Fundamental analysis of small-cap stocks

These are my fundamental analysis posts.

Friday, April 28, 2017

Light blue picture of cluster of grapes with text about Dillard's

Dillard’s is traded on the New York Stock Exchange under the ticker symbol DDS.

Valuation:

Dillard’s is a well ran business with solid earnings, solid cash flow and overall performance.

The trailing P/E ratio 11.2 and the P/E over the average three years is 8.4.

Free cash flow and dividend:

Free cash flow is healthy at $412,000,000 which corresponds to $12 per share.

The dividend is also at a paltry 26 cents per share which is too low considering the Free cash flow.

Balance sheet:

But DDS’ overall financials look more than reasonable.

For instance, the ratio between Current assets and Current liabilities is 1.9, but the Debt to equity ratio is a little bit high at 1.3.

Return on equity is 10%.

Negatives are that the company is involved in buying its own stock which only favor the ones who are selling the stock.

Summary:

Dillard’s seem reasonably priced with a good Free cash flow, but with a high Debt to equity ratio.

I would consider the stock as a BUY at these prices.

 

 

Monday, April 24, 2017

Today I will look at one of the best value Faroese companies around: P/F Bakkafrost A/S.

Orange figure of fish with text about Bakkafrost

The company is traded on the Norwegian Stock Exchange under the ticker BAKKA but they report their financials in Danish kroner.

Valuation:

Bakkafrost looks cheap at a P/E ratio of 7.9, but when looking at the average of the past three years’ earnings it comes in at 10.8 which does not look that impressive.

The Price to book ratio is 3.0 which is not cheap.

Balance sheet:

The Balance sheet on the other hand looks more than OK. The company has a Debt to equity ratio of 0.5 and a Working capital to debt ratio of 1.6.

Current assets to current liabilities is very good at 7.2.

Free cash flow and dividend:

The company has a Free cash flow of 163 Million DKK which equates 3.34 DKK a share.

This does not pay for the dividend at 8.70 DKK per share, but the dividend has been steady and increasing for the past 5 years.

Summary:

Even if the stock is not really cheap at 206 DKK, I would still consider it a BUY today.

 

 

 

Thursday, April 20, 2017

Today I will take a look at one of the best run French companies: Inter Parfums SA (ticker (Paris): ITP)

Blue figure of perfume bottle with text about Inter Parfums

Description:

Inter Parfums is a cosmetics and perfume company based in Paris.

The company is very well run with solid earnings and cash flow.

Valuation:

However, for the stability you will have to pay. The trailing P/E ratio is 30.0 and the P/E ratio over the past trailing years’ is 32.6.

The Price to book value is a hefty 4.1.

Balance sheet:

The balance sheet looks very good: The company has a Working capital of €280 million and a Debt to equity ratio of 0.4 which is considered to be low risk.

The ratio between Current assets and Current liabilities is also good at 3.5.

Cash flow and dividend:

The company has a Free cash flow of €42 million which equates to €1.28 per share.

Of this they pay out a dividend of €0.50 which amounts to a yield of 1.7% – a reflection of the high price.

Summary:

In summary I would not buy new stock at these prices. However, if you already own it I would hold on to the stock and keeping on reinvesting the dividend.

 

Monday, March 20, 2017

Today I would like to look at fundamental analysis of The Cato Corporation (ticker: CATO).

a32e38

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.

 

 

Monday, March 13, 2017

Today I would like to look at fundamental analysis of one the best ran British small-cap stocks, Treatt Plc.

Blue picture of perfume icon with text about 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

Blue picture with brown car icon with text about Tesla Motors.

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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