Book value growth: 26 Canadian companies rise to the occasion

Mr. Bowman is a portfolio manager at Hamilton Wickham Investment Counsel Inc.advising wealthy clients. [email protected]

What are we looking for?

Value investors like Benjamin Graham and Warren Buffett pay close attention to a company’s growth in book value, and for good reason: This metric is a great way to tell if a stock may be undervalued. evaluated. My colleague Rob Bélanger and I thought we would look at the book value growth of some Canadian companies.

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To be included in our selection, companies had to have increased their book value by more than 20% in the last 12 months. Book value is the net asset value of a business calculated as total assets minus intangible assets (goodwill, patents) and liabilities. The S&P/TSX Composite Index is posting an average book value growth of 10.2%.

The price-to-cash-flow (P/CF) ratio is a good measure of a company’s value, and a lower number (indicating that the company is trading at a low price relative to cash flow) is preferable.

Similarly, the price-to-earnings ratio is a valuation measure of a company’s stock price relative to its earnings per share and, generally, lower is better.

What did we find?

Examining how book values ​​change over time can steer investors toward companies that are creating real shareholder value no matter what’s happening in the stock market. Although only a measure used by value-oriented investors, if growth in book value exceeds growth in stock price, it may indicate an undervalued company.

Bomber has increased its book value by more than 320% in the last 12 months while the stock price has only increased by 26.7%. The company also has one of the best on-screen P/CFs and a very respectable P/E ratio.

The most successful title, CGI Group, may be overvalued since the stock price increased by 56.8% and the book value only increased by 29.6%. The P/E and P/CF are among the worst on our list, and the company pays no dividends.

Some of the most attractive companies on our screen include Rogers Communications, Superior Plus, Norbord, and H&R REIT.

Investors would be well advised to contact an investment professional or do additional research.

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