Validea’s pick of the week provides a detailed report on a company that scores well in the stock-screening service’s model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.
Atlanta-based Ebix Inc. is a global supplier of software and e-commerce solutions to the insurance and financial arenas. Shares have struggled over the past year as growth has slowed, but several strategies think that has made it a great bargain. It's market cap is $515-million (U.S.).
Ebix has grown sales at a 30-per-cent pace over the long term, two-and-a-half times the industry average. It gets strong interest from the Warren Buffett-inspired strategy, thanks in part to its having upped EPS in each year of the past decade and having more annual earnings ($62-million) than long term debt ($46-million).
2013 EPS are on track to come in below 2012's, but the Buffett model sees that as a buying opportunity, not a sign of longer term problems.
The company has a strong 22.8-per-cent return on retained earnings (those not paid out as dividends) over the past decade, which the Buffett-based model likes, and it has averaged a 21.8-per-cent return on equity over past ten years, another reason the Buffett model likes it.
Ebix has a stellar 147-per-cent return on capital, a big reason why the Joel Greenblatt-inspired model ranks it as the third-best in the entire U.S. market.
Ebix trades for just 8.3 times trailing 12-month EPS and has a 26-per-cent long-term EPS growth rate. That makes for a strong 0.31 PE-to-growth ratio, which the Peter Lynch-based model likes.
It has a 14.4-per-cent earnings yield (EBIT/enterprise value), which the Greenblatt model also likes, and it is a small cap that is being heavily shorted, so may be subject to significant short term volatility.
John Reese is long EBIX.
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