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Research Report

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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.

Snap-on (SNA-N) is a leading manufacturer of professional-grade tools and related equipment. The company has an $8.5-billion market cap. Its stock has a 52-week high of $174.52 but currently trades well below that at $146.70.

The shares rate highly according to Validea's Peter Lynch-based model, which favours its yield-adjusted PEG ratio of 0.91 and its reasonable debt-to-equity ratio.

The stock also scores well according to the Magic Formula method, which was outlined by Joel Greenblatt in "The Little Book that Beats the Market". Greenblatt ranks stocks by their valuation, using the earnings yield (the inverse of the P/E ratio) and also by a firm's return on capital. Snap-on's earnings yield and return on total capital put the shares in the 39th spot out of all stocks in the U.S., ranked by these fundamental criteria.

The company is also exhibiting solid earnings growth, which is a big reason why Validea's Growth Investor model, based on the strategy outlined by Martin Zweig, rates the company close to 80 per cent. The firm's earnings persistence, along with its quarterly earnings growth rates, are helping make the stock attractive. For example, earnings over the last five years, from earliest to latest, have come in at 4.71, 5.20, 5.93, 7.14 and 8.10.

The stock has a reasonable price-to-earnings ratio of 16.8 and carries a yield of 1.7 per cent, which is slightly below that of the S&P 500.

Click here for a complete breakdown of Validea's investing guru report.

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