I like to look for companies with predictable and stable business models. Since I believe companies with rising and/or consistent performance are fertile hunting grounds to look for moats, or moats in-the-making, I screened on the following:
- Predictability rating = 5 star (click here for a description of the Predictability rank).
- Market cap under $5B
- ROC > 15%
- Debt/Equity = 0
- 10-yr Revenue Growth > 10%
- 10-yr EBITDA Growth >10%
- 10-yr EPS Growth > 10%
Carbo Ceramics (CRR):
Carbo Ceramics produces and supplies ceramic proppant used in the hydraulic fracturing of natural gas and oil wells, which increases production by injecting liquids into the wells under high pressure. The company's products are marketed under the CARBOHSP, CARBOPROP, CARBOLITE, and CARBOECONOPROP names. These products are marketed internationally through the oil field service companies that provide hydraulic fracturing services. Carbo Ceramics has facilities abroad.
In the last 10 years, CRR has been able to grow revenue at 15.9%; EBITDA at 15.1%; and book value at 15.6%. As of March 30, 2012, shares traded for $105.45. This price places all of their price multiples (P/E, P/S, and P/B) in roughly the middle of their historical valuation bands, as seen below.
Factset Research Systems (FDS):
FactSet Research Systems Inc. supplies global economic and financial data to analysts, investment bankers and other financial professionals. The company combines information from over 200 databases and furnishes information and analytics, including fundamental data on tens of thousands of American and international companies and securities.
FDS grew revenue at 17.4%; EBITDA at 18.4%; and book value at 16.4%. They last traded at $99.04, placing their P/E in the middle of its historical range. However, P/S and P/B are in the upper end of the historical range.
IDXX, in the last decade, grew revenue at 15.7%; EBITDA at 17.3%; and book value at 8%. At a market price of $87.45, their valuation ratios all appear to be hovering in the upper range of its historical range.
Boston Beer Company (SAM):
The Boston Beer Company, Inc. produces beer, malt beverages, and cider products at Company-owned breweries and under contract. Their beer products are primarily positioned in the `Better Beer` category of the beer industry, which includes craft beers and most imports sold at premium prices.
Over the last decade, SAM has grown revenue at a 13.8%; EBITDA at 25.3%; and book value at 14%. They currently trade for $106.79, placing their P/E in the lower range of its historical band. However, their P/S and P/B ratios are in the upper registers.
These companies aren't dirt cheap, and are probably fairly- to modestly over-valued. However, they'd warrant further research so you can add them to your wish list when the price is right.
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Disclosure: Long SAM
DISCLAIMER: This review/analysis is provided for informational and entertainment purposes only and is the opinion of the author. The information and content contained herein should not be construed as a recommendation to invest or trade in any type of security. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any security or investment of any kind. Conduct your own research and due diligence.
About the author:
Bill SmithI'm an IT professional and a private individual value investor with degrees in Electronic Engineering and Economics. My major investment influence is Warren Buffett--finding "wonderful companies trading at wonderful prices".