I’ve been reading How to Value Invest by Jason Rivera and I’m applying what I learn to the value investing metrics I’m use.
The overall principle of value investing remains the same: purchase shares of companies for less than their intrinsic value. I’m simply trying to find the best way to do that.
Some of the additional metrics I’ve been considering at are the EBIT plus cash and cash equivalents / outstanding shares multiples. I’m also looking at the quick ratio and current ratio as ways to measure company solvency as well as net cash per share and insider ownership.
That might sound like a foreign language but I’ll be creating an updated value investing metrics article in the coming weeks that dives into each in more detail.
March Value Stock Picks
FutureFuel (FF on NYSE)
From Google Finance: “FutureFuel Corp. is engaged in the chemical and biofuels business. The FutureFuel Chemical Company, a subsidiary of Company, manufactures chemical products and bio-based products comprising biofuels and bio-based specialty chemical products. The Company operates in two segments: chemicals and biofuels. The chemicals segment manufactures chemical products that are sold to third-party customers. The biofuels segment primarily produces and sells biodiesel to its customers.”
Enterprise Value to Market Capitalization is at .5, EV/FCF is 3.541, and the EV/EBIT ratio is 7.472 (the ratios measure the value of the enterprise relative to free cashflow and earnings before interest and taxes). FF has a yield of 1.72% with a sustainable 18.62% payout ratio. Net Cash per Share is $3.68. The five year average return on equity has been over 5%. A current ratio of 2.814 ensures FutureFuel can service it’s debts. It is a little pricey at around 11 times EBIT plus cash and cash equivalents per share. It is owned over 18% by insiders, which is a good thing.
Enzon Pharmaceuticals Inc. (ENZN on OTC Markets Group)
From Google Finance: “Enzon Pharmaceuticals, Inc. receives royalty revenues from existing licensing arrangements with other companies primarily related to sales of four marketed drug products: PegIntron, Sylatron, Macugen and CIMZIA. The Company has no clinical operations and limited corporate operations. PegIntron is used both as a monotherapy and in combination with REBETOL (ribavirin) capsules for the treatment of chronic hepatitis C. Macugen is used for the treatment of neovascular (wet) age-related macular degeneration. Sylatron is used for the treatment of melanoma. CIMZIA is used for the treatment of moderate to severe rheumatoid arthritis and Crohn’s disease. CIMZIA is a biologic medicine that counteracts tumor necrosis factor (or TNF), which promotes inflammation of the joints in rheumatoid arthritis.”
Enterprise Value to Market Capitalization is at .3, EV/FCF is 1.3 and EV/EBIT ratio is just .52. Net Cash per Share is $.15. The five year average return on equity has been over 5%. Although the trailing twelve month ROE has been negative 6%. A current ratio of 8.4 ensures Enzon can service it’s debts. Even at 5 times EBIT plus cash and cash equivalents it has a a large margin of safety at over 70%.
AmTrust Financial Services (AFSI on NASDAQ)
From Google Finance: “Amtrust Financial Services, Inc. (AmTrust) is an insurance holding company. The Company, through its subsidiaries, provides specialty property and casualty insurance focusing on workers’ compensation and commercial package coverage for small business, specialty risk and extended warranty coverage, and property and casualty coverage for middle market business. Its segments include Small Commercial Business, Specialty Risk and Extended Warranty, and Specialty Program. The Small Commercial Business segment is engaged in providing workers’ compensation, commercial package and other commercial insurance lines produced by wholesale agents, retail agents and brokers in the United States. The Specialty Risk and Extended Warranty segment is engaged in providing coverage for consumer and commercial goods and custom designed coverages. The Specialty Program segment is engaged in writing commercial insurance for defined classes of insureds through general and other wholesale agents.”
Enterprise Value to Market Capitalization is at 1.37, EV/FCF is 3.6 and EV/EBIT ratio is 6.218. AFSI has a yield of 3.44% with a sustainable 22.76% payout ratio. Net Cash per Share is a whopping $45.40. The five year average return on equity has been over 5%. A current ratio of 2.98 ensures AmTrust can service it’s debts. Even at 5 times EBIT plus cash and cash equivalents it has a a large margin of safety at over 75%. It is 16.68% owned by insiders.
I’m planning on opening positions in each of these three securities.
Data is from ycharts.com.
None of this information is a recommendation to buy any security. I’m just sharing some of the value stocks I like.