Stock Investing

A summary of Morningstar analyst reports from our Canadian coverage universe
By Morningstar | 01/09/17

At the heart of our valuation system is a detailed projection of a company's future cash flows, resulting from our analysts' research. Analysts create custom industry and company assumptions to feed income statement, balance sheet and capital investment assumptions into our globally standardized, proprietary discounted cash flow (DCF) modelling templates. We use scenario analysis, in-depth competitive advantage analysis and a variety of other analytical tools to augment this process. Moreover, we think analyzing valuation through discounted cash flows presents a better lens for viewing cyclical companies, high-growth firms, businesses with finite lives (e.g., mines) or companies expected to generate negative earnings over the next few years. That said, we don't dismiss multiples altogether but rather use them as supporting cross-checks for our DCF-based fair value estimates. We also acknowledge that DCF models offer their own challenges (including a potential proliferation of estimated inputs and the possibility that the method may miss short-term market price movements), but we believe these negatives are mitigated by deep analysis and our long-term approach.

About the Author
Morningstar Research Inc. is a Canadian subsidiary of Chicago-based Morningstar, Inc., a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions.

Morningstar's equity research group believes that a company's intrinsic worth results from the future cash flows it can generate. The Morningstar Rating for stocks identifies stocks trading at a discount or premium to their intrinsic worth -- or fair value estimate, in Morningstar terminology. Five-star stocks sell for the biggest risk-adjusted discount to their fair values, whereas 1-star stocks trade at premiums to their intrinsic worth.

Four key components drive the Morningstar rating: (1) our assessment of the firm's economic moat, (2) our estimate of the stock's fair value, (3) our uncertainty around that fair value estimate, and (4) the current market price. This process ultimately culminates in our single-point star rating.

Basic Materials

 Agnico-Eagle MinesAEM
 Agrium Inc.AGU
 Barrick Gold CorporationABX
 Cameco CorpCCO
 Canfor CorpCFP
 Eldorado Gold Corp.ELD
 First Quantum Minerals Ltd.FM
 Goldcorp, Inc.G
 Iamgold Corp.IMG
 Kinross Gold Corp.K
 Norbord Inc.OSB
 Potash Corporation of Saskatchewan, Inc.POT
 Teck Resources Ltd.TCK.B
 West Fraser TimberWFT
 Yamana Gold Inc.YRI

Communication Services

 Quebecor Inc.QBR.B
Rogers Communications, Inc.RCI.B
 Shaw Communications Inc.SJR.B

Consumer Cyclical

Gildan Activewear, Inc.GIL
Magna International Inc.MG
 Restaurant Brands International IncQSR
 Canadian Tire Corp LtdCTC.A

Consumer Defensive

George Weston Ltd.WN
Loblaw Companies Ltd.L
Metro Inc.MRU
Saputo, Inc.SAP


ARC Resources Ltd.ARX
Canadian Natural Resources Ltd.CNQ
Cenovus Energy, Inc.CVE
 Crescent Point Energy CorpCPG
Enbridge, Inc.ENB
Encana Corp.ECA
Husky Energy, Inc.HSE
Imperial Oil Ltd.IMO
 Inter Pipeline LtdIPL
Keyera Corp.KEY
MEG Energy Corp.MEG
Pembina Pipeline Corp.PPL
Peyto Exploration & Development Corp.PEY
 Precision Drilling CorpPD
Suncor Energy Inc.SU
Tourmaline Oil Corp.TOU
TransCanada Corp.TRP

Financial Services

AGF Management LimitedAGF.B
Bank of MontrealBMO
Bank of Nova ScotiaBNS
Canadian Imperial Bank of CommerceCM
CI Financial Corp.CIX
Fairfax Financial Holdings Ltd.FFH
Great-West Lifeco Inc.GWO
IGM Financial Inc.IGM
Manulife Financial Corp.MFC
National Bank of CanadaNA
Power Corporation of Canada.POW
Power FinancialPWF
Royal Bank of CanadaRY
Sun Life Financial Inc.SLF
Toronto-Dominion BankTD

Health Care

Valeant Pharmaceuticals International Inc.VRX


Air CanadaAC.B
Bombardier Inc.BBD.B
Canadian National Railway CoCNR
Canadian Pacific Railway Ltd.CP
 Ritchie Bros Auctioneers Inc.RBA
SNC-Lavalin GroupSNC
 Thomson Reuters Corp.TRI
Westjet Airlines Ltd.WJA


BlackBerry LtdBB
CGI Group, Inc.GIB.A


Fortis, Inc.FTS
TransAlta CorporationTA

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