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StockPointer® US and ADR Model Portfolio Transactions – June 2020

We have rebalanced the Stockpointer® US and ADR model portfolios which are effective now. Here are the details for the US portfolio :

Ins:

  1. United Therapeutics Corporation (UTHR) – Market Trend. Increase in the Healthcare sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.
  2. AT&T Inc. (T) – Market Trend. Increase in the Telecommucations sector.
  3. Federated Investors (FHI) – Intra-sectoral transaction. In the top of its sector.


Outs:

  1. Constellation Brands, Inc. Class A (STZ) – Both a Market Trend and an intra-sectoral transaction. Decrease in the consumer staples sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio. The company’s EPI also fell below 1.
  2. Employers Holdings, Inc. (EIG) – Both a market trend and an intra-sectoral transaction. Decrease in the Financial sector and no longer in the top of its sector.
  3. South State Corp (SSB) – Intra-sectoral transaction. No longer in the top of its sector. This company was in our portfolio following the merger with CenterState Bank Corportation (CSFL).

 

Here are the details for the ADR portfolio:

Ins:

  1. Swedish Orphan Biovitrum AB (BIOVF) – Market Trend. Increase in the Healthcare sector as seen in the Top 100 index, therefore, increasing our position in the portfolio.
  2. Globe Telecom Inc. (GTMEF) – Market Trend. Increase in the Telecommucations sector.
  3. Ford Otomotiv San (FOVSY) – Intra-sectoral transaction. In the top of its sector.
  4. Daito Trust Construction (DITTF) – Intra-sectoral transaction. In the top of its sector.
  5. Wipro Technologies (WIT) – Intra-sectoral transaction. In the top of its sector.
  6. China Resources Cement (CARCY) – Intra-sectoral transaction. In the top of its sector.

 

Outs:

  1.  Trane Technologies (TT) – Market Trend. Decrease in the industrial sector as seen in the Top 100 index, therefore, decreasing our position in the portfolio.
  2. Fomento Económico Mexicano (FMX) – Market Trend. Decrease in the Industrial sector.
  3. Megacable Holdings (MHSDF) – Intra-sectoral transaction. No longer in the top of its sector.
  4. DBS Group Holdings (DBSDF) Intra-sectoral transaction. No longer in the top of its sector.
  5. Garmin (GRMN) – We decided to exclude this stock because it is not an ADR and we think this is a good timing to do it.
  6. LyondellBasell (LYB) – We decided to exclude this stock because it is not an ADR and we think this is a good timing to do it.

Defensive Stocks with High Dividend Growth & Sustainability: BWX Technologies Inc, Quebecor Inc & Telus

In our last Number Cruncher, BWX Technologies Inc, Quebecor Inc & Telus were the top 3 in our screen. In this Number Cruncher Extra, we will go into more detail about these companies in Stockpointer.

The company has a significant SP Score of 60. In the short-term, sales, earnings per share and performance spread is uptrending. The stock clearly has momentum in its fundamentals. The long-term perspective is also good with solid past growth in all the variables. Briefly, it is difficult to say anything negative about these numbers except for the risk score which stands at 48. It’s a bit high, but the performance score of 87 surely compensate that risk.

 

This is the factor comparaison of BWX Technologies Inc. The stock could be classified as a quality and growth stock. The overall ranking is higher than its peers and sends a good signal.

 

Quebecor is the second company of our list. The interessing element with this business is its tremendous dividend growth. The dividend yield, not to be confused with the dividend per share, increased by 54% in the last 5-year. The company aggressively grew it’s dividend resulting in a higher dividend yield and the market didn’t increase as much as the dividend growth. The company has also solid earnings per share in the last year and the last 5-year.

 

This is the Economic Value Added section of Quebecor. The firm increased its NOPAT over the years, but also increased it’s EVA. The EVA can be seen as the value created by a company. Typically, some companies can growth their NOPAT, but engages in non-value generating activities which hurt shareholders in the long-term. In this case, the management intelligently used its capital to generate value.

Telus has the highest score of our Number Cruncher Extra. The performance score is close to 70 and at the same time the risk score is only at 36. With these scores, Telus has a great risk-return profile and a appreciable SP score of 65. The firm is more mature than the others and generated lower growth, but Telus also pays a 5% dividend which represent 64% of its net income. 5.5% growth in EPS and a 5% dividend could be seen as a 10.5% return for its shareholders.


