The only thing that ever consoles man for the stupid things he does is the praise he always gives himself for doing them.
-Oscar Wilde
Our play of choice is Parker Hannifin Corp. (PH) and we like it for the following reasons:
- A very sturdy levered free cash flow of $1.10 billion.
- A great total return for the last three years of 206%.
- An exceptional payout ratio of 21% and a five year average payout ratio of only 25%.
- A 3 year dividend growth rate of 16.5%.
- Paying dividend since 1949 and consecutive dividend increases for seven years.
- A great interest coverage ratio of 15.27.
- A decent quick and current ratio of 1.2 and 1.7 respectively.
- Net income has more than doubled from $509 million in 2009 to $1049 million in 2011.
- EBITDA has increased from $1.15 billion in 2009 to $1.85 billion in 2011.
- Cash flow has surged from $5.40 in 2009 to $8.65 in 2011.
- Annual EPS before NRI has increased from $5.61 in 2008 to $6.37 in 2011.
- It sports a decent ROE of 10.34%.
- A quarterly revenue growth rate of 8.4%.
- A fine free cash flow yield of 8.7%.
- A fine EPS growth rate of 12.23%.
- 100K invested for 10 years would have grown to 273K; dividends were not reinvested if they were the rate of return would be much higher.
Parker Hannifin Corp.
Industry: Industrial Machinery & Equipment
Levered Free Cash Flow: 1.10B
Net income for the past three years
Net Income 2009 = $509 million
Net Income 2010 = $554 million
Net Income 2011 = $1049 million
EBITDA 12/2011 = $1853 million
EBITDA 12/2010 = $1221 million
EBITDA 12/2009 = $1153 million
Net income Reported Quarterly = $371 million
Total cash flow from operating activities
2009 = $1.13 billion
2010 = $1.22 billion
2011 = $1.17 billion
Cash Flow 12/2011 = 8.56 $/share
Cash Flow 12/2010 = 5.69 $/share
Cash Flow 12/2009 = 5.4 $/share
Annual EPS before NRI 12/2011 = 6.37
Annual EPS before NRI 12/2010 = 3.4
Annual EPS before NRI 12/2009 = 3.13
Annual EPS before NRI 12/2008 = 5.61
ROE = 20.7%
Return on Assets = 10.34%
Quarterly Earnings Growth = 4.6%
Quarterly Revenue Growth = 8.4%
Key Ratios
Price to Sales = 1.05
Price to Book = 2.61
Price to Tangible Book = 11.63
Price to Cash Flow = 10.6
Price to Free Cash Flow = 17.4
Current Ratio 09/2011 = 1.91
Current Ratio 5 Year Average = 1.7
Quick Ratio = 1.21
Cash Ratio = 0.38
Interest Coverage 09/2011 = 15.27
Payout Ratio 09/2011 = 0.21
Payout Ratio 06/2011 = 0.22
Payout Ratio 5 Year Average 09/2011 = 0.25
Payout Ratio 5 Year Average 06/2011 = 0.25
Change in Payout Ratio = -0.04
Dividend yield 5 year average = 1.8%
Dividend growth rate 3 year average = 16.58%
Dividend growth rate 5 year average = 17.71%
Consecutive dividend increases = 7 years
Paying dividends since = 1949
Total return last 3 years = 206.76%
Total return last 5 years = 75.27%
General Dynamics Corp. (GD)
Industry : Aerospace
Levered Free Cash Flow: 2.20B
Net income for the past three years
Net Income 2009 = $2394 million
Net Income 2010 = $2624 million
Net Income 2011 = $2526 million
EBITDA 12/2011 = $4451 million
EBITDA 12/2010 = $4516 million
EBITDA 12/2009 = $4235 million
Net income Reported Quarterly = $1690 million
Total cash flow from operating activities
2009 = $2.86 billion
2010 = $2.99 billion
2011 = $3.24 billion
Cash Flow 12/2011 = 9.17 $/share
Cash Flow 12/2010 = 8.46 $/share
Cash Flow 12/2009 = 7.7 $/share
Annual EPS before NRI 12/2011 = 7.28
Annual EPS before NRI 12/2010 = 6.82
Annual EPS before NRI 12/2009 = 6.21
