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Auto parts maker Linamar passes its road test

The Frank Hasenfratz Centre for Innovation in Guelph, Ont, is where Linamar designs, develops and tests new products for engines and transmissions.

Glenn Lowson/The Globe and Mail

Validea's pick of the week provides a detailed report on a company that scores well in the stock-screening service's model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.

Ontario-based Linamar Corp. operates 40 manufacturing facilities around the world, making precision powertrain systems solutions for the light vehicle, commercial truck, off-highway, energy and industrial OEM markets. It also makes aerial work platforms for the construction and access markets. It has a $2.2-billion market cap.

It has grown EPS at a 14-per-cent rate over the long term (based on average of the four- and five-year growth rates), and an even better 44.6 per cent in the most recent quarter.

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The stock has $5.20 in free cash flow per share, making for an 18.2-per-cent free cash flow yield. It has good momentum, with an 89 relative strength over past 12 months. The stock has a 15-per-cent return on equity.

The Peter Lynch-based model has strong interest in it thanks to a 12.5 P/E and 1-per-cent dividend, making for a 0.82 yield-adjusted P/E-to-growth ratio.

The Warren Buffett-based model likes that the company has averaged a 17.5-per-cent return on retained earnings over the past decade.


Click here for a complete breakdown of Validea's investing guru report.

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