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Intelligent Investing
Published: 7 December 2015
Contents
Market Review
Market Review
1
Equities
Just Eat
2
Wolseley2
Equity Screen
UK3
Europe4
European Equities
Henkel5
Investment Trust
Impax Environmental
Markets5
Profit Takers6
The information provided in
Intelligent Investing is not tailored
advice – it has no regard for the
specific investment objectives,
financial situation or needs of any
specific person.
Investment involves risk. The value
of investments and the income from
them can go up as well as down and
you may not get back the amount
originally invested.
This is a marketing communication
under FCA rules. For important
information please see the full
disclosures.
Intelligent Investing | December 2015
Over the last few weeks markets have
moved sideways, albeit nervously, in a
range of plus or minus 5%. Moves by
the Chinese authorities to reflate their
economy appear to be taking hold. Signs
of a gentle recovery are becoming more
apparent in Europe, supported by talk of
still more quantitative easing from the
European Central Bank. The UK continues
with its slow and steady upwards
progress, while economic data in the US
remains very supportive, especially on the
employment front. With China no longer
a constraint, as it was in September, the
odds are now on the US Federal Reserve
raising rates at its December meeting,
finally, after seven years rooted close
to zero.
This long period of very cheap money has
fuelled a rise in asset values, although
it has not delivered the economic
growth its proponents originally hoped.
Therefore, this first, totemic move towards
normalising monetary conditions may
cause some ripples of volatility, even if the
size of any rate rise is small.
Moreover, there are other headwinds
that markets still have to confront. There
is, tragically, the awful terrorist outrage
in Paris to consider, along with the
lock-down in Brussels that followed it;
the Chief Executive of Siemens, one of
Germany’s largest companies, warned
investment would suffer in the face of the
uncertainty this climate of fear engenders.
A renewed collapse in commodity prices
may indicate a drop in global economic
demand, particularly in Emerging Markets;
the Bloomberg commodity index, a broad
measure of a spread of different industrial
and agricultural commodities, is down by
11% since early October - and has fallen by
approaching 25% over the course of 2015.
However, in our view there is sufficient
economic momentum from the US, the
UK and from embryonic recoveries in
Europe and China for growth to continue
over the coming months. This will support
gradual revenue and earnings increases
for companies in aggregate, although
clearly mining and energy companies may
struggle, and quantitative easing is still
very much the order of the day in Europe
and Japan.
Nonetheless, the near seven year equity
rally is long in the tooth and valuations are
no longer cheap in absolute terms. This
means that when companies disappoint,
the market punishes culprits savagely.
Corrections of 15%-20% have been
commonplace, as seen in the cases of
Rolls-Royce, Chemring, Meggitt, Pearson,
SIG and Home Retail amongst others.
In some cases these big adjustments
are justified; but in others, they throw up
opportunities where the lurch downwards
exceeds the size of the downgrade. We
are also seeing some companies that
are capable of generating real growth, by
exploiting new niches and technologies
such as Just Eat which features later in
this publication. Here, despite sometimes
high valuations, market consensus can
underestimate the scale of growth involved.
Richard Champion
Deputy Chief Investment Officer, UK
Equities
One to Takeaway?
Just Eat
Share price:
456.2p
Market cap: £3,080m
2014A
2015F
2016F
Revenue (£m)
157
235
325
Earnings per Share (p)
3.8
5.8
9.3
Dividend per Share (p)
0.0
0.0
1.2
Dividend Yield
0.0%
0.0%
0.3%
Free Cash Flow Yield
2.2%
1.3%
2.1%
Price Earnings Ratio
69.1
78.5
49.3
112%
238%
448%
Return on Capital
Employed
Source: Quest®
Just Eat (‘JE’) provides takeaway
restaurants with an online presence by
enabling customers to order takeout
across a range of technologies. They
have 11 million active users and 59,000
restaurants across 14 countries on
their platform. Typically, they focus on
independent restaurants but they have
also begun to partner with chains such as
Papa Johns, itsu and Yo! Sushi.
JE receives commission (c.10-12%) on the
value of the order. The success of their
model is underpinned by the fact that it
appeals to customers and restaurants.
