What are we looking for?
Canadian companies with the strong balance sheets and cash flow to take advantage of uncertain markets.
The screen
Markets have become more volatile over the past year as investors weigh sticky inflation, shifting interest-rate expectations and rising geopolitical risk. While many companies respond to uncertainty by cutting spending, those with excess liquidity and strong returns on capital can instead play offence. As markets fall and valuations compress, well-capitalized companies can invest through the cycle and pursue acquisitions on favourable terms.
Using FactSet’s screening tool, I identified Canadian companies with the financial capacity to invest opportunistically by applying the following criteria:
- Traded on the S&P/TSX Composite;
- Market capitalization greater than $1-billion;
- Forecast 2026 free cash flow yield greater than 5 per cent;
- Cash and equivalents greater than short-term debt
- Return on invested capital greater than 10 per cent
The 10 remaining companies were ranked by three metrics: net short-term cash as a percentage of market capitalization, return on invested capital and forecast free cash flow yield.
What we found
Wesdome Gold Mines Ltd., a mining and exploration company, ranked No. 1 and stood out among the other six non-energy materials producers with the highest return on invested capital of 27.1 per cent. While many gold miners carry substantial debt to fund development projects, Wesdome’s strong cash balance of $265.9-million and negligible debt gives it flexibility to invest in new projects. Wesdome announced its operating results on Jan. 20, reporting record 2025 gold production and an optimistic 2026 forecast. With gold prices elevated and strong financial flexibility, it is well positioned to have a strong year ahead.
Constellation Software Inc., a software and services provider, ranked No. 6 and is the only technology company to pass the screen. Constellation implements a unique growth strategy, purchasing and integrating smaller software providers into its broader portfolio of tech companies. Its strong net short-term cash balance of $2.5-billion leaves it well positioned for a volatile market, as smaller software vendors facing uncertainty may be more willing sellers, feeding into Constellation’s acquisition strategy.
The information in this article is not investment advice. The author assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained above.
Arjun Deiva, CFA, is an MBA candidate at the University of California, Berkeley, Haas School of Business.