St. Patty Stocks Not So Lucky
Tuesday, March 14th, 2017
On March 17th St. Patrick’s Day tradition calls for green beer, shamrock party favors and an enduring quest for that pot ‘o gold. But it seems most of this year’s St. Patty’s portfolio plays won’t be charming those seeking to generate green with their investments.
Here are four holiday-themed public companies on my radar:
Diageo PLC (DEO) - Rating = SELL
This alcoholic beverage company contains many popular names including Johnnie Walker, Crown Royal, Captain Morgan, and Ciroc. The company also sells two popular brands for Saint Patrick’s Day, Bailey’s Irish Cream and Guinness. Sales have grown 7.4% over the last 12 months, while EPS has fallen 2.9% during the same time frame. The company has a decent amount of liquidity with a current ratio of 1.29, but debt/equity of 115.7% is a little high. DEO pays a nice dividend of 2.6% and only uses 38% of their earnings to pay it out. The current price is $114.97 and the 52-week range is $99.46-$117.84. Based on estimated EPS of $5.65 we have a target sell price of $93.23. The company is based in London, but trades on the NYSE under ticker DEO.
Party City (PRTY) - Rating = SELL
Party City has a current price of $14.57 and a 52-week range of $9.37-$19.10. The current valuations are favorable as the P/E is 14.85 which is below the industry average of 64.59, Price/Sales of 0.74 is below the industry average of 0.75, and price/cash flow is 8.56 which is below the industry average of 10.75. Looking to December 2017 estimated EPS of $1.21 gives us a target sell price of $19.97. This would be an estimated return of 37%. While this looks good, the company has too many questions on the balance sheet. The company has no tangible equity and total debt/equity of 198% is too high.
Newmont Mining Corp (NEM) - Rating = SELL
Newmont has seen sales increase 10.3% while diluted EPS fell from $0.43 for 2015 to a negative $1.18 for 2016. This is due in part to a loss on discontinued operations that took place in 2016.The company has a current price of $36.29 and the 52-week range is $24.59-$46.07. The balance sheet is very strong for the company as the current ratio is 2.67 and debt/equity is 43.1%. Looking to December 2018 estimated EPS of $1.44 gives us a target sell price of $23.76.
Gold Fields Limited (GFI) - Rating = BUY
Alas, the pot ‘o gold after proverbial storm of “sells.” This company is based in South Africa, but has an ADR of GFI and trades on the NYSE. GFI explores and extracts gold and copper in various places around the world. Valuations are attractive for the company as price/sales is 0.98 which is below the industry average of 3.15, price/tangible book value of 0.98 is below the industry average of 1.98, and price/cash flow of 3.15 is below the industry average of 15.69. The balance sheet looks strong as there is a current ratio of 1.22 and debt/equity is just 55.2%. Looking to December 2018 estimated EPS of $0.32 gives us a target sell price of $5.28.
Amid a holiday rife with green beer, green cookies, green popcorn and even green bagels, it seems the charms of this year’s holiday-themed stock picks will only be leaving investors green with envy for other profit-proven plays they took a pass on.
Do you have a question or a company you'd like us to take a look at? Email us at Brent@WilseyAssetManagement.com or Chase@WilseyAssetManagement.com.