The low risk score can be explained with its high and stable return on capital. It’s important to mention that the company increased it’s net operating profit after taxes (NOPAT) by 35% over 5-year which represents a 6.1% growth. The firm may not be the most exciting in terms of growth, but it is impressively solid.

You can subscribe the Inovestor for Advisors platform for free here

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com

Seeking Downside Protection Among Utilities, Telecom Sectors

What are we looking for?
Last week’s sharp market downturn reminded us of the not so distant, painful memories of the market correction of last February and March. As the saying goes, stocks take the staircase up and the elevator down. This is why investors can make use of defensive stocks to protect their portfolios and limit their downside. Utilities and telecommunications stocks can be great defensive holdings.

Today, we will look at Canadian and U.S. large caps in the telecom and utilities sectors. Dividends are a key component of these sectors, so we will focus on companies with a sustainable payouts.

The screen
We screened companies focusing on the following criteria:
· Market capitalization greater than $5-billion (Canadian);

· Four-year annual dividend growth higher than 6 per cent. A company whose dividend is
increasing should see its total return follow the same trend;

· Growth in net operating profit after taxes (NOPAT) over 24 months. The company needs to increase its operating income to have a sustainable growth in its dividend;

· StockPointer (SP) Performance Score of more than 65 – The score mainly takes into account risk-adjusted return on capital and free cash flow per share. A great score means the company has a good profitability to increase its dividend. The score varies between zero and 100.

For informational purposes, we have also included recent stock price, dividend yield, one-year price return and dividend payout ratio.

More about Inovestor
Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios, and easily communicate investment decisions with clients through client-friendly reports. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies. (Canadian and U.S. stocks and American depositary receipts). For more details about these defensive stocks, please subscribe the Inovestor for Advisors platform for free: inovestor.com/en-CA/store/

Company Ticker Sector Mkt. Cap. ($ Mil.)* 4Y Ann. Div. Growth (%) 24M NOPAT Chg. (%) SP Perform. Score Div. Payout (%) Div. Yld. (%) 1Y Price Rtn. (%) Recent Price ($)*
BWX Technologies Inc. BWXT-N Utilities 5,600 22.6 2.0 87.5 24.8 1.3 17.5 58.79
Quebecor Inc. QBR-B-T Telecom 7,450 66.5 0.5 70.0 16.8 2.7 -8.6 29.50
Telus Corp. T-T Telecom 29,780 7.4 0.9 69.7 64.0 5.0 -4.5 23.30
Portland Gen’l Electric POR-N Utilities 3,990 6.4 2.7 68.8 61.3 3.5 -19.3 44.63
Fortis Inc. FTS-T Utilities 23,860 6.7 1.6 68.1 38.0 3.7 -1.0 51.39
Canadian Utilities Ltd. CU-T Utilities 8,490 8.9 1.8 66.7 59.6 5.6 -18.5 31.02
American Water Works AWK-N Utilities 23,040 10.1 0.8 66.3 56.8 1.7 9.1 127.29
CMS Energy Corp. CMS-N Utilities 16,690 7.1 1.1 65.9 62.5 2.8 0.6 58.30
* Figures shown in native currency. Source: Inovestor

What we found
BWX Technologies Inc., a U.S. supplier of nuclear fuel and components, has the highest SP Performance Score of our filtered list. Its dividend grew at an average annual rate of 22.6 per cent over the past four years. Its revenue grew by more than 6 per cent annually over the past five years and return on capital went from 8.5 per cent to 19.1 per cent over that period. With a dividend payout of 24.8 per cent, we see room for future increases.

Media conglomerate Quebecor Inc. increased its dividend in the past four years by an average annual 66.5 per cent. The lack of investment opportunities may be the reason behind this decision, in which case increasing the dividend rather than doing bad investments could be viewed as a wise decision. The payout ratio is the lowest on our list at 16.8 per cent, leaving further room for additional increases without jeopardizing the business’s sustainability.

Telus Corp., one of the Big Three mobile phone operators in Canada, has the second-largest market capitalization of our screen (the largest market cap, belonging to American Water Works Co., is shown in U.S. dollars). Telus also shows stable and high returns on capital, which are reflected in its SP Performance Score of 69.7. The company seems a safe choice. Although its four-year annual dividend growth rate is considerably lower than either BWX or Quebecor, Telus’s strong market share and economies of scale should allow it to continue to increase its dividend in the future.

