Value Screeners Identify Good Opportunities for 2nd Half of 2018

The Peter Lynch Growth screener listed four companies with high business predictability and at least two more positive investing signs than severe warning signs: Allegiant Travel Co. ALGT, Big Lots Inc. BIG, Mednax Inc. MD and Amerco Inc. UHAL.

Brief overview of Peter Lynch Charts and Warning Signs features

GuruFocus provides two key features for each company: the Peter Lynch Chart and the warning signs. The former compares a company’s historical price trend to the Peter Lynch earnings line, which assumes a price-earnings ratio of 15. Figure 1 shows a sample Peter Lynch chart for Apple Inc. (AAPL).

Figure 1

As Figure 1 illustrates, the Peter Lynch charts shown on a company’s summary page include not only the standard Peter Lynch earnings line, but also the earnings line based on a company’s 10-year median price-earnings ratio.

The summary page also lists the company’s good signs and warning signs under the “Warning Signs” section, as Figure 2 illustrates.

Figure 2

The website color codes the warning signs like those seen on traffic lights: green represents good signs, orange represents medium warning signs and red represents severe warning signs.

Allegiant Air

Las Vegas-based Allegiant Air provides low-cost travel services primarily to leisure travelers in underserved cities, allowing the company to sell air transportation either on a stand-alone basis or bundled with other travel-related products and services.

Allegiant Air CEO Maurice Gallagher discussed in his May 2018 shareholder letter that the company had “61 quarters of consecutive profitability,” including the quarter ending March 31. Passenger revenues increased 14.1% year over year, driven primarily by a 9.5% increase in departures and a 2.9% increase in the load factor.

GuruFocus ranks Allegiant Air’s profitability 8 out of 10 and lists four positive investing signs, including expanding operating margins and consistent revenue growth. The company has a business predictability rank of five stars and profit margins that outperform over 83% of global competitors.

Big Lots

Columbus-based Big Lots offers a wide variety of merchandise at discount prices. Products range from food and consumables to home products and electronics.

Even though comparable-store sales declined 3% during the quarter ending May 5, Big Lots still expects fiscal full-year adjusted earnings to increase between 5 cents and 25 cents from the prior year.

GuruFocus ranks Big Lots’ profitability 8 out of 10, driven primarily by a strong Piotroski F-score of 7 and a four-star predictability rank. The company has six positive investing signs, including consistent revenue growth and a price-sales ratio near a three-year low.

Among gurus that own positions in Big Lots, Richard Snow (Trades, Portfolio) has the largest stake with 1,409,953 shares.

Mednax

Florida-based Mednax provides various pediatric services, primarily in the U.S. The company’s profitability ranks 8 out of 10: even though operating margins have declined over the past five years, Mednax still has a five-star predictability rank and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 94% of global competitors.

GuruFocus lists five positive investing signs for Mednax, including consistent revenue growth and attractive price valuations. The company’s price-book and price-sales ratios are near respective 10-year lows.

Amerco

U-Haul parent Amerco provides trucks and trailers for “do-it-yourself” household movers. The Nevada-based company’s profitability ranks 8 out of 10 as profit margins and returns outperform over 87% of global competitors. GuruFocus ranks the company’s business predictability five stars as the company had consistent revenue and earnings growth over the past 10 years.

Among the gurus with positions in Amerco, David Abrams (Trades, Portfolio) has the largest stake with 492,044 shares.

See also

Table 1 summarizes the value screener record as of June 26.

Table 1

Mednax also made the historical low price-book and historical low price-sales screeners. Big Lots also made the undervalued predictable screener, suggesting good growth and value potential according to Berkshire Hathaway Inc. BRK.ABRK.B co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio)’s investing strategy.

Disclosure: No positions.

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