Good Companies Screener Identifies Opportunities for Spring

A look at high-quality companies versus the 'good' companies

Author's Avatar
Mar 30, 2018
Article's Main Image

On March 30, the “Good Companies” screener identified eight “golden egg” companies with strong growth potential for spring 2018. Four of the companies have a financial strength rank of at least 6: Abaxis Inc. (ABAX, Financial), The Home Depot Inc. (HD, Financial), Jack Henry & Associates Inc. (JKHY, Financial) and The Middleby Corp. (MIDD, Financial).

Difference between “high-quality” companies and “good” companies

While the “high-quality” and “good companies” screeners share common filters, the latter screener is more selective as it contains filters like the following:

These filters exclude the fast growers, including Biogen Inc. (BIIB, Financial) and Ulta Beauty Inc. (ULTA, Financial), from the list of good companies.

Abaxis

California-based Abaxis develops, manufactures and markets portable blood analysis systems used in various human and veterinary patient care centers. Despite a poor Piotroski F-score of 4, Abaxis still has a financial strength rank of 9, driven by robust interest coverage and Altman Z-scores.

445577904.png

1758446821.png

Abaxis’ profitability ranks 7 out of 10 primarily due to profit margins outperforming over 80% of global competitors. GuruFocus ranks the company’s business predictability four stars out of five; however, the predictability rank is on watch as revenues have decelerated over the past 12 months.

1658347880.png

Home Depot

Atlanta-based Home Depot said in its March 22 annual report that earnings per share were $7.29 for the 12 months ending Jan. 28, up 13% from the prior year. The company has three positive investing signs, including expanding operating margins and consistent revenue and earnings growth.

63009858.png

116220995.png

Home Depot’s profitability ranks 8 out of 10 as the company’s margins and returns are near a 10-year high and outperform over 86% of global competitors, which include Lowe’s Companies Inc. (LOW, Financial).

625577474.jpg

945841668.jpg

Jack Henry & Associates

As discussed in a previous article, Jack Henry & Associates has a five-star predictability rank due to strong and consistent revenue and earnings growth. According to the chart below, the company’s revenue and earnings bar consistently increase year over year, suggesting a “five-star quality” company.

1098158040.png

Middleby

Illinois-based Middleby provides equipment for various foodservices, including preparation and packaging. The company’s profitability ranks 8 out of 10, driven by expanding profit margins and a business predictability rank of 4.5 stars. Middleby’s operating margin of 17.57% outperforms 88% of global competitors.

417641240.png

1658506052.png

See also

The list of good companies also contains AutoZone Inc. (AZO, Financial), Canadian National Railway Co. (CNI, Financial), IDEXX Laboratories Inc. (IDEX, Financial) and Nathan’s Famous Inc. (NATH, Financial). However, these four companies have modest to weak financial strength: GuruFocus ranks AutoZone and Nathan’s financial strength a 4, suggesting some financial distress. Canadian National Railway and IDEXX have a modest financial strength rank of 5.

Premium members have full access to our All-in-one Screener, which allows you to screen for good companies based on an investing strategy. You can either use one of our predefined screeners or create your own screener.

Disclosure: No positions.