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 provides marketing and data services to Validea.ca and receives compensation. Try it.
Genuine Parts (GPC-N) is a $14.6-billion company that distributes automotive and industrial replacement parts, office products and electrical / electronic materials all over the world. It has paid a dividend every year since going public in 1946, and its stock features both value and growth characteristics that make it appealing based on Validea's Guru model portfolios.
The stock scores 100 per cent on the Cornerstone Growth Model, a quantitative approach developed by James O'Shaughnessy. This growth model rewards companies with growing profits, reasonable valuations and price momentum. GPC has grown earnings in each year over the past five, has a price-to-sales ratio of 0.96 and exhibits nice momentum when compared to other stocks that pass the aforementioned investment criteria.
GPC also gets an above-average score from Validea's Buffett-based quantitative model, which is based on the investment methodology outlined in the book Buffettology. The Buffett approach values long-term earnings predictability, long-term above-average profitability and a host of other metrics. Over the past 10 years, GPC has produced a steadily-increasing earnings stream. What's more, it has achieved an average return on equity of 19.4 per cent and an average return on capital of 16.9 per cent over that same period. The ability to generate long-term consistent earnings and above-average profitability is a quantitative way of showing the firm has a competitive moat around its business.
Positive free cash flow, a shrinking share count and GPC's ability to pay down debt using its earnings are further positives for the Buffett model.
The stock's dividend yield of 2.7 per cent adds to its attractiveness.
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