5 Canadian Small Cap Stocks with the Best Return on Equity

The Canadian small cap stocks on our list have put their capital to good use

SmallCapPower | July 24, 2017: Return on Equity (ROE) is a measure of profitability that calculates how many dollars of profit a company generates per dollar of equity. ROE is calculated by taking net income and dividing it by shareholders’ equity. A high ROE is usually correlated with strong management, as it shows they have allocated shareholders’ capital to high return projects. Today we have identified five Canadian small cap stocks with leading ROE ratios.

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Computer Modelling Group Ltd. (TSX: CMG) – $9.58

Computer Modelling Group Ltd. (CMG) is a Canada-based computer software technology company serving the oil and gas industry. The Company operates through the development and licensing of reservoir simulation software segment. The Company is a supplier of process reservoir modelling software with a blue chip customer base of international oil companies and technology centers in approximately 60 countries. The Company also provides professional services consisting of specialized support, consulting, training and contract research activities.

  • Market Cap: $763,699,666
  • EPS (LTM): $0.31
  • ROE (LTM): 41%

Equitable Group Inc. (TSX: EQB) – $55.67
Consumer Lending

Equitable Group Inc. is a financial services business that operates through its wholly-owned subsidiary, Equitable Bank (the Bank). Equitable Bank serves retail and commercial customers across Canada with a range of savings solutions and mortgage lending products, offered under the Equitable Bank and EQ Bank brands. Equitable Bank provides mortgage loans to a range of customers that include business-for-self borrowers, newcomers to Canada and commercial real estate investors. The Bank also provides Canadians with various saving options that offer security and attractive interest rates, including Guaranteed Investment Certificates (GICs), High Interest Savings Accounts (HISAs) and deposit notes.

  • Market Cap: $917,310,998
  • EPS (LTM): $9.31
  • ROE (LTM): 17%

goeasy Ltd. (TSX: GSY) – $27.44
Consumer Lending

goeasy Ltd. is a Canada-based full-service provider of goods and alternative financial services. The Company is engaged in providing loans and other financial services to consumers, and leasing household products to consumers. It operates in two segments: easyfinancial and easyhome. Its easyhome segment consists of four product categories: furniture, electronics, computers and appliances, which are offered under weekly or monthly leasing agreements. easyhome operates through both corporately owned stores located across Canada and through a network of franchised locations. Additionally, it operates an e-commerce platform that allows customers to enter into merchandise leasing transactions through online channels.

  • Market Cap: $367,472,584
  • EPS (LTM): $2.44
  • ROE (LTM): 17%

Martinrea International Inc. (TSX: MRE) – $10.79
Auto, Truck & Motorcycle Parts

Martinrea International Inc. is a Canada-based company engaged in the development and production of metal parts, assemblies and modules, fluid management systems and complex aluminum products focused primarily on the automotive sector. The Company’s segments are North America, Europe and Rest of the World. It serves various vehicle manufacturers, as well as automotive suppliers and also serves other industrial sectors across the world. The Company’s products are suspension and chassis metal components; body and structure metal components; aluminum components; chassis modules; fluid and air handling systems, and fabricated assemblies. It also provides custom parts and assemblies’ production for lower volume assembly lines, such as bus, recreational vehicles, air conditioning systems, military applications and farm appliance manufacturing.

  • Market Cap: $933,466,282
  • EPS (LTM): $1.59
  • ROE (LTM): 17%

First National Financial Corp. (TSX: FN) – $26.44
Corporate Financial Services

First National Financial Corporation is a Canada-based parent company of First National Financial LP (FNFLP), which is an originator, underwriter and servicer of prime residential (single-family and multi-unit) and commercial mortgages. The Company operates through two segments: Residential (which includes single-family residential mortgages) and Commercial (which includes multi-unit residential and commercial mortgages). The Company provides mortgage-financing solutions to the mortgage market in Canada. The Company also invests in short-term mortgages, usually for six- to 18-month terms. The Company provides underwriting and fulfilment processing services to a mortgage originator using the mortgage broker distribution channel.

  • Market Cap: $1,585,538,823
  • EPS (LTM): $2.85
  • ROE (LTM): 18%

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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