Is Haynes still a buy?

PUBLISHED: Feb 04 2017 @ 02:25 | Comments (0) |

Haynes (LSE:HYNS) was selected for my modified cyclically adjusted price-earnings ratio, CAPE, portfolio in Feb 2015. To think through whether it remains a good investment I’ll use the three stages I used back then.

First, is the cyclically adjusted price-earnings ratio significantly below average?

The average earnings per share for Haynes over the past 11 years is 13.1p (after earnings have been reduced by all the bad stuff in the “exceptionals” category). With the current share price at 157p that gives a CAPE of 12.

This is below the UK market average CAPE of around 13 to 14. But when I first bought into Haynes in 2015 its CAPE was a lowly 4.8.

I must say, I would feel more comfortable buying if there was a greater gap between Haynes current CAPE and the market average CAPE.

Second, Piotroski factors

Piotroski factors provide some insight into the likelihood of financial distress by examining trends in key accounting metrics over two years.

If all nine are in a positive direction then a very low level of distress is indicated. Any score under five out of nine should make us wary.

I’ll use the latest interims along with the comparable period the year before.
1.Is it profitable? Yes. One Piotroski point.
2.Does it produce positive cash flow from operations? Yes. Second Piotroski point.
3.Has the return on capital employed figure improved? Yes. Third Piotroski point
4.Is cash flow greater than profit? Yes. Fourth Piotroski point.
5.Has the ratio of long term debt……………………………..To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

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