Pendulum

Donville Kent Asset Management

Jason Donville

Research

9 Pages

Donville Kent explores how slowing demographics and accelerating innovation could reshape Canadian equity leadership after the 2015 correction. The piece argues many high ROE growth companies traded at recession level valuations, with 20 of Canada’s fastest growing stocks priced below 10x 2016 earnings.

Key Takeaways

Growth Valuation Disconnect: The cheapest quartile of Canada’s Fast 40 traded at just 4.7x 2016 cash earnings, while the second quartile traded at 8.2x earnings.
Innovation Driving Leadership: Technology and healthcare represented 55% of the Fast 40 versus only 6.1% of the TSX 60, highlighting a major shift in growth exposure.
High ROE Opportunities: Concordia Healthcare traded at 3.6x 2016 earnings with projected 21% ROAE, while Valeant posted the highest ROAE/PE ratio at 9.8.
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