Yahoo Finance GuruScreens - upgrades and downgrades - October 7th
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. For those of you who don’t know what semi-chemical fluting, it is basically 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 of Screens. It also makes the grade for three momentum screens, namely the respective Value Momentum, Tiny Titans and Josef Lakonishok screens. Cello has beaten the market by 34% this year and the analysts are becoming more optimistic too. Since October 2013, EPS estimates have risen from 7.1p to 7.7p. Several factors have driven the share price higher.
Earnings have grown by 23% over the last twelve months and are expected to grow by another 12% over the next twelve months. This trend occurred as Cello's health segment added pharmaceutical giants like Pfizer and Shire to its client list. In addition, Cello's signal division, which already provides marketing services to Tesco and HP, started to license Pulsar - a social media analytics solution - to over 60 customers, up from just 14 last year.
The company enjoys favourable tailwinds as US pharmaceutical companies have been increasing their spending. The company also acquired UK-based PR business - iS Healthcare Dynamics. Cello’s management team believes that the acquisition ‘will further complement Cello Health's insight, advisory and communication based capabilities in the healthcare sector’.
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