According to the All-in-One Screener, five Peter Lynch stalwarts with strong profit margins are Copart Inc. (CPRT, Financial), Intel Corp. (INTC, Financial), Edwards Lifesciences Corp. (EW, Financial), Masimo Corp. (MASI, Financial) and IDEXX Laboratories Inc. (IDXX, Financial).
Starting point: Peter Lynch Stalwarts screen
According to Investopedia, Lynch defined a stalwart as “a large, well-established company that still offers long-term growth potential.” The investor sought companies with a strong balance sheet, little or no debt, solid cash flow and earnings growth between 10% and 12%.
GuruFocus launched a new version of the All-in-One Screener in March. Over the past few weeks, we have made significant changes to the layout as discussed in the new feature announcement. The Screener offers several predefined screens, including the Peter Lynch Stalwarts screen. The screen contains the following criteria: GuruFocus business predictability rank of at least two stars, a 10-year median return on capital of at least 14%, 10 years of profitability, a 10-year revenue growth rate between 8% and 20% and a 10-year earnings per share growth rate between 10% and 20%.
One can then add the following filters to narrow the stalwarts to those with strong profit margins:
- Operating margin of at least 22%.
- Five-year operating margin growth rate of at least 3.5%.
As of Friday, the Screener listed five stalwarts with strong profit margins.
Copart
Dallas-based Copart provides online auctions and vehicle remarketing services primarily to insurance companies, car dealerships, fleet operators and vehicle rental companies. GuruFocus ranks the company’s financial strength 7 out of 10 and profitability 9 out of 10 on several positive signs, which include a strong Piotroski F-score of 7 and a three-year revenue growth rate that outperforms approximately 89.5% of global competitors. Additionally, Copart’s business predictability ranks five stars out of five on strong and consistent revenue and earnings growth over the past 10 years.
Copart’s operating margin is near a 10-year high of 33.45% and outperforms 98.56% of global auto and truck dealerships. Gurus riding Copart’s strong profit momentum include Pioneer Investments (Trades, Portfolio) and Chuck Royce (Trades, Portfolio), our keynote speaker at next week’s value conference.
Intel
Shares of Intel tumbled 10% on Friday on the heels of the company lowering its full-year revenue guidance from the January figure of $71.5 billion to $69 billion. The Santa Clara, California-based semiconductor company said revenues for the quarter ending March 2019 were flat compared to the prior-year quarter, with data-centric revenues declining 5% year over year and PC-centric revenues increasing 4% year over year. Despite this, Intel’s operating margin, which is currently 32.81%, has increased approximately 5% per year over the past five years and is outperforming 95.17% of global competitors. The company’s 3.5-star business predictability rank further contributes to a GuruFocus profitability rank of 9.
Gurus with holdings in Intel include Ken Fisher (Trades, Portfolio) and Bill Nygren (Trades, Portfolio).
Edwards Lifesciences
Spun off from Daniel Loeb (Trades, Portfolio)’s top holding Baxter International Inc. (BAX, Financial) in 2000, Edwards Lifesciences designs, manufactures and markets various medical devices and equipment for advanced stages of heart disease. GuruFocus ranks the Irvine, California-based company’s financial strength 8 out of 10 and profitability 9 out of 10 on several positive signs, which include robust interest coverage, a strong Altman Z-score of 12.33 and consistent revenue growth. Edwards Lifesciences’ operating margin of 29.32% is near a 10-year high and outperforms 94.87% of global competitors.
Masimo
Irvine, California-based Masimo engages in noninvasive patient monitoring. GuruFocus ranks the company’s profitability 6 out of 10: Even though the three-year revenue growth rate of 10.90% outperforms just 52% of global competitors, Masimo’s operating margin of 24.29% outperforms 87.56% of global medical instruments and supplies companies.
IDEXX Laboratories
Westbrook, Maine-based IDEXX produces and distributes diagnostic products and equipment for pets and livestock. GuruFocus ranks the company’s financial strength 5 out of 10: Even though the interest coverage underperforms 66% of global competitors, IDEXX Laboratories’ Altman Z-score of 11.07 suggests minimal financial distress. Additionally, the company’s profitability ranks 9 out of 10 on several strong indicators like a business predictability rank of 4.5 stars and a 24.21% return on assets and an operating margin of 22.20%, both near a 10-year high and outperforming over 90% of global competitors.
Conclusions
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Disclosure: No positions.
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