What are we looking for?
Let's look for stocks that have the strongest profit momentum.
Today's search
We'll turn to StarMine for help on today's screen. StarMine is a Thomson Reuters service that ranks analysts and provides lots of data about earnings estimates.
We'll use the StarMine Indicator, which ranks stocks from 1 to 100 based on three criteria: 1) StarMine finds the analysts that have predicted earnings surprises in the past and then sees whether they are projecting more; 2) Recent increases to earnings estimates by analysts for the current quarter and year; 3) Positive changes in analyst recommendations.
We'll screen Canadian stocks that have a StarMine Indicator at the top of the range (90 or greater).
We'll also limit the screen to Canadian-listed companies with market caps greater than $250-million and coverage by at least three analysts.
What did we turn up?
The market tends to like companies with rising earnings estimates. Look for companies in this spreadsheet that are showing rising earnings estimates for the coming quarter and next year. Also, check out the column called "Smart estimate EPS this quarter" and compare it with "mean EPS estimate this quarter." The Smart estimate highlights analysts that have been right about earnings surprises in the past and shows how their current estimate for the quarter is different from the median or consensus number (a higher figure predicts a positive surprise).
Transat A.T. Inc. stands out on the list, as analysts have grown much more positive on the stock as of late and it appears the company could produce an earnings surprise next quarter if the Smart estimate is right. Transat also ranked highly in Tuesday's Number Cruncher, the CPMS's Bargain Model Portfolio. That screen found stocks trading at cheap price-to-book-value ratios, while also showing signs of improving earnings.
Desjardins analyst Martin Landry raised his rating on the tour operator's stock to "buy" from "hold" and his target to $17 from $12 last month on "its compelling valuation and operational momentum."
"Transat reported very strong results that were significantly higher than our expectations as well as consensus," he said. "The company benefited from reduced competition in the transatlantic market and from its unique product, which commands sustained pricing. We expect strong results in the fourth quarter for the same reasons."