlier. Revenue rose 32.3%, to $7.8 billion from $5.9 billion....

TELUS CORP. (Toronto symbols T $34 and T.A $33; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 317.7 million; Market cap: $10.8 billion; Price-to-sales ratio: 1.1; SI Rating: Above Average) has purchased privately owned Black’s Photo Corp., which operates 113 stores that sell cameras, film and other photographic equipment. Telus plans to sell its cellphones and wireless services through Black’s. This looks like a good fit, as more consumers are using their cellphones to take pictures and videos. Adding Black’s will also help Telus compete with BCE, which recently bought consumer-electronics retailer The Source in an effort to attract new wireless customers. The company paid just $28 million for Black’s, which is equal to 11% of the $244 million, or $0.77 a share, that it earned in the three months ended June 30, 2009. Telus is a buy. The non-voting “A” shares are the better choice.

SNC-LAVALIN GROUP INC. $49 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151 million; Market cap: $7.4 billion; Price-to-sales ratio: 1.0; SI Rating: Average) hopes to win a $255 million U.S. contract to install gas turbines in three Iraqi electrical-power plants....

INDIGO BOOKS & MUSIC INC. $12 (Toronto symbol IDG; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 24.5 million; Market cap: $294 million; Price-to-sales ratio: 0.3; SI Rating: Average) is Canada’s largest bookseller. Indigo operates 91 superstores under the Indigo, Chapters and World’s Biggest Bookstore brands. It also sells books online, and in smaller stores under the Coles, Indigo, Indigospirit, SmithBooks and The Book Company banners. In February, Indigo launched a new web site called shortcovers.com, which lets users download electronic books and magazines to their computers and mobile devices. Although e-books are still evolving, U.S.-based bookseller Amazon.com’s Kindle reader and devices from other companies, such as Sony, have spurred interest in them. As well, shortcovers will help Indigo compete if Amazon decides to bring the Kindle to Canada. Indigo’s losses in its first quarter, which ended June 27, 2009 rose to $0.09 a share from $0.05 a year earlier. That’s mainly because of the cost of launching shortcovers.com. As well, Indigo earns most of its money during the Christmas season, which falls in its third quarter. It typically earns little, or even posts losses, in the other quarters....