This is the place where I put the Fundamental Analysis posts.
Monday, March 20, 2017
Today I would like to look at fundamental analysis of The Cato Corporation (ticker: CATO).
Valuation
The company is an extremely well run apparel business based in North Carolina.
The trailing P/E value is 9.0 and if you look at the preceding three years’ earnings the P/E comes in at 10.1.
The Price to Book is a healthy 1.5.
Balance sheet
The company has a healthy looking Balance sheet with a Working capital of $280 million and Net working capital of $242 million.
The Debt to Equity ratio is 0.56 which is considered as low risk.
Cash flow and dividend
The Free cash flow is $67 million and the company pays out a dividend of $1.20 per share.
The company only has three years’ history of paying out uninterrupted and increasing dividends, but this is misleading because the dividends have been paid for more than 15 years.
The current dividend yield is 5.5% which is good.
My recommendation:
At these prices The Cato Corporation is a BUY.
Wednesday, March 15, 2017
Today I would like to look at fundamental analysis of American Railcar Industries (ticker: ARII).
The company designs and manufactures hopper and tank railcars. It is based just outside of St. Louis in Missouri and had a Total Revenue last year of $640 million.
Valuation
The company seems reasonably priced at a trailing P/E ratio of 10.5.
The P/E for the average three preceding years come in even better at 7.9.
The Cyclically Adjusted Price Earnings (CAPE) ratio is 15.4 which is not extreme in any way.
At current prices you are paying 1.4 times Book Value.
Balance Sheet
If we then look at the Balance Sheet we can see that the Debt to Equity ratio is 1.65 which is high, but not extreme.
Most of this debt is in the form of bonds so it is not something that needs to be rolled over every year which is a good thing.
The Working Capital to Debt is 0.3 which is a little bit low, but not out of the ordinary.
Cash Flow and Dividend
The Free Cash Flow is $157 million which equates to about $8 per share.
That means that the company can pay out a generous dividend of $1.60 per share and the dividend yield is 4.1 percent at these prices.
The dividend history of uninterrupted and increasing dividends is 4 years which is also reasonable.
My recommendation:
At these prices American Railcar Industries is a BUY.
Monday, March 13, 2017
Today I would like to look at fundamental analysis of one the best ran British small-cap stocks, Treatt Plc.
Valuation
As always I prefer first to look at the valuation numbers and here it becomes clear that the stock is expensive.
You have to pay a hefty 28.8 times the trailing earnings for the stock.
When you look at the average three preceding years, the stock is even more expensive at 32.7 times trailing earnings.
Already here I would hesitate, but it gets worse. At these market prices, you are paying 5.2 times Book Value which obviously is not cheap.
Balance Sheet
The Balance Sheet looks far better. The Debt to Equity ratio is 0.9 and the Working Capital to Debt is 1.1.
The ratio between Current Assets and Current Liabilities is 3.3 which is very good.
Treatt Plc. has a Net Working Capital of £21,000,000 which equates to about 40p per share.
Dividends
The dividend history looks good with more than 15 years of non-interrupted and increasing dividends.
The current dividend yield is only 1.3 percent which obviously is a reflection of the high price.
Conclusion:
If you already own Treatt Plc. by all means keep the stock, but if you do not I wouldn’t buy it at these prices.
The Balance Sheet looks very good, but I would not buy the assets at this price.
The company has a good dividend history, but the feeble yield is a reflection of the price.
Thursday, February 23, 2017
The reason for this is that I’ve recently been watching a Youtube channel called Now You Know that show a lot of news about Tesla Motors.
So I thought that I should look into the hype and see for myself if there was anything to it.
What I did was that I went to Tesla’s website and I downloaded their financial reports.
The numbers are shocking.
Tesla has been in business for almost ten years and in none of those they have made any money.
Granted, the loss last year was less than the year before, but still the second largest loss out of these ten years.
Looking at the balance sheet it’s very much the same story.
Its total debt is a staggering 16.8 billion dollars and the free cash flow is a negative 1.4 billion.
No wonder that the stock is losing more than 5 percent as I write this.
Who in their right mind would want to invest in something like that?
It’s clear that if you buy Tesla stock you hope that the earnings will materialize in the future.
At $259 those hopes are very expensive.
Elon Musk may be an excellent visionary, but his abilities as a CEO of Tesla Motors are not as good.
If you would like to learn more about fundamental analysis you can do that here.
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