price to sales ratio

Low oil and natural gas prices have prompted Pengrowth to lower production and cut its distributions. However, these moves put the trust in a strong position to quickly increase cash flow and distributions when prices rebound. As well, Pengrowth’s reasonable debt should let it take advantage of depressed energy prices by making acquisitions, probably at bargain prices. Pengrowth has been around since 1988, and is now one of the largest energy trusts in North America. It survived years of low oil prices in the 1990s, and should withstand this recent drop. As well, its high-quality reserves should last well over 10 years. PENGROWTH ENERGY TRUST $7.13 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 256.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; SI Rating: Average) is one of North America’s largest energy royalty trusts. It owns all or part of several oil and natural-gas properties in Alberta, British Columbia and Saskatchewan....

CANADIAN TIRE CORP. $45 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.4; SI Rating: Above Average) operates 475 stores that sell automotive, household and sporting goods. It also operates 86 PartSource auto-parts stores, 372 Mark’s Work Wearhouse casual-clothing stores and 273 gas stations. Canadian Tire continues to replace its older stores with new ones that are more shopper-friendly. The new stores have wider aisles, brighter lighting and clearer signage. On average, its stores are a third larger than they were five years ago. These improvements contributed, at least in part, to a rise in Canadian Tire’s sales last year. Its sales rose 6%, to $9.1 billion from $8.6 billion the previous year. Same-store sales rose 0.3%. However, earnings fell 4.5%, to $572.5 million from $599.9 million. Per-share earnings fell 2.2%, to $4.85 from $4.96 on fewer shares outstanding. These figures exclude writedowns of hedging contracts and other items. The earnings drop was largely caused by higher administrative and advertising costs....

TORSTAR CORP. $5.04 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 78.9 million; Market cap: $397.7 million; Price-to-sales ratio: 0.3; SI Rating: Above Average) publishes The Toronto Star, which is Canada’s largest daily newspaper by circulation. The company also publishes three other dailies and over 100 weeklies, mainly in southern Ontario. Newspapers and web sites account for 70% of Torstar’s revenue and 60% of its earnings. The company’s other main business is wholly owned Harlequin Enterprises Ltd. Harlequin is the world’s leading publisher of romance novels. It also publishes non-fiction titles, including self-help and diet books. Harlequin sells 95% of its books in other countries. This reduces Torstar’s reliance on the Ontario market, which has been struggling because of the recession. It also helps Torstar benefit from a lower Canadian dollar.

Steady revenue, but erratic earnings

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Canadian Tire is down 36% from its April 2008 peak of $70. Investors fear that rising unemployment will hurt its sales and increase losses on its credit-card loans. However, the company has been improving its stores. It also owns some of Canada’s best-known brands. These factors give it a big advantage in a highly competitive industry. CANADIAN TIRE CORP. $45 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.5 million; Market cap: $3.7 billion; Price-to-sales ratio: 0.4; SI Rating: Above Average) operates 475 stores that sell automotive, household and sporting goods. It also operates 86 PartSource auto-parts stores, 372 Mark’s Work Wearhouse casual-clothing stores and 273 gas stations. Canadian Tire continues to replace its older stores with new ones that are more shopper-friendly. The new stores have wider aisles, brighter lighting and clearer signage. On average, its stores are a third larger than they were five years ago....

TIM HORTONS INC. $32 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 181.5 million; Market cap: $5.8 billion; Price-to-sales ratio: 3.0; SI Rating: Average) plans to buy back up to 5% of its outstanding shares in 2009. This could cost it $200 million. (In 2008, it earned $301 million, or $1.64 a share.) Share buybacks reduce the number of shares outstanding, which increases the value of the remaining shares. Tim Hortons has also raised its dividend by 11.1%, to $0.40 a share, for a yield of 1.3%. Tim Hortons is a buy. CANADA BREAD CO. LTD. $39 (Toronto symbol CBY; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 25.4 million; Market cap: $990.6 million; Price-to-sales ratio: 0.6; SI Rating: Above Average) earned $64.9 million, or $2.55 a share, in 2008. That’s down 22.6% from $83.8 million, or $3.30 a share, the previous year. However, these figures include several non-recurring items, including the replacement of a U.K. bagel plant that was destroyed by a fire early last year. If you disregard all unusual costs, earnings per share fell 13.3%, to $2.87 from $3.31. Sales rose 12.9%, to $1.7 billion from $1.5 billion, mainly because Canada Bread raised its prices to offset higher wheat and other input costs....