Customers benefit from faster, easier and
more flexible ordering at no extra cost
while restaurant owners benefit in that JE:
1. drives additional orders 2. generates
average orders that are 30% larger
3. cuts the amount of time spent taking
phone orders 4. eliminates errors while
taking orders and 5. provides much
needed credibility via the customer
feedback mechanism.
JE is the clear market leader in 12 of
their 14 territories. In this ‘winner takes
all’ market it is worth noting that the
number two has never managed to
make a profit which suggests that their
market leading positions will become
increasingly dominant over time as the
industry consolidates.
As you would expect of a stock trading
on 50x earnings, growth has been
impressive with average annual revenue
growth of 70% since 2012. Unlike some
other technology stocks JE has been
consistently profitable for two years. To
justify the current valuation, we need
comfort on the level of projected future
growth. Although the UK, along with
Denmark, are their only markets close
to maturity, there is still scope for good
growth with 70% of UK takeaway delivery
orders still being taken on the phone.
However, we expect the majority of growth
to come from outside the UK given that
it accounts for only 28% of revenues but
78% of JE’s total addressable market. As
a result and upon maturity of their estate,
management expect a sevenfold increase
on 2014 revenues.
Simon McGarry
Senior Equity Analyst
Turn up the heat
Wolseley
Share price:
3882p
Market cap: £9,384m
Revenue (£m)
2015A
2016F
2017F
14,894
13,332
14,050
Earnings per Share (p)
222.8
256.2
278.4
Dividend per Share (p)
90.8
99.4
110.5
Dividend Yield
2.4%
2.6%
2.8%
Free Cash Flow Yield
4.5%
5.5%
6.2%
Price Earnings Ratio
16.7
15.2
13.9
17.0%
17.8%
17.6%
Return on Capital
Employed
Source: Quest®
US business growing faster than its
underlying markets
18
16
14
12
10
%
8
6
4
2
0
FY15 market growth
B2
C
C
HV
A
In
du
st
ria
l
Fi
re
&
Fa
b
W
Bl
e
nd
ed
at
er
wo
rk
s
*
FY15 LFL revenue growth
Source:Wolseley 2015 Full Year Results
*HVAC – Heating, ventilation and air-con
Intelligent Investing | December 2015
Wolseley is the world’s largest specialist
distributor of plumbing and heating
products employing 38,000 people
across the US, UK, Nordics, Canada and
Central Europe. The company benefits
from a strong, stable management team
with an excellent growth track record.
Their end markets remain fragmented
providing ample opportunity for M&A
having completed 18 bolt-on acquisitions
last year. They rank in the top two in
81% of their markets which is extremely
satisfying considering the inherent scale
benefits in distribution. Staff turnover
being consistently below industry averages
is constructive for what is fundamentally a
relationship based business. Sustainable
homes are also a nascent market with the
potential to drive material future growth.
In early November, Wolseley published
robust first quarter results. Despite
the shares falling 5%, revenues were
up 3.9% on a constant currency basis.
Whilst Central Europe and Canada (8% of
revenues) dragged on performance both
the US (62% of revenues) and the Nordics
(14%), which have been problematic of
late, were better with like-for-like growth
of 4.5% and 5.5%. However, the elephant
in the room is the US construction sector
which is recovering nicely but remains a
shadow of its former self. With 1% annual
population growth and the median US
house being 40 years old the backdrop
for a revival in US construction activity
looks promising. Oxford Economics,
a leader in global forecasting and
quantitative analysis, agrees – having
recently predicted that US construction
activity growth will outpace China over the
next 15 years at 5% annually.
Admittedly, building materials suppliers
are notoriously cyclical businesses but
this has been somewhat mitigated by an
increased focus on Repair, Maintenance
and Improvement which is more resilient
in downturns. Nonetheless, the balance
sheet remains conservatively managed
with net debt below EBITDA. After cutting
the dividend in 2009, it was reinstated
in 2011 and the shares now yield 2.7%
(dividend cover 2.5x) with a further 10%
growth expected this year. Management
have also repurchased over 4% of the
shares in just 15 months. Given the
shares trade on 15.2x current year
earnings which is a 7% discount to the
UK market we consider Wolseley an
interesting investment opportunity.
