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Morning Coffee: S&P Stocks with Buybacks and Earnings Increases

June 05, 2014 | About:
Chris Mydlo

Chris Mydlo

41 followers

This morning I performed a scan of the S&P 500 with the GuruFocus All-In-One Guru Screener to find stocks that have a history of share buybacks and growth. A company’s stock can increase at a faster rate if its increase in earnings and revenue is combined with a reduction in share count. I used the following criteria in the screen:

  • In S&P 500: Yes
  • Share Buyback Rate (5y): Minimum 10%
  • Share Buyback Rate (1y): Minimum 5%
  • Revenue Growth Rate (5y): Minimum 5%
  • EPS Growth Rate (5y): Minimum 5%

The screen resulted in five stocks: Gap Inc (GPS), Travelers Companies Inc. (TRV), Assurant Inc. (AIZ), AutoZone Inc. (AZO) and DirecTV (DTV).

Gap Inc. (GPS)

Market Cap: 18.28 billion, P/E: 14.70

Business Predictability: 2.5/5, Financial Strength: 8/10, Profitability & Growth: 8/10

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The Gap operates as an apparel retail company worldwide. It provides apparel, accessories, and personal products for men, women, and children under the Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix brands. Over the past five years shares outstanding have been decreasing at an annual rate of 10.23 percent. Earnings and revenue have been growing at annual rates of 14.10 and 15.10 percent for the past five years. Using the GuruFocus DCF Calculator, the stock is fairly priced with a fair value of $41.21.

Travelers Companies Inc. (TRV)

Market Cap: 32.85 billion, P/E: 9.00

Business Predictability: 2/5, Financial Strength: 7/10, Profitability & Growth: 7/10

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Travelers provides various commercial and personal property, and casualty insurance products and service to businesses, government units, associations, and individuals in the United States. Over the past five years shares outstanding have been decreasing at annual rate of 9.96 percent. Earnings and revenue have been growing at annual rates of 8.5 percent and 12.7 percent. The stock is undervalued according to the DCF calculator, but analysts are expecting earnings to be flat for the next two years. The stock is still undervalued based on its P/E ratio of 9 compared to the industry median of 12.70. Travelers would be trading at $131.83 with a P/E of 12.70, making it undervalued by 28 percent.

Assurant Inc. (AIZ)

Market Cap: 4.96 billion, P/E: 10.20

Business Predictability: 3.5/5, Financial Strength: 6/10, Profitability & Growth: 8/10

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Assurant provides specialized insurance products and related services in North America, Latin America, Europe, and internationally. The company operates through four segments: Assurant Solutions, Assurant Specialty Property, Assurant Health, and Assurant Employee Benefits. Over the past five years shares outstanding have been decreasing at an annual rate of 10.53 percent. Earnings and revenue have been increasing at annual rates of 21.2 and 12.6 percent for the past five years. According to the GuruFocus DCF calculator, the stock is fairly priced trading near its fair value of $70.93.

AutoZone Inc. (AZO)

Market Cap: 17.98 billion, P/E: 18.00

Business Predictability: 4/5, Financial Strength: 6/10, Profitability & Growth: 9/10

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AutoZone is engaged in retailing and distributing automotive replacement parts and accessories. The company operates stores in the United States, Mexico, and Brazil. Shares outstanding have been decreasing at an annual rate of 10.15 percent over the past five years. Earnings and revenue have been increasing at high annual rates of 24.30 and 19.90 percent over the past five years. According to the GuruFocus DCF Calculator, the stock is undervalued by 24 percent with a fair value of $711.68.

DirecTV (DTV)

Market Cap: 41.55 billion, P/E: 16.30

Business Predictability: 1/5, Financial Strength: 6/10, Profitability & Growth: 8/10

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DirecTV provides digital television entertainment services in the United States and Latin America. The company acquires, promotes, sells, and distributes entertainment programming primarily through satellite to residential and commercial subscribers. Shares outstanding have decreased at an annual rate of 13.77 percent over the past five years. Earnings and revenue have increased at annual rates of 49.2 and 28 percent over the past five years. On May 18, 2014, AT&T (T) announced an agreement to acquire DirecTV for cash and stock equating to $95 per share. The stock is currently trading at $82.50, 13.1 percent below the announced purchase price. The stock is trading at a discount to the purchase price because of perceived regulatory complications in completing the deal. If AT&T is able to complete the purchase, the stock will see an increase of 15 percent. If the deal is not allowed to be completed by regulators, the stock is still slightly undervalued with a fair value of $89.77 according to the GuruFocus DCF Calculator using the average five-year EPS growth rate of 12.5 percent given by analysts.


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