What are we looking for?
Artificial Intelligence at Report on Business creates a fundamental price valuation for every Canadian stock after the markets close each day. Then it sorts them out to look for potentially underpriced winners.
The screen
Despite the fact there are only 70 large caps in Canada (8 per cent of the TSX), these companies are household names. Large caps are valued at more than $2-billion and are attractive for investors because they are typically lower-risk, more liquid and commonly owned by institutions.
- AI at ROB analyzed all large caps to find differences between their latest traded values and their estimated valuations.
- This analysis helps investors find investment opportunities by taking advantage of the gaps between a company’s intrinsic value and its current value.
- Valuations are generated using a proprietary algorithm from as many as six data calculations with an approach that has been historically correct 78 per cent of the time.
What we found
The list is sorted by stocks with the greatest percentage difference between valuation and price. Companies on this list are worthy of further research, including:
- CIBC (CM-T) leads all big banks at 13 per cent undervalued. Its share price is down 18 per cent from a year ago and down 10 per cent against the banks index over the same period (TXBA-I). Like other banks on this list, it is being affected by variable interest rates and general anxiety about banks. Long investors bullish on CIBC should expect a reversion to the mean due to strength in the bank’s size and balance sheet.
- Franco-Nevada (FNV-T) is considered 12 per cent undervalued and riding a 19 per cent growth in share price over 52 weeks. It is well diversified in terms of ore, silver and platinum production and a favourite of institutions and funds. For investors looking for a way to gain exposure to precious metals, its high price has them asking if there is still room to grow.
- Nutrien (NTR-T) is the world’s largest fertilizer producer. On balance it stands out with a 4.8 P/E, 3.2 per cent yield and 12 per cent room to grow in terms of valuation. These numbers are due to strong 2022 profits, the result of geopolitical increases in the cost of energy that markets don’t expect to continue. It is trading near its 52-week low, having lost 35 per cent of its value, with investors waiting for a rebound.
More about Artificial Intelligence at Report on Business
Artificial Intelligence at Report on Business scans market data using algorithms to process large quantities of information. The results are specialized reports produced through automation.
Continuing ROB project experiments that leverage artificial intelligence include valuation screens across 14 categories and end-of-day closing summary reports for all North American securities.