Investors are advised to do further research before investing in any of the companies shown in the accompanying table.
Here is the screen we used :

Portfolio Manager’s June comment For May Results

The Canadian stock market continued to rally in May. The S&P/TSX Total Return Index rose by 3% during the month, while the S&P 500 and the MSCI ACWI ex. USA gained 4.7% and 3.3% respectively. At May end, the year-to-date S&P/TSX Total Return Index loss was 9.7% while the S&P500 shrunk by 5% and the MSCI ACWI ex. USA fell off 14.6%. Despite being in negative territory, all equity indexes are now into a V-shape recovery.

The best TSX sectors for the month of May were Information Technology up 14.6% and Consumer discretionary up 8.1%. At the opposite, the worst performing sectors were Real Estate down 0.4% and Utilities unchanged on the month.

Our best performers in May were Canadian Tire up 20.4%, Parkland Corp up 17.6% and Constellation Software up 16.9%.

On the other hand, the weakest contributors were Kirkland Lake Gold down 7.8%, First National down 4.5% and Equitable group down 3.7%.

Real estate investments to cushion your portfolio

The increased uncertainty in the economy and volatility in the stock markets is causing investors to stumble on their investment decisions and looking to diversify their portfolios.

It is widely viewed that real estate is recession-proof. While the large capital investment is the common hurdle that prevents most investors from dipping their feet in the water, we look at real estate investment trusts (REITs) as the welcoming alternative. REITs enable investors to diversify their portfolio by owning shares of real estate properties with the desirable feature of liquidity while earning some steady monthly income.

WPT Industrial Real Estate Investment Trust (“the REIT”) (TSX: WIR.U, WIR.UN) focuses on acquiring, developing, and managing industrial properties primarily located in the United States.

Diving into the fundamentals using Inovestor’s Stock Guide platform, the REIT has demonstrated strong performance YOY with an upward trending revenue and controlled cost of operations. With a decent return on invested capital, the company appears to have no major issue meeting its debt obligations as evidenced by several historical debt-related ratios, a healthy interest coverage ratio, and a comfortable level of cash. It is also worth noting that the operating revenues do not follow the growth of assets and debt. As a result, asset turnover is declining while the return on assets is increasing.

2019-12-31 2018-12-31 2017-12-31 2016-12-31 2015-12-31
Accounts Receivable / Days 8.255 7.776 7.658 7.448 6.659
Acid Test 0.194 0.219 0.188 0.549 0.248
Assets to Debt 4.98 3.185 2.868 2.514 2.341
Assets to Debt + EECD 4.98 3.185 2.868 2.514 2.341
Cash Flow to Debt 0.248 0.158 0.159 0.152 0.15
Cash Flow to Debt + EECD 0.248 0.158 0.159 0.152 0.15
Current Ratio 0.194 0.219 0.188 0.549 0.248
Debt to Equity 0.366 0.605 0.662 0.835 1.631
Debt + EECD to Equity – EECD 0.366 0.605 0.662 0.835 1.631
Debt Ratio 0.268 0.377 0.398 0.455 0.62
Debt Ratio + EECD 0.268 0.377 0.398 0.455 0.62
Dividend Payout  (Common) 44.504 67.994 57.298 68.935 61.823
Dividend Yield 7.159 8.044 7.516 8.599 8.339
Earnings Yield 16.749 11.727 13.114 12.4 13.435
Interest Coverage 4.944 3.771 4.811 3.576 2.584
Net Profit 83.347 53.175 64.199 47.791 31.977
Price to Book Value 0.798 0.772 0.855 0.804 0.827
Price to Cash Flow 7.614 7.85 7.232 5.679 3.375
Price to Invested Capital 0.584 0.481 0.515 0.438 0.314
Price to EBITDA 4.68 6.204 6.041 5.808 4.547
Price to Sales 4.977 4.538 4.896 3.853 2.372
Price to Earnings 5.971 8.528 7.625 8.064 7.443
Return on Invested Capital 10.485 7.387 7.574 6.749 6.911
Return on Common Equity 11.555 7.08 9.537 7.488 7.506
Return on Assets 6.097 4.378 5.148 4.154 2.868

 

Change in supply chain management will play a key role in the real estate allocation in a portfolio. Given that WPT Industrial Real Estate Investment Trust is engaged mostly in the Industrial sector and the US President’s call to reclaim the global supply chain back in the U.S, investing in companies that are vertically integrated seems to be a good strategy. Intuitively speaking, Industrial REITs will benefit from manufactures relocating operations to North America in search of warehouse and distribution centers

StockGuide is the world’s most powerful, accurate, and thorough software for mining and screening critical financial data on Canadian companies.

