What are we looking for?
Canadian-listed companies that stand out across a broad range of fundamental and market-based measures. The screen is inspired by the Trading Central Quant Canada 50 Equity Index ETF (TCCA) methodology, which combines value, growth, quality, momentum and income factors to identify attractively positioned stocks.
The screen
We used Trading Central Strategy Builder to search for Canadian-listed stocks displaying a combination of size, quality and strong overall quantitative fundamentals.
We began with a minimum market capitalization of $1-billion and a share price above $5 to focus on larger, more established companies while excluding very small and low-priced stocks.
We then required both a Trading Central Quantamental Rating and a TC Quality Factor Rating of at least 50 out of 100. The Quantamental Rating combines 20 indicators spanning value, growth, quality, momentum and income, while the Quality Factor places additional emphasis on measures related to profitability, financial strength and capital efficiency.
For additional context, we included each company’s price-to-earnings ratio, dividend yield, year-to-date return and one-year return. These measures were not used as screening criteria but help compare valuation, income and recent share-price performance across the results.
The table shows the top 10 stocks returned by the screen.
More about Trading Central
Trading Central provides financial market research and investment analytics to online brokers and financial institutions. Its research and analytical tools cover stocks, exchange-traded funds, indexes, foreign exchange, options and commodities. Strategy Builder, Trading Central’s stock screener, is available through a number of retail brokerage platforms worldwide.
What we found
Topping our list is Quebecor Inc. QBR-B-T, a Canadian telecommunications and media company. With a TC Quantamental Rating of 59, the company stands out for a return on equity of 36.9 per cent and EPS growth of 25.5 per cent last quarter compared with the prior-year period, pointing to strong profitability and earnings growth. The stock has surged 64.8 per cent over the past year and 26.2 per cent year to date.
Lundin Gold Inc. LUG-T, a Canadian gold producer operating the Fruta del Norte mine in Ecuador, posted the highest TC Quantamental Rating on the list at 71, paired with the highest TC Quality Factor Rating at 90, reflecting a rare combination of overall fundamental strength and financial quality. The gold producer’s return on equity of 101 per cent stands out even among its peers, alongside EPS growth of 12.3 per cent last quarter versus the prior year and a dividend yield of 6.44 per cent, the highest on the list. The stock has pulled back 13.4 per cent year to date, though it remains up 23.2 per cent over the past year.
Bank of Montreal BMO-T, one of Canada’s largest diversified banks, holds a market capitalization of $179.22-billion, the largest on our list. With a TC Quantamental Rating of 51 and a TC Quality Factor Rating of 72, the bank posted a return on equity of 11 per cent, alongside EPS growth of 41.2 per cent last quarter versus the prior year and a dividend yield of 2.67 per cent. The stock climbed 40.9 per cent year to date and 62.2 per cent over the past year.
Trading Central Strategy Builder provides a backtesting capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 19-per-cent annualized return compared to 12 per cent for the S&P/TSX 60 Index.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of investing in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.