Annual EPS before NRI 12/2008 = 6.22
Annual EPS before NRI 12/2007 = 5.1
ROE = 19.58%
Return on Assets = 7.94%
Quarterly Earnings Growth = -17.3%
Quarterly Revenue Growth = 6.3%
Key Ratios
Price to Sales = 0.8
Price to Book = 1.97
Price to Tangible Book = -12.13
Price to Cash Flow = 8
Price to Free Cash Flow = 50.3
Current Ratio 09/2011 = 1.38
Current Ratio 5 Year Average = 1.31
Quick Ratio = 1.17
Cash Ratio = 0.31
Interest Coverage 09/2011 = 24.97
Payout Ratio 09/2011 = 0.26
Payout Ratio 06/2011 = 0.26
Payout Ratio 5 Year Avg 09/2011 = 0.24
Payout Ratio 5 Year Avg 06/2011 = 0.24
Change in Payout Ratio = 0.02
Dividend yield 5 year average = 2.4%
Dividend growth rate 3 year avg = 10.33%
Dividend growth rate 5 year average = 15.56%
Consecutive dividend increases = 17 years
Paying dividends since = 1979
Total return last 3 years = 109.92%
Total return last 5 years = 5.18%
Wal-Mart Stores, Inc. (WMT)
Industry : Retail - General Merchandise/Department Stores
Levered Free Cash Flow: 9.33B
Net income for the past three years
Net Income 2009 = $13381 million
Net Income 2010 = $14370 million
Net Income 2011 = $16389 million
EBITDA 12/2011 = $33384 million
EBITDA 12/2010 = $31340 million
Net income Reported Quarterly = $1690 million
Total cash flow from operating activities
2009 = $23.15 billion
2010 = $26.25 billion
2011 = $23.65 billion
Cash Flow 12/2011 = 6.33 $/share
Cash Flow 12/2010 = 5.61 $/share
Annual EPS before NRI 12/2011 = 4.07
Annual EPS before NRI 12/2010 = 3.66
Annual EPS before NRI 12/2009 = 3.42
Annual EPS before NRI 12/2008 = 3.18
ROE = 21.66%
Return on Assets = 8.12%
Quarterly Earnings Growth = -14.7%
Quarterly Revenue Growth = 5.9%
Key Ratios
Price to Sales = 0.47
Price to Book = 2.77
Price to Tangible Book = 4.49
Price to Cash Flow = 8.81
Price to Free Cash Flow = 76.1
Current Ratio 03/2012 = 0.88
Current Ratio 12/2011 = 0.88
Current Ratio 09/2011 = 0.88
Current Ratio 5 Year Average = 0.86
Quick Ratio = 0.23
Cash Ratio = 0.13
Interest Coverage 03/2012 = 15.06
Interest Coverage 12/2011 = 15.06
Interest Coverage 09/2011 = 9.91
Payout Ratio 12/2011 = 0.33
Payout Ratio 09/2011 = 0.33
Payout Ratio 06/2011 = 0.34
Payout Ratio 5 Year Average 12/2011 = 0.31
Change in Payout Ratio = 0.02
Dividend yield 5 year average = 2.1%
Dividend growth rate 3 year average = 14.87%
Dividend growth rate 5 year average = 15.72%
Consecutive dividend increases = 36 years
Paying dividends since = 1973
Total return last 3 years = 34.8%
Total return last 5 years = 48.24%
Company : Mcgraw-Hill Cos (MHP)
Levered Free Cash Flow = 1.41B
Basic Key ratios
Percentage Held by Insiders = 4.16
Market Cap ($mil) = 13072
Growth
Net Income ($mil) 12/2011 = 911
Net Income ($mil) 12/2010 = 828
Net Income ($mil) 12/2009 = 731
12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 9.98
Quarterly Net Income this Quarterly/ same Quarter year ago = 39.1
EBITDA ($mil) 12/2011 = 1807
EBITDA ($mil) 12/2010 = 1830
EBITDA ($mil) 12/2009 = 1720
Net Income Reported Quarterlytr ($mil) = 214
Annual Net Income this Yr/ Net Income last Yr = 10.02
Cash Flow ($/share) 12/2011 = 4.32
Cash Flow ($/share) 12/2010 = 4.09
Cash Flow ($/share) 12/2009 = 3.82
Sales ($mil) 12/2011 = 6246
Sales ($mil) 12/2010 = 6168
Sales ($mil) 12/2009 = 5952
Annual EPS before NRI 12/2007 = 2.99
Annual EPS before NRI 12/2008 = 2.65
Annual EPS before NRI 12/2009 = 2.37
Annual EPS before NRI 12/2010 = 2.69
Annual EPS before NRI 12/2011 = 2.91