Learn more about StockGuide and its critical features.

Six U.S. Industrial large caps with economies of scale

What are we looking for?
The United States ISM Producing Managers Index dropped to 36.1 in April due to the COVID-19. The manufacturing companies were hit harder, but their valuations also dropped further than the other sectors. The U.S. Industrial sector fell by 27.5% compared to 12.7% for the S&P 500.

Today, we will look at U.S. large caps in the industrial sector. During the 2008 financial crisis, these companies were hit hard but did incredibly well shortly after. With the fiscal and monetary stimulus put in place to mitigate the COVID-19 combined with the reopening of factories, the history could repeat itself once again.

 

The screen

We screened U.S. companies focusing on the following criteria:

  • Market capitalization higher than 10 billion;
  • Earnings per share (EPS) growth 5-year average higher than 5% – We want a company that improved their profitability in the past 5 years;
  • Net operating profit (NOP) growth over 24 months higher than 5% – The EPS can be distorted by accounting classifications. We also use this variable to ensure we have a company that grew their bottom line;
  • Positive sales growth over 24 months – a great company should have been able to grow its revenue in the past 2 years;
  • Net operating profit (NOP) growth over 24 months must be higher than 24 months sales growth – We want a company that displays economies of scale;
  • Future growth value (FGV) lower than 50% – We can separate a company in 2 parts: the current operating value and the future growth value. The current operating value represents the value of the business today if it had no growth. The FGV is the intangible part of the company that we buy. We don’t want it to be too high.

For informational purposes, we have also included recent stock price, dividend yield and one-year price return.

 

More about Inovestor

Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios, and easily communicate investment decisions with clients through client-friendly reports. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian and U.S. stocks and American depositary receipts).

TICKER NAME PRICE ($) MKT CAP ($MIL.) SALES CH. 24M (%) NOP CH. 24M (%) FGV (%) EPS GROWTH AVG 5Y (%) DIV. YLD. (%) 1Y RTN. (%) SECTOR
LMT Lockheed Martin Corporation 377.54 105601 18.4 168.7 25.7 14.5 2.5% 10.4% Industrial – Capital Goods
AME Ametek, Inc. 83.24 19098 13.6 31.4 46.7 11.3 0.9% -2.2% Industrial – Capital Goods
CAT Caterpillar Inc. 108.61 58861 5.1 114.9 22.2 8.5 3.6% -6.1% Industrial – Capital Goods
CMI Cummins Inc. 162.03 23867 5.5 135.3 -10.2 7.9 3.2% 0.5% Industrial – Capital Goods
PH Parker-hannifin Corporation 165.14 20307 1.7 28.7 30.1 5.7 2.1% 1.3% Industrial – Capital Goods
DE Deere & Company 137.9 42304 26.5 48.6 23.0 5.3 2.2% 1.9% Industrial – Capital Goods

 

What we found
For those who don’t have any ethical issue with armament, Lockheed Martin Corporation has the highest growth in EPS in the last 5-year period. The company has the second highest sales growth and the highest NOP growth of our list. In their last earnings report, they maintained their previous guidance for EPS, operating profit and cash from operations.

Ametek Inc., a global manufacturer of electronic instruments and electromechanical devices, demonstrates great economies of scale. In the last 5-year period the company converted a 6.7% growth in sales into a 15.2% increase in EPS. In their first quarter sales declined by 6.6% over the previous first quarter, but it managed to increase their adjusted operating margin by 100 bps.

Cummins is organized into distinct business segments including engine, components, distribution and new power. This company is the cheapest of our list based on the FGV while displaying decent past results and big economies of scale. A negative value for the FGV means the company is selling at a discount of the current operating value.


We used this customized screener for the article.
For more details about these industrial stocks, please subscribe the Inovestor for Advisors platform for free: https://www.inovestor.com/en-CA/store/

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

 

5 U.S. banks with solid balance sheets

What are we looking for?

The Canadian banking sector is widely considered to be one of the best and safest banking systems in the world, which explains why Canadians are heavily invested in the six major banks. However, the financial sector, represents 32 per cent of the S&P/TSX Composite Index. To diversify their portfolios, investors might want to consider investing in the U.S. banking sector. In the aftermath of the financial crisis, U.S. banks have become better capitalized, with an increased focus toward a more sustainable business model. Today, we will be looking at five dividend-paying U.S.-based banks with solid balance sheets.

