Book value growth: 26 Canadian companies rise to the occasion
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.
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.