The FTSE had a bad week last week, dropping to 6446 on Thursday - its lowest closing point since December 2013. This trend occurred as Mario Draghi described the economic recovery in the 18 euro countries as ‘weak, fragile, and uneven’, but failed to hint towards any additional economic stimulus from the ECB. Ongoing tensions in the Middle East did not help either. Nevertheless, the market is a forest of many trees and a good way to search for potential investments is to use a rule-based stock screen. So which companies have qualified for the GuruScreens this week?
Powerflute Oyj
Powerflute, the paper and packaging group, has several potentially bullish points. First, the company operates in a niche market and has a good ROCE of 16% - higher than 82% of UK listed companies. The paper mill it owns in Kuopio, Finland is one of only three suppliers of Nordic semi-chemical fluting in Europe. Semi-chemical fluting is used in the manufacture of corrugated boards which are used to transport and protect fragile objects.
Second, the company seems to enjoy favourable industry tailwinds. Powerflute’s annual report for the year ending December 2013 noted that ‘the industry in which we operate is constantly evolving due to growing demand for environmentally sustainable packaging solutions and increasing globalisation of the food supply chain.’ This seems to be corroborated by the numbers. Powerflute’s earnings have grown each year since 2011 while revenues have grown each year since 2012.
Third, the company recently announced plans to acquire Corenso - an international coreboard producer, which the management team describes as ‘one of the world's leading producers of high performance cores’. Corenso operates 12 cores plants across Europe, the US and China. The acquisition is to be funded from existing cash and new debt facilities. The risk of share dilution is therefore limited and Powerflute's management believe that the acquisition will be ‘immediately earnings enhancing’.
The company was recently promoted to Stockopedia’s Piotroski High F-Score Screen, because Powerflute has an impressive Piotroski score of 9 out of 9. The favourable industry tailwinds have helped the company become more profitable than it was last year, and Powerflute is also better placed to pay off debts.
Cello
Cello, the market research company, has recently qualified for Stockopedia’s Screen…