Simon McGarry
Senior Equity Analyst
2
UK Equity Screen
Dividend cover – thin or threadbare
Search Criteria
In this world of low interest rates and bond yields, equity
dividends represent an attractive potential source of
income. However, profitability and cash flows in many
areas of the market are coming under increasing
pressure and are making it more difficult for companies
to maintain these ambitious dividend policies.
1. 12 month forward dividend yield is greater than 3%
2. 12 month forward dividend cover is less than or equal to 1.7x
3. Earnings per Share (EPS) fell last year and is expected to do
so again this year
Considering that the UK market is expected to pay roughly
63% of its 2015 earnings out in dividends, up from just 40%
before the financial crisis, it appears that any wiggle room for
earnings disappointment has now been substantially eroded.
With this in mind, we have run a screen to identify what we
feel are future candidates for a possible dividend cut. We have
already seen dividend cuts from companies as diverse as
Tesco, Serco, Glencore, Drax and Centrica to name but a few.
The latest example is Amec who, in November, announced
its first dividend cut in 18 years. What is interesting is not
that they made this cut because they were forced to, but to
quote their CEO, they needed to manage their business “on
the assumption of an extended period of weakness”. What
is perhaps more fascinating is that, at the time of the cut,
next year’s dividend was covered 1.7x by forecast earnings.
4. Returns are forecast to fall this year
5. Net debt for the current year is greater than EBITDA
Although hindsight is 20/20 vision, it is nonetheless interesting
that in the three months before the dividend cut, the analyst
consensus view of Amec’s forecast earnings per share was
increasingly negative – and estimated a fall for the years
ending 2015 and 2016 of 4% and 10% respectively.
In light of Earnings per Share (EPS) for the UK market expected
to fall by 5% in 2016, it appears that the combination of a high
dividend yield, low cover and negative EPS growth is a particularly
dangerous combination for investors at present. Considering that
Amec has fallen over 40% since cutting its dividend, by avoiding
any potential future dividend cuts could prove rewarding indeed.
12 month forward
Market
capitalisation
(£m)
Net debt/
EBITDA
EPS growth
Performance
over previous
Dividend
yield
Dividend
cover
Prior
year
Current
year
Current
year
1 month
3 months
102,421
7.6%
1.1
-21%
-16%
1.2
-8%
-2%
Oil Gas and
Consumable Fuels
67,506
7.3%
0.9
-15%
-47%
1.4
-9%
4%
GlaxoSmithKline
Pharmaceuticals
65,072
6.2%
1
-14%
-29%
1.1
-3%
0%
Vodafone
Wireless
Telecommunication
Services
57,982
5.3%
0.5
-52%
-17%
2.1
1%
-4%
Diageo
Beverages
47,792
3.1%
1.5
-9%
-5%
2.8
1%
11%
BHP Billiton PLC
Metals and Mining
41,891
10.6%
0.5
-47%
-54%
2.2
-26%
-29%
Rio Tinto PLC
Metals and Mining
37,907
7.3%
1.1
-21%
-43%
1.2
-10%
-10%
Centrica
Multi-Utilities
10,814
5.8%
1.4
-29%
-3%
2.2
-6%
-11%
Tate & Lyle
Food Products
2,822
4.7%
1.3
-39%
-2%
2.1
1%
11%
IMI
Machinery
2,521
4.2%
1.5
-3%
-25%
1.1
-5%
-10%
Electrocomponents
Electronic
Equipment
Instruments and
Components
1,022
5.0%
1.2
-19%
-9%
1.6
9%
27%
Vedanta PLC
Metals and Mining
1,016
9.7%
-0.8
-119%
-671%
4.8
-28%
-37%
Premier Farnell
Electronic
Equipment
Instruments and
Components
382
6.9%
1.6
-3%
-18%
2.8
2%
-19%
Company name
Industry name
Royal Dutch
Oil Gas and
Consumable Fuels
BP
Source: Quest ®
Past performance and future forecast figures are not a reliable indicator of future results.
