5 Companies that Look Attractive in March 2012
0.31%March 26 | MyPlanIQ portfolio symbol P_36844
We continue to look for ideas to help build long term selections for
retirement. The majority of ETFs are indexed so there is no
selection and we use that as a benchmark to compare with stock
selections. By and large the dividend bearing ETF portfolios do
pretty well so it is a good comparison.
Today we pick up on an aricle by
Morgan Housel of the Motley
Fool presents five attractive companies based on the Enterprise/Unlevered Free Cash Flow ratio.
We have covered this before but a brief recap:
- Enterprise value market capitalization (share price x shares outstanding) plus total debt and minority interests, minus cash
- Unlevered cash flow< with interest paid on outstanding debt added back in
The ratio of these two statistics provides a valuation metric that takes into consideration allproviders of capital -- both stockholders and bondholders as focusing on profits and equity alone can be misleading.
Using this metric, here are five companies that Morgan found attractive.
Company |
Enterprise Value/ Unlevered FCF |
5-Year Average
|
---|---|---|
Oracle (ORCL) | 11.2 | 15.7 |
Microsoft (MSFT) | 11.1 | 14.4 |
Bristol-Myers Squibb( BMY) | 10.0 | 16.5 |
UnitedHealth (UNH) | 10.0 | 10.6 |
Hewlett-Packard (HPQ) | 8.8 | 15.0 |
Source: S&P Capital IQ.
This is a list of well known names but probably too focused on tech and health. In any case, it will be interesting to measure against our dividend bearing ETF portfolio: