The FTSE is still struggling against the backdrop of uncertainty in the Eurozone. Indeed, the FTSE 100 closed at 6195 last Thursday - its lowest point since June 2013. Some GuruScreens will inevitably hold up better than others in these circumstances. This week we take a deeper look by analysing companies that have passed through three respective income, growth and momentum screens, to explore how they have performed.
Winning Growth & Income
The Winning Growth & Income Screen searches for companies with good growth credentials that offer above average dividend yields. It is interesting to note that companies which qualify for this screen must have a Beta below 1 - meaning that the stock price must be less volatile than the market. Stocks with a lower Beta have historically tended to decline more slowly during a bearish phase. In the UK for example, the FTSE 100 has fallen by 7% over the last 3 months, while the Winning Growth & Income Screen has only dropped 2.3%. Let’s take a look at the companies that have passed through this screen.
Pennant International
Pennant International (PEN) qualified for the screen on the 1st October. The firm provides and supports training software systems to military and civilian customers, based on emulation, simulation and virtual reality. For example, they provide the UK MoD with virtual reality parachute training systems.
The yield is 3.35% on a TTM basis, while brokers expect the company to pay a 3.85% yield in 2015. There were some red flags over the firm’s cash flow in 2013. The company reported operating cash flows (0.62p per share) that were well below earnings (6.33p per share). If a company has bad cashflow but attempts to maintain its dividend, it may be financing the payout with debt. However, on a TTM basis, Pennant’s operating cash flows have risen to 7.95p per share, while the company generated 6.47p in terms of earnings per share.
The company has managed to generate these earnings and cashflows partly by securing a string of new contracts. Pennant’s final year report for 2013 noted that “Record new orders [were] taken during the year worth in excess of £20m”. Indeed, Pennant won its largest ever contract - worth £16m over 5 years to…
