Dundee Industrial prepares to make splash with big IPOFrank Gunn/The Canadian Press
Buying stocks where the earnings growth outlook is improving is rarely a bad idea. We took a look at all S&P/TSX Composite constituents in search of companies with the biggest increases in earnings expectations for 2014.
These two tables show the domestic companies where, over the past three months, analysts have changed their 2014 earnings predictions by the greatest percentage – both raised and lowered.
Some of the results are less interesting than it appears at first glance. The 131 per cent jump for Crew Energy Inc, for instance, looks amazing until we realize that expectations increased from a loss of $0.0625 to a gain of $0.0325 – an eight cent swing is not as exciting the percentage figure.
The same pattern is true on the second table where the revised expectations for Athabasca Oil Corp. are not quite as dire as the negative 412 per cent figure indicates – 2014 earnings expectations went from $0.0325 to a loss of $0.14.
Readers will have to be careful about jumping to conclusions where small numbers are involved, but there's still a lot to chew on here. The seven per cent hike in growth predictions for Magna is worth further study – the stock has already performed extremely strongly – and the outlook is clearly brightening for SNC-Lavalin as well.
The table listing companies with the greatest reduction in expected profits shows the sheer carnage in precious metals stocks. Reitman's suggests growing pressure on Canadian retail stocks and Potash's future remains murky.
The first table is, I think, a good place to start researching new investment opportunities. Investors caught with stocks where the forecast is deteriorating can use the second table to help make the decision as to whether to sell, or hang on in the hopes of improvement.
Scott Barlow is a contributor to Globe Unlimited. Click here to read more of his work, and follow Scott on Twitter at @SBarlow_ROB.
Scott Barlow