EHL supplies equipment rental solutions to the earthmoving industry.
Some of the reasons it is our large cap stock of the week include:
- We’ve liked this company for a while. In fact, Tony previously made it his stock of the week back in late August.
- However the price dropped shortly after their results came out and their net profit was down.
- When Tony looked into it though, he realised Emeco has been going through a bit of a restructure over the last 12 to 18 months. They had a recapitalisation, paid down debt, etc.
- Plus a lot of the equipment rental has been slowed down by COVID, particularly in Western Australia, where it’s been difficult getting fly in fly out workers to get in there, which lead to fleet utilisation being down from 64% to about 59%.
- But we think their numbers look quite good.
- The share price is $1.10, but our intrinsic value #2 is $2.38, more than twice the current price.
- The price is also lower than Stock Doctor’s intrinsic value of $1.51.
- Equity per share is $0.99, meaning the share price is nearly one-for-one. There’s not much fat in the price.
- It gets a score for having consistently increasing equity.
- It also gets a score for having a low price-to-operating cashflow ratio of 2.74.
- It’s just broken through the Napoleon line (meaning it has been a Josephine but has recovered).
- It has an average daily transaction volume of $1.69m, making it suitable for investors with deep pockets.
- QAV score of 0.23