Canadian equity research

A summary of Morningstar analyst reports from our Canadian coverage universe

Morningstar 1 September, 2017 | 5:00PM
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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.

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 Mines AEM
 Agrium Inc. AGU
 Barrick Gold Corporation ABX
 Cameco Corp CCO
 Canfor Corp CFP
 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 Timber WFT
 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 Inc QSR
 Canadian Tire Corp Ltd CTC.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 Corp CPG
Enbridge, Inc. ENB
Encana Corp. ECA
Husky Energy, Inc. HSE
Imperial Oil Ltd. IMO
 Inter Pipeline Ltd IPL
Keyera Corp. KEY
MEG Energy Corp. MEG
Pembina Pipeline Corp. PPL
Peyto Exploration & Development Corp. PEY
 Precision Drilling Corp PD
Suncor Energy Inc. SU
Tourmaline Oil Corp. TOU
TransCanada Corp. TRP

Financial Services

AGF Management Limited AGF.B
Bank of Montreal BMO
Bank of Nova Scotia BNS
Canadian Imperial Bank of Commerce CM
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 Canada NA
Power Corporation of Canada. POW
Power Financial PWF
Royal Bank of Canada RY
Sun Life Financial Inc. SLF
Toronto-Dominion Bank TD

Health Care

Valeant Pharmaceuticals International Inc. VRX


Air Canada AC.B
Bombardier Inc. BBD.B
Canadian National Railway Co CNR
Canadian Pacific Railway Ltd. CP
 Ritchie Bros Auctioneers Inc. RBA
SNC-Lavalin Group SNC
 Thomson Reuters Corp. TRI
Westjet Airlines Ltd. WJA


BlackBerry Ltd BB
CGI Group, Inc. GIB.A


Fortis, Inc. FTS
TransAlta Corporation TA

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BlackBerry Ltd3.78 CAD-10.21Rating
BRP Inc97.25 CAD1.11Rating
Cameco Corp66.60 CAD-2.49
Canadian Tire Corp Ltd Class A127.77 CAD-0.04Rating
Canfor Corp14.86 CAD-2.17Rating
Crescent Point Energy Corp11.73 CAD-2.82
Precision Drilling Corp95.04 CAD-2.36
Quebecor Inc Shs -B- Subord.Voting29.56 CAD-0.50Rating
Restaurant Brands International Inc97.22 CAD-0.98Rating
Ritchie Bros Auctioneers Inc100.70 CAD0.05Rating
Thomson Reuters Corp210.31 CAD0.20Rating
West Fraser Timber Co.Ltd108.24 CAD-0.70Rating

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