WHAT ARE WE LOOKING FOR?
This week, we've been exploring long-term trends in profit growth in an attempt to look past some of the short-term volatility that can rile share prices and cause investors unnecessary angst.
Cyclical trends, extraordinary items and other events can in some cases create a distorted picture of a company's financial health. We are trying to look past that and find companies that deliver consistent growth over time.
TODAY'S SCREEN
In trying to track down the companies that are delivering the most consistent growth over time on the TSX, we turned our eye to the compound annual growth rates for diluted EPS and started running the numbers on a three-year, five-year and 10-year basis - extraordinary items were excluded.
We set the bar very high, looking for companies that delivered better than 15-per-cent growth in each period.
Once we had our list of consistent performers, we sorted them by price-earnings ratio to figure out which ones were relatively cheap right now.
WHAT DID WE FIND?
It didn't come as a surprise that only 22 companies on the TSX made the cut. What was a surprise is how very different they all are from one another.
Energy heavyweight EnCana is the sort of name you might expect on this list, and with natural gas prices under pressure right now and the recession still playing itself out, it sits near the very top given our sort order. Canadian Natural Resources, Enbridge, Inter Pipeline and Major Drilling round out the contingent from the oil patch.
Brookfield Properties, with its exposure to real estate, interest rates and the economy, is in a different space than EnCana, but it similarly doesn't look out of place atop the list.
Stella-Jones makes power poles and other treated lumber products and, if you think it's surprising that a company in the forestry sector made it, consider that it's not alone - Sino-Forest, and its forests in China business model, also made the list.
Le Château seems to have sharply turned the season's fashions into a reliably profitable niche. Ritchie Bros. Auctioneers meanwhile has taken a different tack, reselling last season's things for a tidy profit year-in and year-out.