As investors, we rarely remain still in the quest for better investment opportunities. I have been recently running some screeners and reading about companies. After applying some filters through a checklist and mental models, I have finally narrowed my options to eight companies.
A member of this forum once told me that if we can think of how a company adds value to its customers, then we can start digging into annual reports and/or presentations to confirm or deny our thesis on how value is delivered. Generally, the idea in our mind is erroneous, since value added may not come from what the company sells directly. This may sound counterintuitive, but that is the way it goes. This suggestion has helped me go through lots of companies in a more efficient way.
I believe in the Pareto rule, 80% of the results stem directly from the first 20% of effort and time invested. I will be updating my views on this watchlist and as usual, it is open to your comments and suggestions. Here are the eight companies:
Wesco International (WCC, Financial): A provider of electrical, industrial and communications maintenance equipment, together with supply chain management and logistics services. The company has a market cap of $2.1 billion, a P/E of 12.1x, P/B of 1.2x, annual sales of $7.5 billion, a current ratio of 2.38 and an EV/EBITDA of 8.9x.
Hibbett Sports Inc. (HIBB, Financial): Operator of sporting goods retail stores. The company has a market cap of $800 million, a P/E of 12x, P/B of 2.7x, annual sales of $936 million, a current ratio of 2.7 and an EV/EBITDA of 6.5x.
CSX Corporation (CSX): Provides rail-based transportation services and the transport of intermodal containers and trailers. The company has a market cap of $25 billion, a P/E of 12.9x, P/B of 2.1x, annual sales of $11.8 billion, a current ratio of 1.5 and an EV/EBITDA of 9x.
Wabash National Corp. (WNC, Financial): Manufactures standard and customized truck trailers and intermodal equipment. The company has a market cap of $817 million, a P/E of 8.2x, P/B of 1.9x, annual sales of $2 billlion, a current ratio of 2.5 and an EV/EBITDA of 4.9x.
Dillard's Inc. (DDS, Financial): Retailer of fashion apparel, cosmetics and home furnishing retailers. The company has a market cap of $3 billion, a P/E of 12x, P/B of 1.8x, annual sales of $6.7 billion, a current ratio of 1.6 and an EV/EBITDA of 7.2x.
Gentex Corp. (GNTX, Financial): Designs and manufactures automatic-dimming rearview mirrors and electronics for the automotive industry. The company has a market cap of $4.5 billion, a P/E of 14.5x, P/B of 2.7x, annual sales of $1.5 billion, a current ratio of 7.5 and an EV/EBITDA of 8.4x.
The Finish Line (FINL, Financial): Mall-based specialty retailer of shoes, apparel and accesories. The company has a market cap of $788 million, a P/E of 14.2x, P/B of 1.4x, annual sales of $1.9 billion, a current ratio of 2.1 and an EV/EBITDA of 7.9x.
Cal Maine Foods (CALM, Financial): Producer and marketer of shell eggs in the U.S. The company has a market cap of $2.4 billion, a P/E of 7.1x, P/B of 2.9x, annual sales of $2 billion, a current ratio of 3 and an EV/EBITDA of 4.2x.
I will admit that I am certainly more excited about Hibbett Sports due to its capital allocation policies, Wabash, provided its leadership in the industry and Gentex, which currently has a 90% market share across the globe. In terms of valuation, Wabash is perhaps the most exciting, with a market cap below its annual sales. I will update my views as I read and apply more filters to them.
What do you think?
