Hope you are doing well.
Recently, we released our new stock recommendation for our Premium Members and would like to share with you details on the same.
So basically, it’s a virtually debt free company, compounded profits at 20% + consistently, maintained returned ratios like ROE and ROCE at 20% + consistently, doubled its market share in exports in its segment in the last 6-7 years and yet available at less than 7 times Pre-tax earnings.
Such companies are mostly available in the small-mid cap space and if one can handle volatility, the medium to long term outcomes tend to be good.
When investing in such stocks, it’s important to check if there has been major run up in earnings which is making the stock look cheap on PE basis. Well, the stock is quoting below 10 times even on 5 years’ average post tax earnings.
Further, on Price to book value basis, the stock is quoting below its 5 and 10-years’ median value
What are some of the other characteristics of the company:
- Industry – Food processing
- Market share – 200% increase in last 10 years and 50% increase in last 3 years
- 20% + PAT and 15% + Sales CAGR over the last few years
- Leadership – leader in sales in several of the countries it sells in
- Minimal debt – Net debt free with large surplus cash
- Promoter holding – High
- Dividend – Consistently paying since 1996
Due to the correction in the small cap stocks in the last 1 year, the stock is down 25% from the highs recorded in 2021 while the PAT has grown by more than 20% in the first half of FY 23; thus, making the stock available at very reasonable valuations.
In an industry with high failure rate, the company is not only surviving, rather growing and growing without taking much risk.
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