What are we looking for?
With the markets at or near all-time highs, is it time to shift some of our winners to more defensive names to protect capital and generate dividends? Let’s look at stocks that fall into the consumer defensive (also called consumer staples) sector and what valuations and dividends are for this group.
The screen
We used StockCalc’s screener to select the top 10 listed consumer defensive stocks by market capitalization on the TSX. We then used StockCalc’s valuation models to calculate fundamental (or intrinsic) valuation for each stock to see if they are undervalued or overvalued compared with current price.
Overview of the techniques used:
- Discounted cash flow (DCF value) is a valuation technique in which cash-flow projections are discounted back to the present to calculate value per share;
- A price comparables (price comps) technique values the company on the basis of ratios from selected comparable companies;
- An adjusted book value (ABV) is calculated by multiplying book value per share by its 10-year average price-to-book ratio.
- If we have analyst coverage, we may include the consensus target price in our valuation.
More about StockCalc
StockCalc is a fundamental valuation platform with tools to calculate and report on value per share for thousands of public companies listed on major North American stock exchanges. StockCalc also contains numerous tools to understand what the stocks you are investing in are worth. Globe Unlimited subscribers can subscribe to StockCalc using the promo code Globe30, which offers a 30-day free trial and special pricing for the second month.
What we found
The consumer staples sector comprises companies in the packaged foods, grocery stores and beverages industries. The sector also includes discount stores and household and personal products. The names on the list are ones we are very familiar with.
This group of stocks collectively increased by 4 per cent on average over the past 12 months and had an average dividend of just over 2 per cent for a total return of just over 6 per cent. That compares to the broader TSX index which was up almost 30 per cent in the same time period. This sector has a beta traditionally between 0.6 and 0.8. (Beta measures how much a stock or sector’s price moves compared with the overall market, which has a beta of 1.0). A beta less than 1.0 means the stock (sector) has lower highs and higher lows than the market it is compared with.
All stocks on the list pay a dividend and the analyst targets are all above current price, whereas our valuations are a mix of above and below current. Let’s look at a couple of these companies.
George Weston (WN-T) is a holding company that controls majority stakes in retailer Loblaw and in Choice Properties, a real estate investment trust. Loblaw boasts the largest retail footprint across Canada with more than 2,500 food retail and pharmacy stores under banners such as Loblaws, No Frills, Maxi and Shoppers Drug Mart. Choice Properties REIT owns and manages more than 700 commercial and residential properties in Canada. Our models as well as analyst consensus show upside to current price for WN-T. Given our overall valuation for Loblaw (L-T) is near current price but our valuation for Weston is above the current price, the difference between the two must be in the value of the real estate holdings.
Premium Brands (PBH-T) owns a broad range of specialty food manufacturing and food distribution businesses with operations in Canada and the United States. All of our models as well as analyst consensus show Premium Brands to be undervalued. They will be releasing second-quarter 2026 results on Thursday, Aug. 6.
You can see in the accompanying table the percentage difference between each stock’s recent closing price and its intrinsic value. The “StockCalc Valuation” column is a weighted calculation derived from the models and analyst target data if used.
Investing involves risk. StockCalc accepts no liability whatsoever for any loss or damage arising from the use of this analysis.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.
