price to sales ratio

GREAT-WEST LIFECO INC. $23 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 944 million; Market cap: $21.7 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) is Canada’s second-largest insurance company after Manulife Financial Corp. (Toronto symbol MFC). The company also offers wealth-management services and owns Putnam Investments, a major U.S.-mutual fund company. Power Financial Corp. (Toronto symbol PWF) owns 68.7% of Great-West’s shares. The stock market downturn cut Great-West’s assets under administration by 14.7%, to $332.9 billion as of March 31, 2009, from $390.5 billion a year earlier. Great-West’s fees rise and fall with the value of the securities it manages, so the drop hurt its earnings: In the first quarter of 2009, earnings fell 33.9%, to $326 million from $493 million a year earlier. Earnings per share dropped 41.7%, to $0.35 from $0.60, on more shares outstanding. Great-West holds $2 billion in notes and other securities issued by U.K. and European banks. If conditions worsen, the company may have to write down some of these. However, government support of these banks lowers the likelihood of a big loss....

Great-West and IGM have recovered nicely from their March lows. Despite this, both remain cheap in relation to their earnings. They also stand to expand their leading market shares as weaker competitors fold. This should let them continue paying above-average dividends. GREAT-WEST LIFECO INC. $23 (Toronto symbol GWO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 944 million; Market cap: $21.7 billion; Price-to-sales ratio: 1.0; SI Rating: Above Average) is Canada’s second-largest insurance company after Manulife Financial Corp. (Toronto symbol MFC). The company also offers wealth-management services and owns Putnam Investments, a major U.S.-mutual fund company. Power Financial Corp. (Toronto symbol PWF) owns 68.7% of Great-West’s shares. The stock market downturn cut Great-West’s assets under administration by 14.7%, to $332.9 billion as of March 31, 2009, from $390.5 billion a year earlier. Great-West’s fees rise and fall with the value of the securities it manages, so the drop hurt its earnings: In the first quarter of 2009, earnings fell 33.9%, to $326 million from $493 million a year earlier. Earnings per share dropped 41.7%, to $0.35 from $0.60, on more shares outstanding....

TIM HORTONS INC. $29 (Toronto symbol THI; Aggressive Growth Portfolio; Consumer sector; Shares outstanding: 180.6 million; Market cap: $5.2 billion; Price-to-sales ratio: 2.5; SI Rating: Average) operates roughly 3,400 coffee-and-donut stores, including 500 in the United States. The recession has slowed Tim Hortons’ sales. At the same time, higher food and coffee costs are squeezing its profit margins. Despite this, Tim Hortons plans to open 150 to 180 new stores this year. Most of these will be in smaller markets, where there are few competitors. The new stores should help Tim Hortons achieve its goal of increasing this year’s operating profits by 11% to 13%. Tim Hortons is a buy.

ARBOR MEMORIAL SERVICES INC. $17 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.7 million; Market cap: $181.9 million; Price-to-sales ratio: 0.7; SI Rating: Average) owns 41 cemeteries, 26 crematoria, four reception centres and 87 funeral homes in eight provinces. In its second quarter, which ended April 26, 2009, earnings fell 7.6%, to $4.9 million, or $0.45 a share. Arbor earned $5.3 million, or $0.49 a share, a year earlier. Revenue rose 3.3%, to $60 million from $58.1 million. The company performed 2.9% fewer funeral services in the quarter, but earned higher fees per service. Demand for funerals could stagnate or drop in the next few years. Many people born in the 1920s have already died, and birthrates were lower in the 1930s and 1940s due to the Great Depression and World War II. The post-war baby boomers have not yet reached their years of highest mortality. But boomers will likely spend more on funerals than their parents. Arbor is a buy....

ANDREW PELLER LTD. $7.30 (Toronto symbol ADW.A; Income Portfolio, Consumer sector; Shares outstanding: 14.9 million; Market cap: $108.8 million; Price-to-sales ratio: 0.4; SI Rating: Above Average) owns wineries in Ontario, Nova Scotia and B.C. In its latest fiscal year, which ended March 31, 2009, Peller’s revenue rose 9.8%, to $268.2 million from $244.3 million in the prior year. The gain was partly due to two acquisitions in 2008. It paid $11 million for World Vintners Inc., which sells home winemaking kits, and $1.6 million for Small Winemakers Collection Inc., which imports and markets premium wines in Ontario. Without these purchases, revenue would have risen by 5.7% in fiscal 2009. Despite the higher revenue, Peller lost $125,000, or $0.03 a share, in fiscal 2009. That’s down from earnings of $11.4 million, or $0.78 a share, in the prior year. Profits fell mainly due to a $9.5-million, non-cash writedown of foreign-exchange hedging contracts, which the company uses to shield itself from changing exchange rates. It also incurred a $1.3-million charge in connection with the closure of a Quebec distribution centre....

