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19 September 2024
By Maynard Paton
I always love a traditional ‘value bargain’. Hence this revisit to an old screen that pinpoints companies trading at less than book value.
Importantly, this screen attempts to avoid ‘value traps’ by demanding the shares carry net cash, pay a dividend and offer a history of trading above book value.
The exact filter criteria I redeployed were:
- A price to net tangible assets of no more than 1;
- A dividend being paid during the most recent year;
- A 10-year average price to net tangible assets of at least 1;
- Net borrowings less total leases of no more than 0 (i.e. a net cash position excluding IFRS 16 lease obligations), and;
- A share price denominated in pounds sterling.
SharePad returned 10 companies, and I selected Castings because I used to own the shares and was surprised to discover the company was on the list:
Sure enough, Castings’ 303p shares trade (just) below the group’s 308p per share net asset value:
My filter results indicated the shares have traded at an average of 1.3x book value during the last ten years, while the SharePad chart above shows the rating stretching to 2x during 2014.
But there has been the odd occasion (such as now!) when the share price has fallen below book value.
Castings’ book value has advanced over time, and so has the dividend. The payout has in fact not been cut for at least 30 years:
Special payments were also declared for 2016, 2019, 2022, 2023 and 2024.
Given the illustrious dividend history, Castings does not seem the type of business that should be selling just below book value. Yet the shares have moved sideways for years; the 303p price was first achieved in 2007 and today supports a £132m market cap.
Let’s take a closer look.
Read my full CASTINGS article for SharePad >>Maynard Paton
