An Interesting Screen-Deteriorating Operating Margins and Increasing Capital Intensity
In this screen, I am taking trailing four quarter observations and comparing these to trailing four quarter observations lagged back one year prior. I have confined my screen to non-financial stocks in the S&P 1500.
There is no attempt to scale the amount of deterioration. For example, in 3M, a company which I continue to like, the operating margin has decreased from 22.57% to 22.53%, hardly alarming. Operating working capital to revenue has increased to 14.1% from 10.35% which still represents significant improvement from working capital levels which hit 20%+ levels of two years ago. Similarly, capex at 3M as it undertakes its international expansion is at 7.52% of revenues versus 6.94% four quarters prior, again, not an alarming pace. Bottom-line, this is a screen which is designed to raise some questions and further analysis, not to prompt an instant sell or a short.
The data is from Cash Flow Analytics, a company founded by Professor Chuck Mulford of Georgia Tech.
Finally, the ultimate test of investment is a test of market price versus intrinsic value, clearly a judgment that each investor should make for him or herself.
You will find the screen in this link: http://tinyurl.com/3oayag
Disclaimer: I, my family, or clients have a current position in 3M
1 Comments:
Robert Drach, who I consider the premier value oriented market timer just added MMM to his Master List of stocks to buy when the time is right.
This won't show up on this link, but I have it via email. http://www.pbs.org/nbr/site/research/investors/drach/drach/
Enjoyed your analysis
Micro
http://themicrokid.blogspot.com/
Post a Comment
<< Home