National Bank Financial - Wealth Management (NBFWM) is a division of National Bank Financial Inc. (NBF), as well as a trademark owned by National Bank of Canada (NBC) that is used under license by NBF. NBF is a member of the Canadian Investment Regulatory Organization (CIRO) and the Canadian Investor Protection Fund (CIPF), and is a wholly owned subsidiary of NBC, a public company listed on the Toronto Stock Exchange (TSX: NA). The information contained herein has been prepared by Eric Van Enk, Associate Portfolio Manager and Wealth Advisor at NBF. I have prepared this article to the best of my judgment and professional experience to give you my thoughts on various financial aspects and considerations. The opinions expressed represent solely my informed opinions and may not reflect the views of NBF. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. The opinions expressed do not necessarily reflect those of NBF.
O Canada
July 26, 2025, Insight from Eric Van Enk, Wealth Advisor & Portfolio Manager
O Canada | Kunz Financial Group
This week’s chart highlights earnings growth estimates for publicly traded companies in Canada (red), the U.S. (blue), Emerging Markets (light blue) and Europe, Australia & the Far East (grey). In the first column, the average annual earnings growth is displayed for each market over the last decade. Notice Canada is second only to the U.S. at 6% vs. 8%. Also notice that analysts expect Canadian publicly traded companies to realize superior earnings growth relative to the U.S. both this year and in 2027 (red bar above blue bar).
Source: National Bank Financial
The importance of this chart lies in the fact that earnings growth ultimately drives stock prices. Short-term movements in share prices can be caused by numerous factors. However, in the long term, earnings play a critical role in moving share prices higher or lower. Companies that increase their earnings over time generally experience rising share prices while those companies who can’t grow their earnings tend to see flat or lower share prices. Other factors that impact share prices include earnings multiple expansion and contraction, but earnings growth is typically an excellent indicator of a stock’s direction.
What makes this data even more interesting is Canadian stocks are currently trading at a meaningful discount to their global peers. Since 1998, Canadian stocks have traded between a ~20% discount on the low end to a ~20% premium on the high end relative to global peers. By our estimate, Canadian stocks are currently trading at a ~15% discount to the average multiple of stocks in other markets which is near the bottom end of the range over the last 30 years.
The combination of these two factors (superior earnings growth & valuation discount) makes a compelling case for the potential outperformance of Canadian stocks in the near-term. U.S. stocks have outperformed Canadian stocks both historically and recently due primarily to higher earnings growth from U.S. companies. Superior earnings growth south of the border can broadly be attributed to higher growth industries such as healthcare and technology which represent a larger portion of the U.S. stock market relative to the Canadian market. With earnings projections for Canadian companies expected to outpace their U.S. rivals this year and Canadian stocks appearing to be relatively inexpensive compared to global peers, the stage is set for the Canadian stock market to become the star of the show.
Eric Van Enk, Wealth Advisor & Portfolio Manager
National Bank Financial – Wealth Management
Medicine Hat, AB
