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Research Report

Model portfolios find a lot to like in Lear Corp. Add to ...

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.

Lear Corp., a 97-year-old Michigan-based firm, supplies automotive seating and electrical power management systems to customers around the world.  It has employees in 36 countries, and in the past year has taken in over $15-billion (U.S.) in sales. It has market cap of $6.6-billion.

The company has grown EPS at a 26-per-cent pace over the long term, part of why it gets strong interest from the Peter Lynch based model. It trades for just 6.3 times trailing 12-month EPS, making for a 0.24 PE-to-growth ratio, which the Lynch-based model likes.

Lear Corp. has a reasonable debt/equity ratio of 38 per cent, which the Lynch and Kenneth Fisher models like. The Fisher model also likes the firm's growth and 0.42 price/sales ratio, and gives the stock strong interest.

Lear's low price/sales ratio and 83 relative strength help earn it strong interest from the James O'Shaughnessy-based growth model.

It has a return on equity of 45 per cent vs 10 per cent for the auto/truck parts industry.

Lear has retained (not paid as dividends) $4.91 in EPS over past decade, while EPS have risen $10.19. That makes for a stellar 208-per-cent return on retained earnings, which the Warren Buffett-based model likes.

John Reese is long LEA.

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