To introduce the new feature, here is a look at Canada’s most predictable, undervalued companies.
These companies are all found under the Undervalued Predictable Screener by checking “Canada” and unchecking “USA.” UK/Ireland, Europe, Asia and Oceania are all forthcoming.
According to the screener, the stocks that are the most predictable and undervalued in the nation of Canada are: Computer Modeling Group Ltd. (TSX:CMG), National Bank of Canada (TSX:NA.PR.Q), Metro Inc. (TSX:MRU) and Bank of Nova Scotia (TSX:BNS).
Predictability rankings are decided based on the predictability of companies based on the consistency of their revenue per share and EBITDA (earnings before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.
A business that is predictable is one of Warren Buffett’s top five criteria for businesses he invests in.
Computer Modelling Group Ltd. (TSX:CMG)
Based in Calgary, Computer Modelling Group is the world’s largest independent provider of reservoir simulation software, with over 525 oil and gas companies and consulting firms in more than 55 countries.
Computer Modelling Group is the only Canadian stock that GuruFocus grants a five-star predictability ranking. The company has the following ten-year per-share growth rates: 19.1 percent for revenue, 29.5 percent for EBITDA, 39.3 percent for free cash flow and 17.6 percent for book value.
TSX:CMG data byGuruFocus.com
Since the stock went public in 2000, it has gained 24,578 percent.
In the company’s second quarter of 2013, ended Sept. 30, 2012, the company again increased revenue and net income, by 34 percent and 24 percent, respectively, over the previous year. CMG derives its revenue primarily from software license sales, as well as professional services. Revenue increased in the second quarter due to a growth in software license sales driven by annuity/maintenance and perpetual license sales growth, as well as slightly increased fees for professional services.
CMG has a P/E of 33.9, P/B of 18.25 and P/S of
CMG’s midday trading price is $22.21, compared to its discounted cash flow valuation of $22 and discount earning valuation of $18.
National Bank of Canada (TSX:NA.PR.Q)
National Bank offers financial services to its core market and specialized services elsewhere in the world, and securities brokerage, insurance, wealth management, and mutual fund and retirement plan management through its subsidiaries. It is the sixth largest Canadian bank, with 451 branches and $178 billion in assets.
GuruFocus gives National Bank of Canada a predictability rank of 4 stars. It has the following 10-year per-share growth rates: 5.7 percent for revenue, 8.6 percent for EBITDA, 0 for free cash flow, and 8.7 percent for book value.
TSX:NA.PR.Q data byGuruFocus.com
Since Nov. 7, the bank’s stock has gained almost 5 percent.
For the fourth quarter 2012, ended Oct. 31, 2012, National Bank of Canada had net income of $351 million, compared to $292 million a year previously, and earnings per share of $1.97 compared to $1.62. Total revenues increased 6 percent to $1.24 billion, from $1.17 billion (all in Canadian dollars).
The continued growth resulted from personal loan growth, financial market trading, and its acquisitions in wealth management.
NBC has a P/E of 2.79, P/B of 0.628 and P/S of X
The company’s midday trading price is $26.54, compared to its discount cash flow valuation of $276 and discount earning valuation of $96.
Metro Inc. (TSX:MRU)
Metro operates more than 600 food stores and more than 250 drugstores, with annual sales of over $11 billion and 65,000 employees in Quebec and Ontario.
GuruFocus gives Metro Inc. a predictability rank of 4 stars. The company has the following 10-year growth rates: 9 percent for revenue, 12.5 percent for EBITDA, 14.9 percent for free cash flow and 15 percent for book value.
TSX:MRU data byGuruFocus.com
Since 2000, its stock has gained 581 percent.
In its fourth quarter ended Sept. 29, 2012, Metro had an 11 percent year-over-year increase in sales to $2.94 billion and a 75.9 percent net earnings increase to $154.1 million, or $1.46 per share. Same-store sales increased 1.1 percent.
Metro has a P/E of 12.7 percent, P/B of 2.37 and P/S of 0.524.
Its midday trading price of $61.86 compares to its discount cash flow valuation of $69 and discount earning valuation of $71.
Bank of Nova Scotia (TSX:BNS)
Scotiabank is a multinational financial services provider with four business lines: Canadian banking, international banking, global banking and markets and global wealth management. It has 19 million customers in more than 55 countries.
GuruFocus awards BNS a business predictability rank of 4 stars. The company has the following ten-year per-share growth rates: 5 percent for revenue, 5.8 percent for EBITDA, 0 for free cash flow and 11.4 percent for book value.
TSX:BNS data byGuruFocus.com
Since 2000, the stock has gained 271 percent.
In the company’s fourth quarter, ended Oct. 31, 2012, BNS reported a 31 percent increase in net income to $1.52 billion, a 22 percent increase in diluted EPS of $1.18 and a 15 percent increase in revenue to $4.94 billion. The bank saw revenue increases in each of its three categories: net interest income, net fee and commission revenues and trading revenues. Net income improved as the bank brought in higher revenues, including those from acquisitions, and earning assets and trading revenues increases.
BNS has a P/E of 11, P/B of 1.7 and P/S of 2.5.
Its trading price of $57.64 in midday trading compares to a discount cash flow valuation of $56 and discount earning valuation of $70.
See more undervalued, predictable companies from Canada here. Also become a subscriber to GuruFocus’ new Canadian stock coverage or coverage of other regions here.