In my last article, I started to look at the results from my discount to Tangible Book Value screen. I used the following Stockopedia feature to scroll through the StockReports of the screen results quickly:
Using this, I could exclude a number of companies I didn't consider worthy of further investigation. Modern investors have a lot of information at their fingertips and a limited amount of time. The ability to conduct a rapid initial assessment of a company and home in on the most promising prospects is vital to successful investing in the information age. The StockReports provide this edge.
The two main reasons for exclusion were a lack of asset quality or excessive cash burn. Many of these excluded companies were in the resources sector. Although I am not averse to investing in this sector, assets that are not currently generating strong cash flows require more specialist sector knowledge than I possess. Concerns around excessive liabilities or poor earnings quality are still valid here, but when looking at net tangible assets, these tend to be less of an issue.
This left 15 companies that I believed warranted a more detailed look. This week I will look into the first seven
Airea (LON:AIEA)
Airea make floor coverings, mainly carpet tiles, for the commercial and leisure sectors. In 2018 they closed their loss-making residential carpets division. A much larger carpet maker, James Halstead (LON:JHD) , looked at making an offer for the company in 2018, but ultimately, nothing came from it. Since then, the company has been profitable on lower revenue:
Unfortunately, no forecasts are available in the market, so we are reliant on the outlook statement in the interim results to judge if the 8.9x TTM P/E is indicative of the future. Here they say:
"Our order book and sales of new products continue to grow as we strengthen our portfolio of products.
Recovery of our UK market has been pleasing with recovery in export sales expected to continue, however it must be noted that the Ukrainian conflict has adversely impacted some of our key export markets.
We have experienced unprecedented pressure on costs over the last 18 months and we have taken numerous actions to mitigate the impact on profitability. Those cost pressures and managing them will continue to be…
