is Evertz a buy now at these levels?

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Was $19 before panemic, $15 after, but now $12, with low P/E, even a 3% yield

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Asked on September 9, 2020 5:17 pm
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From a value standpoint, the company actually does seem pretty cheap. it's price to earnings is 13.5, price to sales 2.1 and price to book 3.2. All 3 of these are well below what it historically has traded at.

Keep in mind though, the company did cut its dividend, which is a huge no-no for me. Sure, you're getting a 3% yield, but how sustainable is that if things continue to provide hardship for companies? Even with this recent dividend cut, they still have payout ratios in the range of 80% in terms of earnings and 55% free cash flows.

Company also is expecting declining sales growth over the next year. With 5 year average sales growth of only 4.5%, this company doesn't have much wiggle room until revenue is shrinking on a whole. That, and they're notorious for missing earnings estimates.

Pre-pandemic drop, this stock had average annual returns of -2.2%.

Analysts have also been slashing earnings estimates by a significant chunk. In fact, they expect shrinking earnings beyond 2021.

If these ring true, it may be somewhat of a value trap. The company "looks" cheap, but when top and bottom lines are expected to shrink over the next 2 years, it may not be a place where I'd want to park my money.

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Posted by Dan Kent
Answered on September 9, 2020 6:46 pm