In this edition of ‘Stock Teasers’, we are going to be looking at Canadian stock outliers using a unique screener in each edition. The screeners have two main variables, of which will change each time, and the end goal is to find a group of stock outliers on the graph and identify why they might be outliers.

Canadian Stock Outlier Screener

We have used the following variables across the Canadian stock universe: EBIT Margin on the trailing twelve-month basis and 10-year Revenue CAGR. Combining two variables gave investors a good picture of how sustainably companies grew their topline over the years, and how profitable that growth has been translated to the bottom lines. By looking at the compounded annual growth rate (CAGR) in revenue over the last ten years and the EBIT margin in the last twelve months, investors could seek businesses that are potential candidates for above-average profitability profiles along with strong, sustainable growth.

We have outlined a set of stocks below that we have identified as ‘outliers’ on the scatter plot and drew special notice to one major outlier. This green-shaded area indicates stocks that offer a combination of attractive profitability and solid growth in fundamentals over the years.

Let’s take a closer look at some of the stocks which encompass this section of the graph. We can see TMX Group Limited (X), Canadian Apartment Properties Real Estate Investment Trust (CAR.UN), Wheaton Precious Metals Corp. (WPM), and TC Energy Corporation (TRP) are in this area. The common theme between these names is that they do possess a solid 10-year revenue growth and above-average operating margins relative to the rest of the companies.

A brief commentary on recent performance and an overview of what these companies do that may be driving these outlier growth estimates:

TMX Group Limited (X): X operates as exchanges and clearinghouses for capital markets primarily in Canada. X has operated in a favourable market structure over the years as one of the primary exchanges in Canada. The company is trading at 25.2x Forward P/E and organic growth over the next few years is expected to be in the range of 7%.

Canadian Apartment Properties Real Estate Investment Trust (CAR.UN): operates as one of Canada’s largest publicly traded owners of high-quality rental housing. CAR.UN owns more than 64,000 residential apartment suites, townhomes and manufactured home community sites, valued at approximately $16.5 billion worth of investment properties.

Wheaton Precious Metals Corp. (WPM): WPM produces and sells gold, silver, palladium and cobalt deposits. WPM is a capital-light play to the gold theme. The company has a strong balance sheet with a net cash position and is currently trading at a premium valuation of 41x Forward P/E.

TC Energy Corporation (TRP): Operates as an energy infrastructure company that owns natural gas pipelines. The company owns a network of 93,000 kilometres of natural gas pipelines, which, in some cases, are the sole source of distribution. TRP has a solid track record of dividend growth over the years, the 10-year dividend growth rate is around 7% on average.

Common Theme Among Canadian Stock Outliers

We hope that readers enjoyed this edition of ‘Stock Teasers’ talking about some of the Canadian stock outliers for 10-year revenue growth and above-average operating margin. A common theme among the stocks we highlighted is these businesses possess strong organic growth profiles, solid staying and pricing power that are highly sustainable. These companies are solid candidates for long-term holdings as they balance well between upside potential and downside protection. For other editions of our ‘Stock Teasers’, check out this latest blog on Stock Market Gems from /r/CanadianInvestor!

Unlock the Power of Informed Investing with 5i Research!

DIY investing doesn't have to mean going it alone. At 5i Research, we're your trusted partner in navigating the stock market. Our platform offers comprehensive stock and market research, empowering you to make smart investment decisions. 

• Investor Q&A: Have burning questions? Get answers from our team of experts and fellow investors in our dedicated Q&A section.
• Research Reports: With over 60 meticulously researched Canadian stocks, our reports offer in-depth analysis, giving you the confidence to invest wisely. 
• Model Portfolios, Alerts, Forums, Portfolio Tracking, and Much More...