For its recently reported first quarter, this RV and manufactured home supplier almost doubled its net income, rising from $8.4 million, or $0.36 per share, to $16.2 million, or $0.67 per share.
Drew Industries (DW)
from Validea Hot List
Strategy: Growth/Value Investor
Based on: James P. O’Shaughnessy
Drew Industries (DW) is a supplier of components for recreational vehicle (RVs) and manufactured housing. The Company operates in two segments: the RV products segment (RV Segment), and the manufactured housing products segment (MH Segment). Drew’s operations are conducted through its wholly owned subsidiaries, Lippert Components, Inc. and its subsidiaries (Lippert) and Kinro, Inc. and its subsidiaries (Kinro), each of which has operations in both the RV Segment and the MH Segment.
During the year ended December 31, 2012, the RV Segment accounted for 87% of net sales and the MH segment accounted for 13% of net sales. In February 2014, the Company’s wholly-owned subsidiary, Lippert Components, Inc acquired Innovative Design Solutions, Inc. (IDS), and in March 2014, Lippert completed the acquisition of certain assets and the business of Star Design, LLC
MARKET CAP: [PASS]
The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. DW, with a market cap of $1,116 million, passes this criterion.
EARNINGS PER SHARE PERSISTENCE: [PASS]
The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company’s earnings must increase each year for a five year period. DW, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were -1.10, 1.26, 1.34, 1.64 and 2.11, passes this test.
PRICE/SALES RATIO: [PASS]
The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. DW’s Price/Sales ratio of 1.06, based on trailing 12 month sales, passes this criterion.
RELATIVE STRENGTH: [PASS]
The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. DW, whose relative strength is 74, is in the top 50 and would pass this last criterion.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, May 23, 2014