Maynard Paton

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15 June 2023
By Maynard Paton

Today I have revisited a SharePad screen that applies two ratios favoured by ‘quality’ investors — operating margin and return on equity (ROE).

The exact criteria I re-used were:

• An operating margin (latest and 10-year average) of 20% or more, and;
• An ROE (latest and 10-year average) of 20% or more.

Any business with a margin and ROE of at least 20% is probably quite special.

To narrow the field down further, I also sought companies that carried net cash (i.e. net borrowings excluding IFRS 16 finance leases of less than zero):

This time the filter returned 21 matches, including Impax Asset Management, Somero Enterprises, Jarvis Securities and Quartix.

I selected Belvoir because it was among the worst share-price performers of the last twelve months. Let’s take a closer look.

Read my full BELVOIR article for SharePad >>

Maynard Paton

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14 May 2023
By Maynard Paton

Let me start by confessing this article covers pension deficits.

What follows is therefore not thrilling and does require some concentration. But please stick with me, especially if you have ever fallen victim to a ‘value trap’.

You see, an onerous pension scheme is a common reason why companies trade on permanently low ratings. The market essentially believes too much of their future profits will have to plug a retirement ‘black hole’ instead of being paid out as dividends.

A good example is Reach, the newspaper publisher that used to be known as Trinity Mirror.

An update the other week confirmed a £95m profit was expected for 2023:

“Profit expectations for FY23 remain in-line with market consensus.(1)
…
(1) Market expectations compiled by the company are an average of analyst published forecasts – consensus adjusted operating profit for FY23 is £95.3m (range from £93.7m to £96.5m)”

…and yet the market cap is £265 million and the 83p shares currently trade on a P/E of approximately 3:

Studying the group’s pension situation goes some way to explain the rock-bottom rating.

Let’s take a closer look.

Read my full Reach article for SharePad.

Maynard Paton

***SharePad New Subscriber Special Offer***
Readers of my blog can claim one month of free data. Click here for details.

15 April 2023
By Maynard Paton

I have embarked on further ‘back to basics’ filtering to unearth a potential long-term winner for my portfolio.

This new screen identifies companies that offer a rising dividend, low valuation, robust balance sheet and decent director ownership.

The exact filter criteria I applied for this search were:

• A 5-year annualised dividend growth rate of 10%;
• A forecast 10% dividend increase;
• A trailing 12-month P/E of 15 or less;
• Net borrowings less total leases of no more than 0 (i.e. a net cash position excluding IFRS 16 lease obligations), and;
• A minimum 5% total director shareholding.

I ran the screen the other day and SharePad returned only four matches:

I selected James Latham because it traded on a remarkably low trailing P/E of 6.

SharePad shows Latham’s dividend rising nicely over time with only a couple of setbacks:

SharePad also shows the trailing P/E at its lowest since 2007:

Let’s take a closer look.

Read my full James Latham article for SharePad.

Maynard Paton