The screen

Our screen of the banks’ subsector of the U.S. financials sector is based on the following criteria:

Market cap of at least US$10-billion;

-A positive EVA figure. Economic value-added (EVA) is a measure of true economic profit created by a company. EVA is calculated by subtracting the Capital charges from the NOPAT (Net Operating Profit After Taxes). The higher the economic value-added is, the more value a company is generating for its investors;

-An EPI figure of at least one. The economic performance index (EPI) is the main indicator to identify how much wealth is redistributed to the shareholders. The higher the figure, the better, and a negative EPI means that the company is not covering its costs of capital;

-Dividend yield of at least 3 per cent. We are looking for banks that consistently share their profits with the shareholders;

Positive earnings per share. We are looking for profitable companies only;

-A price-to-intrinsic value of between 0.5 and two. Price/IV is the price of the stock divided by the intrinsic value of the stock. We are avoiding overvalued and value trap stocks.

-Long term debt-to-equity ratio below two: We are looking for banks with solid bank sheet and low long term debt;

-Current SP score of at least 55: The SP Score is a proprietary scoring system based on StockPointer’s model. It’s a 12 factors algorithm with a focus on quality and value. This metric represents the overall performance of a company by considering multiple risk and performance factors. A high score indicates a high quality stock trading at a reasonable price. (The score range between zero and 100)

For informational purposes, we have also included recent stock price and one-year return. Please note that some ratios may have been reported at the end of the previous quarter.

What we found

TICKER COMAPNY RECENT PRICE ($) EVA ($MIL.) MKT CAP ($MIL.) EPI LT DEBT DIV. YIELD (%) Price / IV EPS CURRENT SP SCORE 1YR PRICE RTN.(%) LT DEBT / EQUITY
JPM-N Jpmorgan Chase & Co. 93.25 1029.82 284090.00 1.00 299344.0 3.89 1.08 8.88 65 -17.48 1.05
USB-N U.s. Bancorp 34.94 1214.38 53215.13 1.15 52298.0 4.73 0.93 3.93 65 -31.55 0.98
NTRS-Q Northern Trust Corporation 75.47 227.54 15700.09 1.16 4142.2 3.58 1.18 6.73 64 -19.68 0.26
DFS-N Discover Financial Services 41.37 806.58 12672.10 1.41 26098.0 4.82 0.67 6.74 68 -47.27 2.06
SYF-N Synchrony Financial 18.51 1178.58 10798.20 1.45 16063.0 5.41 0.54 4.46 58 -42.92 1.49

Five names made today’s list, ranked by market cap, JPMorgan Chase & Co., which shows the highest EPS, has been growing its revenues constantly since 2015. Although the bank’s performance spread (ROC – COC) was negative from 2016 to 2018, it has been positive for the past two years, which is a good indication for shareholders.

U.S. Bancorp is also a big player in the banking sector with a market cap of US$51-billion. The bank has beaten or matched EPS estimates for the past five years. The bank missed its last earnings estimate because of loan defaults related to COVID-19. With a current operating value of US$55.8-billion, the bank is trading at an 8 per cent discount compared with its current market value. At a current price of $35 per share, it’s worth considering adding it to your portfolio.

For more details about JPMorgan and U.S Bancorp stock and performance, please subscribe the Investor for Advisor platform for free

For readers with an Inovestor for Advisors account, Here is the screener we used

Portfolio Manager’s May Comment for April Results

The S&P/TSX increased by 10.8% in April and the S&P500 increased by 12.8% while the MSCI ACWI ex USA gained 7.6%. At the end of the 12-month period ending April 30th, the S&P/TSX was posting a negative return of 7.9%. Over the same 12-month period, the S&P500 gained 0.9% while the MSCI ACWI ex USA posted a decline of 11%. For the U.S and Canadian markets April results were the best monthly returns of the past decades. Over the past 12 months, the strong performance behind the U.S equity market can be explained by its 5 largest technology names (Microsoft, Facebook, Amazon, Apple and Google).
.

The best TSX sectors for the month of April were Materials up 33%, followed by Information Technology up 29.3%, and Consumer Discretionary up 20.1%. The worst performing sectors were Telecommunication Services (-0.3%), Financials (0.9%) and Utilities (3.7%).