Intelligent Investing | December 2015
3
European Equity Screen
Quality outperformers
Search Criteria
The overriding theme of the last 18 months in European
equity markets, in terms of investment style, has been the
relative outperformance of Quality companies (i.e. healthy
balance sheets, good growth and strong cash flow returns)
and Momentum companies (i.e. where the shares have been
outperforming the wider market) but at the expense of Value
companies (i.e. stocks which look attractive across a variety
of valuation metrics).
1. Market capitalisation is greater than €1bn
2. C
ash flow returns have on average been higher than the cost
of capital over the last 10 years
3. C ash flow returns are expected to improve this year
4. B
oth revenue and Earnings per Share (EPS) have grown over
the last 3 years at an average annual rate of more than 6%
5. Fixed charge cover is greater than 5x for the current year
As mentioned in our Market Review earlier in this publication,
this should be expected as, after a six year equity rally
valuations have become stretched. Usually, at this point in the
cycle, investors are more interested in looking for high quality
companies with the ability to continue generating both strong
returns and reasonable growth, as opposed to ‘deep value’
stocks that trade at significant discounts to book value and
appear to be materially mispriced. To that end, we have screened
our 1,300 stock continental European universe for companies
with robust balance sheets, a track record of strong and
improving returns and who are not experiencing downgrades.
6. Net debt/EBITDA less than 1.5x for the current year
7. Net debt/capital employed less than 25% for the current year
8. C
onsensus EPS forecast for the current year have not been
downgraded in the last 3 months
The figures below are shown in euros.
These returns may differ significantly when converted to other
currencies at the prevailing exchange rates.
3 year average
Current year
Market
cap
(€m)
12 month
forward
Return on
Capital
Employed
Change
in current
Net Net debt/ year consensus
debt/
capital
EPS over the
EBIDA employed
last 3 months
Sales
growth
EPS
growth
Fixed
charge
cover
131,504
225%
11%
17%
36.9
-0.5
0%
1%
Company name
Country
Industry name
Novo Nordisk
Denmark
Pharmaceuticals
Daimler
Germany
Automobiles
83,894
34%
9%
16%
20.1
-0.8
0%
3%
KONE Corp
Finland
Machinery
19,844
130%
11%
12%
13.1
-1.1
0%
0%
Ryanair
Holdings
Ireland
Airlines
18,926
39%
10%
32%
9.0
-0.7
0%
18%
Partners Group
Holding AG
Switzerland Capital Markets
8,979
60%
10%
13%
46.7
-0.7
0%
6%
Kingspan
Ireland
Building Products
4,435
20%
18%
35%
25.8
0.1
2%
9%
Ackermans and
Van Haaren
Belgium
Diversified
Financial Services
4,266
7%
99%
17%
9.1
0.5
7%
5%
Temenos Group
Switzerland Software
3,172
30%
10%
41%
9.6
0.4
17%
5%
Unibet Group plc Sweden
Hotels Restaurants
and Leisure
2,573
57%
29%
27%
35.6
-1
0%
5%
NetEnt AB
Sweden
Internet Software
and Services
2,316
80%
28%
38%
25.4
-0.8
0%
2%
Nemetschek AG
Germany
Software
1,673
39%
16%
28%
6.8
-0.2
0%
5%
Interpump
Group SpA
Italy
Machinery
1,555
23%
19%
14%
9.5
0.6
17%
20%
Lotus Bakeries
NV
Belgium
Food Products
1,229
24%
12%
14%
23.7
0.1
4%
5%
Source: Quest®
Past performance and future forecast figures are not a reliable indicator of future results.
Intelligent Investing | December 2015
4
European Equities
Stick with it...
Henkel
Share price:
€108.30
Market cap: €47.0bn
2014A
Revenue (€m)
2015F
2016F
16,428 18,023 18,698
Earnings per Share (€)
4.4
4.8
Dividend per Share (€)
1.3
1.5
1.6
Dividend Yield
1.6%
1.4%
1.5%
Free Cash Flow Yield
4.5%
4.1%
4.5%
Price Earnings Ratio
18.7
22.5
21.0
19.4%
19.9%
18.3%
Return on Capital
Employed
5.2
Source: Quest®
Cash Flow Returns
20%
15%
10%
5%
20
0
20 5
06
20
0
20 7
08
20
0
20 9
10
20
1
20 1
12
20
1
20 3
14
20
1
20 5e
16
e
0%
CFROA
CFROC
Henkel may not be a household name
in the UK, but its brands certainly are.
