Are Royal Bank Of Canada's Fundamentals Too Stellar To Ignore?
Most U.S. investors rarely if ever think about buying shares of foreign companies. This tendency, called home country bias, is understandable as people prefer to park their money in familiar terrain. But it can be a mistake. Last year, Canadian stocks outperformed their U.S. counterparts by almost 2-to-1, as Prime Minister Mark Carney's plans to deregulate and reinvigorate Canada's economy resonated with investors.
But while Canada's equity benchmark, the S&P/TSX Composite, returned 29% in 2025, there were some notable outperformers. At the top of my list is Royal Bank of Canada (NYSE: RY), a $246 billion Toronto-based bank that's gained 46% during the past 12 months. With 34% of its 2024 revenue coming from wealth management, 30% from personal banking, 21% from capital markets, and 15% from commercial banking and insurance, the bank's business model is well diversified and offers geographic diversification for U.S. investors. Here's why this company's fundamentals are too stellar to ignore.
Operating margin refers to the percentage of revenue that a company retains after operating expenses, from salaries to utility bills and overhead, are paid. It's useful for comparing profitability of companies across industries, and the average S&P 500 company has an operating margin of 13.2% as of January.
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