CAE INC. $7.03 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 255.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.1; SI Rating: Average) makes flight simulators and operates pilot-training facilities. CAE trains over 75,000 pilots a year at 75 sites in 20 countries.

CAE gets about half of its revenue and earnings from highly cyclical commercial airlines. However, the remaining half comes from military clients, which cuts its risk. As well, steady revenue from long-term training contracts helps offset its reliance on new-simulator sales, which have slowed recently. CAE’s revenue rose 68.6%, from $986.2 million in 2005 to $1.7 billion in 2009 (CAE’s fiscal year ends March 31). Earnings soared from $0.19 a share (or a total of $46.9 million) in 2005 to $0.79 a share (or $200.5 million) in 2009. The gain was largely due to a successful restructuring plan, including the sale of its non-aviation businesses.

Research spending a hidden asset

The company continues to spend about 5% of its revenue on research. This lowers CAE’s earnings, but helps it compete with larger simulator makers, such as Boeing and Lockheed Martin.

CAE also plans to spend $714 million over the next five years to apply its expertise to new areas. For example, CAE’s high-resolution displays and simulation technology could help pilots take off and land in foggy or misty conditions. The Canadian government plans to provide up to $250 million in financing.

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MOLSON COORS BREWING CO. $44 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 184 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.1; WSSF Rating: Average) is the world’s fifth-largest brewer by volume. Its major brands include Coors Light, Molson Canadian and Carling. Molson Coors was formed in February 2005, when Canadian brewer Molson Inc. merged with U.S.-based Adolph Coors Co. The merger let Molson Coors close plants and combine distribution networks in the face of growing competition. Canada is Molson Coors’largest market, accounting for 40% of its 2008 sales and 57% of its gross profit. The U.S. (32% of sales and 33% of profit) was its second largest, followed by the U.K. (28% of sales and 10% of profit). It exports its beers to other markets, such as Asia and Latin America, or licenses them to local brewers....

Global beer consumption rose 14% between 2005 and 2008. However, the recession will probably limit growth to around 1% this year. Moreover, brewers face rising competition from makers of wine and liquor. Consumers have also become more health-conscious in recent years, and are drinking less beer as a result. Still, beer sales should improve as the economy begins to recover, and Molson Coors should be in a good position to profit. The company has cut its costs over the past few years through two big mergers, so any rise in beer sales will have a big impact on its earnings. Molson Coors’low-cost operations also help it cope with volatile raw-material costs and foreign-exchange rates. MOLSON COORS BREWING CO. $44 (New York symbol TAP; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 184 million; Market cap: $8.1 billion; Price-to-sales ratio: 2.1; WSSF Rating: Average) is the world’s fifth-largest brewer by volume. Its major brands include Coors Light, Molson Canadian and Carling....

TEXAS INSTRUMENTS INC. $19 (New York symbol TXN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.3 billion; Market cap: $24.7 billion; Price-to-sales ratio: 2.1; WSSF Rating: Average) makes chips for a wide variety of electronic devices, including cellphones, DVD players and digital cameras. It also makes handheld calculators. The company has over 80,000 customers, but cellphone maker Nokia Corp. (New York symbol NOK) accounted for 18% of its 2008 sales. Texas Instruments earned $17 million, or $0.01 a share, in the three months ended March 31, 2009. In the year-earlier quarter, it earned $662 million, or $0.49 a share. Sales fell 36.2%, to $2.1 billion from $3.3 billion. The company spends around 18% of its revenue on research. In response to slowing sales, Texas Instruments has cut 3,400 jobs (or 12% of its workforce). Severance and other payments will cost it $400 million (including $105 million in the latest quarter), but the layoffs should lower its annual expenses by $700 million when it completes these cuts later this year....

NVIDIA CORP. $10 (Nasdaq symbol NVDA; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 546.2 million; Market cap: $5.5 billion; Price-to-sales ratio: 2.0; WSSF Rating: Average) designs 3D-capable chips for computers, video-game consoles and other devices. The company outsources most of its production to chipmakers in Asia. The recession has hurt new-computer sales. In turn, computer makers are ordering fewer graphics chips from Nvidia. Computer makers are also switching to cheaper chips, particularly those that work well with “netbook” computers. Netbooks are small, inexpensive laptop computers whose processors are less powerful than those of traditional laptops. Because of their lower prices and portability, they are currently selling faster than desktops and laptops....