In its Home and Personal Care divisions
that account for 51% of group sales its
brands include: Persil laundry detergent
(although Unilever owns the licence for
production and distribution in the UK and
Ireland), Right Guard deodorants and
Schwarzkopf hair products. The Adhesives
division (49% of sales) is made up of an
industrial business (automotive, building
and construction etc.) and a consumer
business which includes such brands as
Loctite and Sellotape.
Henkel is an example of the type of high
quality company that European equity
markets have been rewarding since
the summer. The company has a strong
balance sheet with net debt/capital
employed of just 1.7% and an excellent
Cash Flow Return on Operating Assets
(CFROA) profile. Henkel’s CFROA has
averaged 13.8% over the last 10 years,
although that masks the fact that its
CFROA has more than doubled from 8.6%
in 2004 to 18.1% last year. The company’s
operating performance has been driven by
an increase in its operating margin which
Cost of Capital
has gone from 7.7% in 2004 to 15.8%
in 2014 and has been compounded by
sales growth that has averaged 4.6%
annually over the last 10 years. To put
the returns into context, the 750 large
capitalisation companies in our Quest®
pan-European universe have averaged a
7.7% CFROA over the last 10 years while
the European Household Products sector
has averaged 8.7% over the same period.
However one has to remember that with
such a track record, maintaining sales and
margin growth year in year out becomes
progressively more difficult and increases
the possibility of a disappointment, if not
deceleration in the trend.
Nevertheless if the recent third quarter
(Q3) results are anything to go by, the
Henkel growth story continues to roll on.
Q3 organic sales grew by 3.2% versus
the 2.8% expected by broker analysts,
with even the cyclically exposed adhesive
division beating estimates. Going forward
Henkel expects organic growth to come in
at 3% for the full year and the operating
margin to increase to 16%.
Marc Pullen
Senior Equity Analyst
The figures are shown in euros.
Source: Quest®
2015 & 2016 are forecast years
These returns may differ significantly when converted to other currencies at the
prevailing exchange rates.
Past performance is not a reliable indicator of future results.
Investment Trust
A green investment
Impax Environmental Markets
Market cap:
£342m
Share price:
158p
Latest NAV per share: 176p
Premium/(Discount):10.2%
Dividend Yield:
0.9%
Source: Bloomberg
Impax Environmental Markets Trust
performance
200
180
160
140
120
100
80
60
40
20
Source: Bloomberg
Intelligent Investing | December 2015
13
20
14
20
15
12
20
11
Impax Environmental
20
20
09
10
20
08
20
07
20
20
05
20
06
04
20
20
02
20
20
03
0
MSCI World
Launched in February 2002, Impax is a
London listed investment trust. It aims
to benefit from growth in demand for
cleaner or the more efficient delivery of
energy, water and waste. The trust invests
internationally in 65 companies, mostly
in quoted markets. At the end of October,
the US accounted for 47% of assets and
Europe 34%. Key sectors include energy
efficiency (28%), water infrastructure &
technologies (19%), alternative energy
(16%), waste management & technologies
(13%) and pollution control (12%). With
£411m of total assets under management,
the trust trades at a discount to assets of
10.5%. It has performed well over time,
outperforming the MSCI All Companies
World Index over three and 10 years to the
end of October.
With a minimal net yield of 0.9%, the main
attraction is the potential for capital growth
– underpinned by significant political and
regulatory pressures, as evidenced by the
2015 Paris Climate Conference taking
place this month. As the oil price has fallen
over the last eighteen months, it can be
argued that a degree of near term impetus
has perhaps come out of the area of energy
efficiency and technological innovation, but
the focus on the environment by authorities
remains significant – and any slowdown is
likely to be muted and temporary.
