The Globe and Mail attempts to identify cheap, low-beta Canadian
companies that offer value creating
economic performance in its Tuesday, March 17, edition. The Globe's guest columnist Nick Winch writes in the Number Cruncher column that he searched for Canadian companies
with a minimum market
cap of $500-million. He only considered stocks with a beta of one or less. He also considered future growth value divided
by market value (FGV/MV) of total capital. FGV/MV is a ratio that
helps determine whether the
stock is trading at a discount
or premium to the current
value of the company's operations.
Mr. Winch filtered for a maximum
premium of 25 per cent. He also looked for positive EVA (economic value
added) growth over the past
12-month and 24-month periods.
EVA is a measure of true
economic profit created by a
company. EVA is calculated by
subtracting capital charges
from the net operating profit
after tax. Mr. Winch only considered companies with a return on capital above 10 per
cent. Canadian stocks with value creating economic performance are CGI Group, Magna International, Exco Technologies, AutoCanada, Royal Bank of Canada and Open Text.
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