The Globe and Mail attempts to identify large-cap Canadian companies
offering robust economic performance
and high free cash
flows in its Tuesday, April 12, edition. The Globe's Jean-Didier LaPointe writes in the Number Cruncher column that he screened for stocks using the following
criteria:
A minimum market cap of
$1-billion;
an economic performance index,
or EPI (return on capital
divided by cost of capital), of one
or higher. An EPI ratio of one or
more indicates a company's capacity
to create wealth for its
shareholders (a higher EPI displays
a greater rate of wealth creation);
a return on capital of 12 per
cent or higher;
a five-year average return on
capital of 12 per cent or higher;
a free-cash-flow-to-capital ratio
of 5 per cent or higher. This ratio
gives a sense of how well the
company uses the invested capital
to generate free cash flow,
which could be used to stimulate
growth or reduce debt;
positive annualized dividend
growth rate over one-, two-,
three- and four-year horizons;
and all companies must pay a dividend. Companies with robust performance are Saputo, Ritchie Bros. Auctioneers, Lucara Diamond, Magna International, Gildan Activewear and Centamin.
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