This is underlined by recent comments
by the Governor of the Bank of England,
Mark Carney, on climate change, the VW
carbon emissions scandal, China’s 13th
five year plan to extend water, waste and
air pollution spending, drought in California
etc. This is an area of investment that is
likely to experience above trend growth and
potential for investment over the longer
term. With an experienced management
team, we believe Impax has the potential to
continue to outperform the market over the
longer term.
Alex Whiting
Investment Director
Past performance figures are not a
reliable indicator of future results.
5
Profit Takers
In addition to providing insight and analysis of particular investment opportunities each month, we also review stocks that have shown
strong performance in recent months and as a result investors might consider taking profits. These stocks are not sell recommendations
however, you may feel now is a good time to take profits and allocate your capital elsewhere. Please do contact your portfolio manager to
discuss any of these ideas or any other aspect of your portfolio held at Canaccord Genuity Wealth Management.
Company name
Market
cap (£m)
Prior
Share FY dividend
price (p) per share (p)
Prior
Current FY Price
FY dividend Earnings
per share (p)
Ratio
Current
FY Price
Earnings
Ratio
1 month
3 month
6 month
Performance over previous
JD Sports Fashion
1,962
1008
7.0
7.9
10.9
20.5
4%
16%
55%
SuperGroup PLC
1,342
1653
0.0
19.6
12.5
24.6
11%
10%
40%
Regus
3,219
346
4.0
4.4
25.8
31.1
5%
17%
35%
Rank
1,100
282
5.6
6.4
11.7
18.0
2%
7%
32%
Big Yellow
1,318
838
21.7
24.6
21.5
27.2
12%
24%
31%
Ted Baker
1,534
3493
40.3
48.6
24.1
35.6
12%
16%
24%
Rightmove
3,919
4116
35.0
38.9
24.1
36.7
7%
10%
22%
Dominos Pizza Group
1,699
1021
17.5
20.7
21.5
31.7
-4%
20%
22%
RPC Grp
1,917
761
15.4
17.6
10.8
16.2
17%
16%
20%
AVEVA
1,482
2319
30.5
29.6
25.3
31.3
11%
13%
19%
65,087
4042
76.1
79.8
21.7
27.2
1%
33%
18%
851
619
21.7
21.6
16.2
17.9
-4%
6%
18%
27,484
3478
35.0
36.3
27.8
34.6
1%
9%
17%
Greene King
2,989
968
29.8
31.4
13.3
14.8
19%
18%
16%
Hargreaves Lansdown
7,034
1490
33.0
35.1
32.5
38.5
3%
35%
16%
917
1845
34.0
37.4
14.6
17.9
9%
9%
15%
DCC
5,266
5950
84.5
97.0
17.5
23.6
12%
22%
15%
Dignity
1,199
2426
20.1
21.4
17.1
23.3
1%
-4%
13%
Telecity
2,482
1223
13.5
16.0
19.0
31.8
3%
12%
12%
Inmarsat
5,040
1123
31.4
34.6
16.9
33.3
14%
11%
12%
WH Smith
1,974
1750
39.4
43.3
15.5
18.7
3%
17%
11%
Intertek
4,569
2842
49.1
51.8
20.9
21.1
8%
12%
11%
DS Smith
3,732
395
11.4
12.3
13.5
15.1
1%
-1%
10%
Halma
3,223
851
12.0
12.7
19.8
25.2
10%
14%
10%
RELX PLC
13,193
1194
26.0
28.0
17.2
19.6
3%
13%
10%
Imperial Tobacco
33,943
3562
141
155
11.2
15.1
2%
12%
9%
3,151
2572
77.0
87.3
8.3
9.7
2%
3%
9%
27,970
3495
63.9
72.3
22.0
18.9
0%
3%
8%
5,653
1541
32.6
29.1
13.2
21.5
3%
3%
8%
70,897
3816
148
156
18.0
18.2
-1%
11%
8%
SABMiller PLC
Dairy Crest
AB Foods
Cranswick
Bellway
Carnival PLC
Mondi PLC
BAT
Past performance is not a reliable indicator of future results.
