TL;DR Based on the last few years financials, Powermatic Data systems do seem quite good. Their valuation looks attractive too, which may suggest that the shares could be undervalued. This stock probably warrants more attention.
For 2018 itself, the firm is very profitable. Their net profit margins are almost 30%! A very high number. Over the last few years, revenue and profits have also grown, which is a very positive sign too. These are certainly very attractive figures to look at. It seems that the biggest improvement came in 2017. Moreover, the trend that I observe is that the company's main driver of profits is its cutting down of costs. For example, revenue had only grown 5%, but all the other profitability metrics had improved more significantly.
The balance sheet also looks very strong. The firm has extremely high short-term liquidity as well as no debt in 2018. Moreover, the figures had also improved over the last few years too. These are all very healthy signs.
For 2018 itself, cashflows look pretty good. This is because of the high cash flow from operating activities, strong working capital conditions and relatively low capital expenditures. This figure is good, with a margin of 18%, higher than most other firms. Cashflows, however, seems to have weakened over the last few years, which doesn't seem to be a very good sign. The dividend payout ratio is on the higher end at 0.54 However, with such strong cash flows in place, the firm looks like they can sustain these dividends.
For 2018, the firm is quite efficient in its use of assets and resources. The efficiency is derived from the high earnings and profitability of the company. However, unlike the other metrics, ROCE and ROE are low. This is caused by the low current liabilities that the firm has and the relatively high book value of equity.
This is further explained when we break down ROE into their Du Pont makeup. As you can see, Net Profit margins are very high. But ROE is low primarily due to the high book value of equity relative to total assets. Furthermore, the firm's assets are not very efficient in generating sales, as exemplified by the Asset Turnover Ratio. As I mentioned earlier, the firm became more efficient in reducing costs over time as compared to increasing sales. These 2 phenomena would thus explain the low ROE the firm has.
Over time, the firm seems to have become more efficient over time too. This is quite a positive sign. However, the Reinvestment rate had increased over time, which isn't a good sign. This means that more of the company's earnings have to be used for reinvestment to sustain operations. However, in 2017 and 2016, the reinvestment rate was negative. This means that the company had extra cashflows from working capital management that was more than sufficient for capital expenditures.
The firm could potentially be undervalued, based on several metrics such as P/E ratio, P/B ratio and the different Enterprise Value Multiples. However, the P/S and PEG ratio seems higher. This can be explained by the relatively high earnings compared to sales, which would push up the P/S ratio. The higher PEG ratio could be explained by how the good growth rate of the firm could have been priced in by investors in their valuation. All in all, the firm looks potentially undervalued. The FCF yield and FCFE yield look good too, which means that the investors of the company are getting quite a good amount of free cash flow generating for them.
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