Lear Corp.

01/10/2014 6:00 am EST

Focus: STOCKS

John Reese

Founder and CEO, Validea.com And Validea Capital Management

 

Our top pick for 2014 is a 97-year-old Michigan-based firm that supplies automotive seating and electrical power management systems to customers around the world, explains John Reese, editor of Validea.

Lear Corporation (LEA) is $6.5 billion market cap firm with employees in 36 countries; in the past year, it has taken in over $15 billion in sales.

Lear shares have had a big year, thanks, in part, to a rebound in the auto industry and generally improving economic conditions in the US.

My Guru Strategies (each of which is based in the approach of a different investing great) think it has room to run.

My Kenneth Fisher-based model likes its 0.42 price/sales ratio, inflation-adjusted, long-term earnings per share growth rate of 23.4%, and solid 5.4% three-year average net profit margins.

My Peter Lynch-based model, meanwhile, likes Lear's dirt-cheap 6.2 trailing 12-month price/earnings ratio and stellar 25% long-term EPS growth rate, which make for an exceptional 0.24 P/E-to-growth ratio, a metric Lynch himself pioneered.

We would note that Lear's 2012 growth was skewed a bit by a tax-related gain. But even if we use the firm's forward P/E of 13.9, and its projected long-term growth rate of 16.4%, we get a very reasonable 0.85 PEG ratio.

And finally, my James O'Shaughnessy-based growth model likes that Lear has been increasing EPS in each year of the past half-decade, and that it has a key combination of qualities: a high relative strength (82), which is a sign the market is embracing the stock, and a low price/sales ratio, a sign it hasn't gotten too pricey.

Subscribe to Validea here...

Related Articles on STOCKS

Keyword Image
11 Reasons to Buy Microsoft
11 hours ago

For our latest recommendation, we revisit one of the world's most prominent technology companies, Mi...

Keyword Image
A Trio of Top-Tier Biotechs
11 hours ago

We hold three biotech stocks in our growth portfolio — Biogen (BIIB), Bioverativ (BIVV), and R...

Keyword Image
Saudis, Oil and ETFs
11 hours ago

Under the guise of clamping down on “widespread corruption,” Prince Mohammed bin Salman ...