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stock pick

Logs to be processed are pictured at Interfor’s Acorn Division mill in Delta, B.C., on Sept. 14, 2012.Darryl Dyck/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.

This Québec-based industrial firm Stella-Jones Inc. makes treated wood products, specializing in railway ties and timbers, as well as wood poles supplied to electrical utilities and telecom companies.

The company has a $1.4-billion market cap, and has grown earnings at a 20 per cent clip over the long haul (using an average of the three-, four-, and five year EPS growth rates), and revenues at a 19 per cent pace (using an average of the three-, four-, and five year sales growth rates). Both beat its industry averages, with the revenue figure nearly doubling it.

What the Validea Guru models like:

Earnings have declined just once in the past decade, a plus in the Warren Buffett-based strategy.

The Buffett model is also drawn by average 18.1 per cent return on equity over the past 10 years.

The Benjamin Graham-based model looks for a current ratio of 2.0, Stella-Jones's ratio is 5.94, or nearly triple.

The Graham model also likes the $445-million in net current assets versus $343-million in long-term debt.

In Peter Lynch-based model one sign the stock is a good buy is a good PE-to-growth ratio: SJ has a 19.7 P/E ratio, 19.7 per cent long-term EPS growth rate, and 0.9 per cent dividend yield make for a yield adjusted PE-to-growth ratio of 0.96, which comes in just under the Lynch model's 1.0 upper limit.

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

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