What are we looking for?
Large-cap North American companies that enjoyed high growth during the past five years and are expected to continue this growth trajectory in the near future.
The screen
Today's screen takes a look at companies headquartered in Canada or the United States with a market capitalization of at least $1-billion (U.S.). For our screen, more than five analysts must cover the stock; greater analyst coverage signals to investors a higher-profile company and often greater financial transparency. Next, two of Thomson Reuters's proprietary StarMine models are used: The Analyst Revisions model gives a ranking based on the changes in analyst sentiment for price and estimate targets; the Earnings Quality ranking measures the sustainability of a company's revenue stream. In both cases, a stock must rank of at least 90 out of 100 to be included.
We then screen for what StarMine calls the earnings per share "predicted surprise" number, which has an inclusion criterion of greater than 0 per cent, indicating what the consensus earnings surprise will be for the company for its upcoming reporting period. Lastly, we consider the compound annual growth rate of estimated earnings for the next five years. Each company must have predicted growth of at least 10 per cent.
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What did we find?
Eighteen companies fit the aforementioned criteria including household names Mastercard Inc. and Boeing Co. One outlier is CVR Refining LP, with an expected five-year EPS growth rate of almost 70 per cent. While this number looks impressive, it should be noted that the petroleum refiner only has eight analysts contributing to its recommendations, a smaller coverage number then many of the other companies in the results, which could provide less certainty in the assumptions made to derive this growth figure.
This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.
Ryan Gottschalk, CFA, is an asset management specialist at Thomson Reuters.