PENGROWTH ENERGY TRUST $7.13 (Toronto symbol PGF.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 256.1 million; Market cap: $1.8 billion; Price-to-sales ratio: 1.0; SI Rating: Average) is one of North America’s largest energy royalty trusts. It owns all or part of several oil and natural-gas properties in Alberta, British Columbia and Saskatchewan. Properties that Pengrowth operates account for 63% of its production. The remaining 37% comes from minority investments in other energy projects, including an 8.4% interest in the Sable Offshore Energy Project south of Nova Scotia. Natural gas provides 60% of Pengrowth’s production. Oil supplies the remaining 40%. Pengrowth prefers to focus on proven properties with sizeable reserves and predictable production rates. It has interests in six of western Canada’s top nine oil-producing areas....

HOME CAPITAL GROUP INC. $25 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 34.4 million; Market cap: $860 million; Price-to-sales ratio: 1.9; SI Rating: Average) is the parent company of Home Trust Company, a federally regulated firm that specializes in residential first mortgages and credit cards for borrowers who don’t meet the criteria of traditional lenders. The credit crisis and Home Capital’s reliance on less-creditworthy customers caused the stock to drop from $41 last May to $14 in November. However, Home Capital is safer than it appears. Its stringent screening process eliminates most of the problem borrowers. Still, 0.86% of Home Capital’s loans were in default in 2008. This is up from 0.72% the previous year. Despite the volatile economy, Home Capital’s 2008 earnings rose 20.4%, to $108.7 million, or $3.13 a share. It earned $90.2 million, or $2.59 a share, in 2007. Revenue rose 23.3% in 2008, to $454.7 million from $368.9 million in 2007....

LINAMAR CORP. $3.10 (Toronto symbol LNR; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 64.7 million; Market cap: $200.6 million; Price-to-sales ratio: 0.1; SI Rating: Extra Risk) supplies transmissions and other parts to several carmakers, including General Motors and Chrysler. These two customers owe Linamar $30 million, and it could have trouble collecting if they go bankrupt. To put this amount in context, Linamar earned $85.6 million, or $1.28 a share, in 2008. However, GM and Chrysler together represent just 9% of Linamar’s total receivables. Moreover, based on its experiences with other customers’ bankruptcies, Linamar would likely recover at least half of these funds. Linamar is a buy.

CANADIAN PACIFIC RAILWAY LTD. $37 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 167.7 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has agreed to sell most of its stake in a 50-50 partnership that owns the railway tunnel between Windsor, Ontario and Detroit. The sale will cut CP’s interest from 50% to 16.5%. With the sale, the Ontario Municipal Employees Retirement System, CP’s partner in the tunnel, will increase its stake to 83.5%. CP will receive $110 million. This is equal to 17% of its 2008 earnings of $631.5 million, or $4.06 a share. It may also receive an extra $22 million, depending on how much freight moves through the tunnel in the future. The sale will help CP pay down its $4.7-billion long-term debt and cope with the recession. CP Rail is a buy.

IGM FINANCIAL INC. $33 (Toronto symbol IGM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 262.4 million; Market cap: $8.7 billion; Price-to-sales ratio: 3.2; SI Rating: Above Average) is Canada’s largest mutual fund company. It manages $98.8 billion of assets. Power Corp. owns 56.4% of IGM. IGM has three divisions. Investors Group sells funds through its own network of advisors. Mackenzie Financial sells its funds through independent brokers. IGM also owns 74.5% of Investment Planning Counsel, whose 700 advisors provide wealth-management services to individuals. IGM has few operations outside of Canada. The sharp stock market drop in the latter half of 2008 hurt demand for IGM’s mutual funds. As a result, the company’s earnings dropped 11.3%, to $766.1 million from $863.8 million in 2007. Per-share earnings fell 10.5%, to $2.89 from $3.23, on fewer shares outstanding. IGM owns around 4% of Great-West Lifeco, and these figures exclude its share of Great-West’s writedown of its purchase of Putnam Investments. IGM’s 2008 revenue fell 6.6%, to $2.7 billion from $2.9 billion....