Intelligent Investing | December 2015
6
Glossary
The glossary is not intended as a technical definition as most of these metrics can be calculated in a number of different ways.
Book Value per Share:
Book Value per Share compares the total shareholder equity, as stated in the company’s balance sheet, to the total
number of shares outstanding.
Cash Flow Return on
Assets (CFROA):
Cash Flow Return on Assets, is an internal rate of return calculation that measures the inflation adjusted after-tax
economic return that a company earns on all forms of capital excluding goodwill and other intangibles. It is a measure of
a company’s profitability and the efficiency with which it uses its capital.
Cash Flow Return on
Capital (CFROC):
Cash Flow Return on Capital is an internal rate of return calculation that measures the inflation adjusted after-tax
economic return that a company earns on all forms of capital, including goodwill. It is a measure of a company’s
profitability and the efficiency with which it uses its capital.
Current Ratio:
A measure of whether or not a firm has enough resources to pay its debts over the next 12 month. Calculated by dividing
current assets by current liabilities.
Dividend Yield:
Dividend per share divided by the share price, often expressed as a percentage. For historic periods the average share
price for the year is used, for forecasts the current share price is used.
Earnings per Share (EPS): An indicator of a company’s profitability, it is the portion of profit after tax allocated to each outstanding share in issue.
EBITDA:
Earnings before Interest, Tax, Depreciation and Amortisation: enables better comparison between companies as it is not
affected by the way that the company is financed or by subjective accounting charges for depreciation and amortisation.
Fixed Charge Cover:
Income before net interest and operating lease payments divided by all fixed (financial) charges, i.e. interest, preference.
Free Cash
Flow Yield:
Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain
or expand its asset base. Free cash flow yield is the annual free cash flow of the company divided by the market
capitalisation of the company.
Price/Book Ratio:
(Price/book):
Equity market capitalisation divided by the balance sheet net assets (equity). This ratio also gives some idea of whether
you’re paying too much for what would be left if the company went bankrupt immediately. Price/book ratios are often
used to compare banks, because most assets and liabilities of banks are constantly valued at market values.
Price Earnings
Ratio (P/E):
Share price divided by EPS. For historic periods the average share price for the year is used, for forecast years, the
current share price is used. It shows how much investors are willing to pay per pound of earnings.
Quest®:
Canaccord Genuity’s proprietary online valuation and analytical tool which combines consensus market figures with the
Quest® Discounted Cash Flow (DCF) Valuation Model.
Return on Capital
Employed (ROCE):
A measure of a company’s profitability and the efficiency with which it uses its capital. It is calculated as operating profit
divided by capital employed.
Return on Equity (RoE):
Net income (before exceptional items and goodwill amortisation) divided by book value of equity. RoE reveals how much
profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet.
Tables:
F – Forecast results, figures based on the combined estimates of analysts covering the company.
A – Actual results, company’s published results.
Investments discussed in this document may not be suitable for all investors. Investors should make their own investment decisions based upon their
own financial objectives and resources, and if in any doubt, seek specific advice from an investment adviser.
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promote the independence of investment research and we are not therefore subject to any prohibition on dealing ahead of its dissemination.
Prices are as at market close 03.12.2015
The information provided is not to be treated as investment advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.
The information contained herein is based on materials and sources that we believe to be reliable, however, Canaccord Genuity Wealth Management makes no representation or
warranty, either expressed or implied, in relation to the accuracy, completeness or reliability of the information contained herein. All opinions and estimates included in this document are
subject to change without notice and Canaccord Genuity Wealth Management is under no obligation to update the information contained herein.
Canaccord Genuity Wealth Management and/or connected persons may, from time to time, have positions in, make a market in and/or effect transactions in any investment or
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Quest® is used under licence and with permission of Canaccord Genuity Ltd. Accounts, Share Prices & Global Consensus Estimates data provided in conjunction with S&P Capital IQ ©
2015; Benchmark Sector comparatives are based on the Global Industry Classification Standard (GICS®) and provided in conjunction with S&P Capital IQ © 2015 (and its affiliates, as
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Intelligent Investing | December 2015
7
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