Today Validea Hot List Editor John Reese recommends a $1 billion-market cap stock that’s in a very steady uptrend and pays a small dividend. His new recommendation is followed by a sell alert on one of the previous recommendations that’s leaving the portfolio.
Inter Parfums (IPAR)
Strategy: Price/Sales Investor
Based on: Kenneth Fisher
Guru Score: 90%
Inter Parfums operates in the fragrance business, and manufactures, markets and distributes an array of fragrances and fragrance related products [sold under] brands which include the Gap, Banana Republic, Anna Sui, Brooks Brothers, bebe, Betsey Johnson, Nine West, Lane Bryant and Jordache.
Price/Sales Ratio: Pass
The prospective company should have a low Price/Sales ratio. Non-cyclical (nonSmokestack) companies with Price/Sales ratio between 0.75 and 1.5 are good values. IPAR’s P/S ratio of 1.44 based on trailing 12 month sales falls within the “good values” range for non-cyclical companies and is considered attractive.
Total Debt/Equity Ratio: Pass
Less debt equals less risk according to this methodology. IPAR’s Debt/Equity of 6.68% is acceptable, thus passing the test. ... Preliminary Grade: Some Interest in IPAR At this Point. ...
Long-Term EPS Growth Rate: Pass
This methodology looks for companies that have an inflation-adjusted EPS growth rate greater than 15%. IPAR’s inflation adjusted EPS growth rate of 55.25% passes the test.
Free Cash Per Share: Pass
This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. IPAR’s free cash per share of 0.71 passes this criterion.
Three-Year Average Net Profit Margin: Pass
This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. IPAR, whose three-year net profit margin averages 10.36%, passes this evaluation. ... We are adding [IPAR] to the portfolio.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, August 2, 2013