The S&P/TSX Composite Index rose 0.63% and is nearing the 16,000-point mark as of close on February 19. On Tuesday, I’d asked whether investors should be concerned about the TSX index’s valuation in early 2019. The index looks broadly overbought after a big rally to start the year.
Today, we are going to look at three Canadian giants that have high valuations in late February. Shareholders and potential buyers should monitor these stocks closely as we move into the spring.
Constellation Software (TSX:CSU) Constellation Software is a Toronto-based company that develops and customizes software for public and private sector market. Shares have surged 29.5% in 2019 as of close on February 19. The stock is up 35% year over year.
Constellation benefited from a good fourth-quarter and full-year report, which was released on February 13. Revenue rose 21% year over year to $831 million, and adjusted EBITDA increased 29% to $226 million. Constellation has generated growth through an aggressive acquisition strategy but appears to be gearing up to divert more capital to reward shareholders in 2019. Shares have soared 350% over the past five years, putting Constellation in elite company.
The stock had an RSI of 73 as of close on February 19, which indicates that the stock is overbought right now.
Loblaw Companies (TSX:L) Loblaw is the largest food retailer in Canada. Shares have increased 9.1% in 2019 as of close on February 19. The stock is up 1.2% year over year.
Loblaw is expected to release its fourth-quarter and full-year results on February 21. In the third quarter, the company saw adjusted earnings rise 2.4% from the prior year to $562 million. Like its peers, Loblaw has been forced to contend with intensified competition in the grocery retail sector. Grocery retailers are aggressively pursuing an e-commerce strategy, which will transform the business in the coming years.
Loblaw has flirted with overbought signals since November, but the stock continues to build momentum. As of this writing, the stock had an RSI of 69, which is just outside overbought territory. Retail sales at supermarkets experienced a 1.2% drop in activity in November 2018. Investors should exercise caution ahead of its Q4 2018 report.
Air Canada (TSX:AC)(TSX:AC.B) Air Canada is the largest airline in the country. Shares have climbed 27.2% in 2019 so far. The stock is up 34% year over year. Air Canada has been on an absolute tear since late December. In January, I’d discussed the risk for the airline industry in a choppy economic environment. However, Air Canada has proven impervious to headwinds, and its earnings have been stellar, even with rising fuel costs.
In 2018, Air Canada reported record system passenger revenues of $16.22 billion. The company carried a record 50.9 million passengers last year. Air Canada stock hit an all-time high of $33.92 early in yesterday’s trading session. Shares last boasted an RSI of 83, indicating the stock is deep in overbought territory in late February.
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. Constellation Software is a recommendation of Stock Advisor Canada.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019