Dividend history =
Dividend Yield = 2.17
Annual Dividend 12/2011 = 1
Annual Dividend 12/2010 = 0.94
Forward Yield = 2.17
Dividend sustainability
Payout Ratio 06/2011 = 0.34
Payout Ratio 5 Year Average 06/2011 = 0.34
Change in Payout Ratio = 0.01
Performance
Percentage Change Price 52 Weeks Relative to S&P 500 = 14.66
Next 3-5 Year Estimate EPS Growth rate = 10.5
EPS Growth Quarterly(1)/Q(-3) = -114.55
ROE 5 Year Average 06/2011 = 47.5
Return on Investment 06/2011 = 27.31
Debt/Total Cap 5 Year Average 06/2011 = 33.61
Current Ratio 06/2011 = 0.86
Current Ratio 5 Year Average = 1.01
Quick Ratio = 0.77
Cash Ratio = 0.44
Interest Coverage Quarterly = 13.22
Valuation
Book Value Quarterly = 5.4
Price/ Book = 8.71
Price/ Cash Flow = 10.88
Price/ Sales = 2.08
EV/EBITDA 12 Mo = 7.14
Dover Corp (DOV)
Levered Free Cash Flow = 383.19M
Basic Key ratios
Percentage Held by Insiders = 1.4
Market Cap ($mil) = 11785
Number of Institutional Sellers 12 Weeks = 1
Growth
Net Income ($mil) 12/2011 = 895
Net Income ($mil) 12/2010 = 700
Net Income ($mil) 12/2009 = 356
12months Net Income this Quarterly/ 12months Net Income 4Q's ago = 27.88
Quarterly Net Income this Quarterly/ same Quarter year ago = 40.34
EBITDA ($mil) 12/2011 = 1514
EBITDA ($mil) 12/2010 = 1248
EBITDA ($mil) 12/2009 = 826
Net Income Reported Quarterly ($mil) = 278
Annual Net Income this Yr/ Net Income last Yr = 27.87
Cash Flow ($/share) 12/2011 = 5.98
Cash Flow ($/share) 12/2010 = 4.81
Cash Flow ($/share) 12/2009 = 3.24
Sales ($mil) 12/2011 = 7950
Sales ($mil) 12/2010 = 7100
Sales ($mil) 12/2009 = 5776
Annual EPS before NRI 12/2007 = 3.22
Annual EPS before NRI 12/2008 = 3.67
Annual EPS before NRI 12/2009 = 1.99
Annual EPS before NRI 12/2010 = 3.47
Annual EPS before NRI 12/2011 = 4.26
Dividend history
Dividend Yield = 1.96
Dividend Yield 5 Year Average = 2.3%
Annual Dividend 12/2011 = 1.18
Annual Dividend 12/2010 = 1.07
Forward Yield = 1.96
Dividend 5 year Growth = 11%
Dividend sustainability
Payout Ratio 06/2011 = 0.29
Payout Ratio 5 Year Average 06/2011 = 0.31
Change in Payout Ratio = -0.02
Performance
Percentage Change Price 52 Weeks Relative to S&P 500 = -8.01
Next 3-5 Year Estimate EPS Growth rate = 13.33
EPS Growth Quarterly(1)/Q(-3) = -113.83
ROE 5 Year Average 06/2011 = 15.33
Return on Investment 06/2011 = 11.76
Debt/Total Cap 5 Year Average 06/2011 = 30.41
Current Ratio 06/2011 = 2.82
Current Ratio 5 Year Average = 2.28
Quick Ratio = 2.16
Cash Ratio = 1.17
Interest Coverage Quarterly = 9.06
Valuation
Book Value Quarterly = 26.6
Price/ Book = 2.41
Price/ Cash Flow = 10.73
Price/ Sales = 1.42
EV/EBITDA 12 Mo = 8.43
Conclusion
The markets are extremely overbought, and it would be prudent and wise for long-term investors to wait for a strong to decent pullback before committing large sums of money to this market. One might have to be patient, as markets tend to overshoot to the upside and downside nowadays. Investors looking for additional streams of income can sell covered calls and if you are bullish on the stock you can also sell naked puts.
EPS, EPS surprise, broker recommendations, and price and consensus charts sourced from zacks.com. Earning's estimates and growth rate charts sourced from dailyfinance.com. Free cash flow yield, income from cont operations, and revenue growth sourced from Ycharts.com. Earning Vs expectations from Smartmoney.com.
Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
