Peter Ashton is vice-president of client services at Recognia Inc.
What are we looking for?
Large-cap Canadian financial stocks poised for continued growth.
Financials make up the largest component of the Canadian market with a 33.7-per-cent weighting in the S&P/TSX composite index. The financial sector has returned approximately 6.8 per cent year-to-date.
The screen
We will be using Recognia Strategy Builder to search for Canadian financial stocks with above average growth prospects.
We begin by setting a minimum market capitalization threshold of $1-billion to focus on larger, more established companies in the sector. Next, we will look for companies with an above average return on equity, specifically those with ROE greater than 15 per cent.
Finally, to zero in on stocks with room to appreciate based on growing earnings, we will select stocks with a projected earnings growth rate of at least 10 per cent versus the prior year.
Strategy Builder ranks stocks based on how closely each stock matches all the various criteria in the strategy.
More about Recognia
Recognia is a global leader in quantitative and technical analysis. It is accessible by more than 20 million investors and traders worldwide through leading retail online brokers. Recognia covers 85 exchanges worldwide, and analyzes 65,000 instruments daily including stocks, indexes, ETFs, currencies and futures.
What did we find?
CI Financial Corp. is one of Canada's largest investment fund companies. CI Financial ranks No. 1 on our screen and has the highest projected earnings growth of 44.7 per cent based on analysts' estimates.
Royal Bank of Canada is the country's biggest company by market cap. RBC has projected earnings growth of 22 per cent this year, which places it in the top half of all companies trading on the TSX.
First National Financial Corp. is Canada's largest non-bank mortgage lender. The company ranks No. 7 on our screen and has the highest return on equity at 57.7 per cent.
Historical performance
Recognia Strategy Builder provides a back-testing capability to evaluate how well an investing strategy would have worked in the past. Using a five-year historical period with quarterly rebalancing, the screen described had a 17.9 per cent annualized return over the period compared to 8.0 per cent for the S&P/TSX composite and 6.8 per cent for the S&P/TSX 60.
The investment ideas presented here are for information only. Investors should conduct further research before investing.
Canadian financial stocks with above average growth prospects
| Rank | Company | Ticker | Market Cap. ($-bil) | ROE (TTM) % | Projected Earnings Growth (This Year vs Last Year) % |
|---|---|---|---|---|---|
| 1 | CI Financial Corp. | CIX-T | 10.0 | 33.5% | 44.7% |
| 2 | Power Corp. of Canada | POW-T | 13.7 | 31.6% | 21.5% |
| 3 | Royal Bank of Canada | RY-T | 109.9 | 21.9% | 22.0% |
| 4 | Power Financial Corp. | PWF-T | 23.6 | 23.4% | 20.5% |
| 5 | Home Capital Group Inc. | HCG-T | 3.3 | 29.0% | 27.6% |
| 6 | Great-West Lifeco Inc. | GWO-T | 30.1 | 16.1% | 21.4% |
| 7 | First National Financial Corp. | FN-T | 1.3 | 57.7% | 24.6% |
| 8 | Bank of Nova Scotia | BNS-T | 86.6 | 17.8% | 15.7% |
| 9 | IGM Financial Inc. | IGM-T | 12.9 | 19.1% | 15.2% |
| 10 | Toronto-Dominion Bank | TD-T | 101.2 | 15.6% | 16.4% |
| 11 | Canadian Western Bank | CWB-T | 3.2 | 18.6% | 18.8% |