The best monthly performers in the portfolio were Kirkland Lake Gold (39.1%) and Parkland Fuel Corp (33.1%). At the opposite, the weakest contributors were Great-West Life Co, which was down 5.7% and Royal Bank of Canada down 1.8%.

4 stocks were sold and bought in the strategy, in April. For this rebalancing, the model required an exposure reduction to 2 sectors namely Consumer Discretionary and Energy. MTY Group (MTY) was sold for several reasons including its negative exposure to the COVID-19 pandemic, Parex Ressources (PXT) was sold as weak oil prices put severe pressure on its margins.

The model called for the selling of Brookfield Asset Management (BAM.A) and Brookfield Infrastructure Partners L.P. (BIP.UN) due to a deterioration of their respective performance scores.

The model also required an increased exposure to Materials and Financials. The names that made it into those sectors were Winpak (WPK) and First National (FN). The other 2 names purchased in this rebalancing were Fortis (FTS) as a replacement for Brookfield Infrastructure Partners L.P. (BIP.UN) and Sun Life Financial as a replacement for Brookfield Asset Management (BAM.A).

Number Cruncher Extra: Viemed Healthcare, Information Services Corporation, Tecsys and More

Today, we will discuss about Canadian small caps that have low debt. This week we had a lot to say about the companies we found in our screener.  Viemed Healthcare (VMD), Information Services Corporation (ISV), Senvest Capital (SEC), Magellan Aerospace (MAL), Tecsys (TCS) and Absolute Software Inc. (ABT) was in our list.

Let’s see the different outlooks from our software:

We added a specific graph or table for each company. We will discuss them below:

Viemed Healthcare

Information Services Corporation

Senvest Capital

Tecsys

Mallegan Aerospace

Absolute Software Corporation

Viemed Healthcare has a strong outlook with a SP score over 60. Recently the score decreased, but by personal experience it is hard for a company to stay above 65 because it is a really strong score. We have growth in sales and earnings per share (EPS) over the long term. The performance spread, the difference between the return on capital and the cost of capital, is positive. It means the company creates value for the shareholders in the long term. The net income is negative on a 1-year basis, but the operating cashflow before considering the change in working capital is higher than last year. we don’t think we should bother with a decrease in last year EPS at this point. The company is also well positioned compared to the other companies of its industry based on the factors comparison table.

Information Services Corporation is at a very high score at 65. The score increased by 2 at it last review which is great specially at this score level. Once again for this company, sales and EPS saw growth. The performance spread score is above 0. The company pays a dividend and the current level is equal to one see in 2015 and 2018 which is not a bad or good sign. The company spends $14M on the dividend each year, but the company free-cash-flow has been 1.5x to 2x this amount in the last 5-year. It seems it can support its dividend easily.

Senvest Capital has the lowest SP score of our group at 53. By looking at the second picture, we can see the NOPAT is volatile. The company reports all their investment results in the income statement and the operating cashflow because of the business definition. This leads to weird accounting in some cases that are not economically meaningful. We suggest the investor to have good knowledge of accounting rules concerning the classification of cashflows and revenue recognition to fully understand the situation of the company. The company is often affected by their investments in the market. However, the company shows good results overall despite the volatility and the uncommon accounting.

Tecsys has a low SP score compared to the others, but there is interesting information about this company. Sales and EPS increased a lot in the last year and the last 5-year. The performance spread is also above 0. The company had great momentum until 2019. The results were a bit disappointing in 2019. The company shows higher volatility in its 5-year result than the others. The company still display characteristics linked to a good company. It has a great return on capital and doesn’t need debt to grow. Its exposition to hospital could lead to higher revenue and profit in the next quarters.

Mallegan Aerospace had a strong decline recently because of the recent turmoil. The company also shows slowing operating profit and the current environment will not help. The industry has a lot of difficulty and it is hard to find good points in the short-term for this company. However, the stock has a moderatly good historic and balance sheet. The lower valuation could be an attractive entry point for the long term investor. There is certainly “blood in the street” as Warren Buffet famously says.

Absolute Software Corporation has a decent score of 58. The company is identified as bad growth by our software. Surely, the operating profit didn’t grow in the last 5 years as seen in the related graph, but the company has some momentum in the last 2 years. It is  possible the company will have good results because of the current environment. Companies had to figure how to work remotely and cyber security is an important part of it.

You can subscribe the Inovestor for Advisors platform for free here

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com