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08 November 2024
By Maynard Paton
I am back again looking for ‘value bargains’ and revisiting a screen that identifies companies trading at less than book value.
Importantly, this screen attempts to avoid ‘value traps’ by demanding the shares offer net cash, dividend payments and 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.
This time SharePad returned 13 companies:
I selected Wynnstay because the shares were priced at a steep discount versus their ten-year average valuation. I also liked the reassuring 20-year run of dividend payments.
Sure enough, Wynnstay’s 318p shares trade nearly 40% below the group’s 503p per share net tangible asset value:
My filter results indicate the shares have traded at an average 1.2x book value during the last ten years. The rating reached 2.3x during 2013, sank to 0.5x during the pandemic and languishes now at a lowly 0.6x.
Wynnstay’s net tangible assets have advanced over time, and so has the dividend. The payout has in fact been lifted every year since the group joined AIM during 2004 at 190p:
Given the illustrious dividend, Wynnstay does not seem the type of business that should be valued well below asset value. Yet the shares have effectively moved sideways for years; the recent 318p price was first achieved during 2011 and today supports a £73m market cap.
Let’s take a closer look.
Read my full WYNNSTAY article for SharePad >>Maynard Paton
