What are we looking for?
Canadian equities with strong growth and value factors as markets trade at or near record highs.
With equity markets testing elevated levels, investors face a challenging environment where overpaying for growth carries real consequences. In times like these, quality matters. We screened the Toronto Stock Exchange for stocks that combine high overall Trading Central quantamental scores with strong rankings across both growth and value factors to find names that offer earnings momentum without demanding a premium price. The result is a list of financially sound, growth-oriented Canadian equities that our model believes are reasonably valued relative to their peers.
The screen
Using Trading Central’s Strategy Builder, we screened TSX-listed equities for stocks with a TC Quantamental Rating of at least 50 out of 100, a TC Value Factor Rating of at least 50, and no minimum threshold on the TC Growth Factor Rating, allowing the composite quantamental score to do the heavy lifting on quality. We also applied a minimum market capitalization of $2-billion to focus on established, liquid names.
The TC Quantamental Rating combines five fundamental factors – growth, value, quality, momentum, and income – into a single composite score that ranks stocks relative to their sector peers. A score above 50 indicates an above-average position within the peer group.
More about Trading Central
Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Its product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder, our stock screener is available through leading retail brokers in Canada and worldwide.
What we found
Topping our list is Teck Resources Ltd, one of Canada’s largest diversified mining companies. Teck tops the list owing to its strong growth metrics and price performance momentum. The company delivered earnings-per-share (EPS) growth of 128.8 per cent last quarter compared to the prior year, with a very strong growth factor score of 92 and quality factor of 77. The stock has surged 41.7 per cent year-to-date and 83.4 per cent over the past year.
B2Gold Corp is a low-cost international gold producer with mines in Mali, Namibia, and the Philippines. It earns the highest TC Quantamental Rating in the screen at 70 out of 100, underpinned by the highest growth factor score of 93. The company delivered exceptional earnings momentum last quarter, with EPS growing 250 per cent and revenue up more than 117 per cent year-over-year. The stock trades at just 12 times earnings with an earnings yield of 8.3 per cent and a return on equity of 14.8 per cent, offering a compelling valuation profile for a gold producer with a 1.72-per-cent dividend yield.
Open Text Corp. is a Canadian enterprise software company specializing in information management and AI-powered cloud services. It earns the highest value factor score in the entire screen at 89 out of 100, reflecting a deeply discounted valuation relative to peers despite solid fundamentals. The stock has pulled back 24.6 per cent year-to-date, making it the screen’s contrarian name, yet the underlying business generates a strong earnings yield of 8.7 per cent and a return on equity of 12.8 per cent. The stock trades at 11.5 times earnings, carries a 4.56-per-cent dividend yield, and has been actively reducing its share count. Shares outstanding have declined approximately 6.7 per cent over the past year, signalling management confidence in the business.
Notably, 10 of the 14 stocks in our screen are current holdings in the Trading Central Quant Canada 50 Equity Index ETF, including all three featured names. The ETF is designed to replicate, to the extent possible, the performance of the Solactive TC Quant CA 50 Index, which selects the top 50 Canadian-listed companies with the strongest blend of valuation, growth, quality, momentum, and income – the exact framework behind TC’s Quantamental Rating. The index is up 15.14 per cent year-to-date, with a long-term annualized return of 45.07 per cent since inception, offering a simple, rules-based way to own a diversified portfolio built on the same strategy highlighted in this Number Cruncher.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.
Gary Christie is head of North American research at Trading Central in Ottawa.
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