I then went back to the David Fish CCC lists. I own several of the top Aristocrats and Champions, so I screened Contenders next. Here is the result:
I own of few these already (TEVA, MSFT), several are similar to existing holdings NSC = CSX, CAT = CMI, and the others had some warts (BBY = value trap). GD caught my attention with a low PE, a nice yield, and respectable EYE ratio. Here are some FASTGraphs on GD:
Nicely undervalued vs. its historical PE (15 years). Historical growth in EPS is 11.6%. Here is a graph of price vs. normal PE for the past six years:
Still below fair value by around 9%. Even though the stock took a big hit in 2008/2009, earnings continued to grow at 6.6%, giving us the undervaluation today. Looking at yield, nice at 3.1%, with a good dividend track record:
GD has a nice track record of increasing dividends. CAGR for the last 5 years of dividend growth is a very healthy 10.72%, and the payout ratio has remained around 25% or lower consistently. An investment in GD 15 years ago handily outperformed the S&P by 6.3% annually.
Price to sales is at historic lows:
Looking at future earnings estimates, this year and next forecast by the company. Out years a consensus of analysts following the stock:
This reinforces today's undervaluation, and while the 7% future growth is not all that exciting, I think this could change depending on the upcoming election. GD has managed to sustain growth during 4 years of the Obama administration, and I suspect future growth estimates assume the current administration stays in power. This could be viewed as a worse case future growth scenario. Low debt, good payout ratio, nice yield and annual dividend increases all point to a well managed firm. I ordinary would not like a stock that derives over 60% of its revenue from one customer (US Government), but because its the government, I don't view that nearly as risky as a major corporate customer.
While I'm skeptical of analyst opinions, I like to at least see what they are saying. Here is a summary my Fidelity account (published without permission, hope this is legal :) :
GD is trading down today, I'm going to initiate a position, and build it over the coming few weeks.