what are we looking for
Canada-listed stocks with high analyst sentiment in a rising interest rate environment.
Since March, bank of canada added the country’s interest rate Seven Strikes Rapid Rise inflation. In theory, given the number of rate hikes in a short period of time, the stock market should have seen a sharp decline. However, total returns for Canada’s main index, the S&P/TSX Composite, were only marginally lower, down 3.9% since the first rate hike on March 2. The central bank also signaled that rate hikes may be nearing the end. With uncertainty in the market, it can be difficult to think about where to invest in stocks.
Today, we use StarMine’s Analyst Revision Model (ARM) to analyze analyst sentiment over the past 60 days, which includes the two most recent rate hikes. Inputs to the model include analyst revisions to estimates and recommendations, with greater weight given to analysts who have historically forecasted more accurate and timely forecasts.
- First, we screen for Canadian-listed stocks with a market capitalization greater than $3 billion.
- Next, we filter for companies with an Analyst Revisions Model score of 80 or higher. The ARM Score is a stock ranking based on the percentile (1-100) change in analyst sentiment. The model looks at changes in sell-side analysts’ estimates for earnings, revenue, and EBITDA, as well as changes in those analysts’ buy/hold/sell recommendations. ARM is highly predictive of stock price movements.
- Finally, we filter for companies with positive ARM Score growth over the past 60 days.
More about Refinitiv
Refinitiv, a London Stock Exchange Group company, is one of the world’s largest providers of financial market data and infrastructure, serving more than 40,000 institutions worldwide. Refinitiv delivers the information, insights and technology that drive innovation and performance in the global financial markets, enabling the financial community to transact smarter and faster, overcome regulatory challenges and scale intelligently.
what we found
The screen ranks nine companies based on change in 60-day scores from StarMine’s analyst revision model. There are two to emphasize here:
Cartesian Systems Group Inc. DSG-T is a technology company based in Waterloo, Ontario, specializing in on-demand software. It saw the largest improvement in the ARM score, rising 30 points in 60 days, raising the company’s score to 80. Descartes released its third-quarter financial results on Dec. 7, reporting earnings of 31 cents a share, up 12 percent from expectations. The surprise caused analysts to revise forward-looking EPS figures upward, boosting the company’s ARM score.
finning international corp., FTT-T One Caterpillar equipment dealer improved its ARM score by 17 points in 60 days, raising its score to 97, the highest score on our list. The biggest change in score occurred after the November 7 earnings report. The Vancouver-based company reported improvements in earnings per share, EBITDA and revenue, leading analysts to upgrade future forecasts for each number. Finning has beaten earnings estimates for six straight quarters, including earnings per share, which topped consensus estimates by nearly 33% in its most recent earnings report.
Investors are advised to conduct their own research before trading any securities shown.
Erik Foo, CFA, is a propositional sales specialist at Refinitiv, responsible for research and portfolio management sales.