Stock of the Week: 120 Years of Experience Can’t Be Beat

|March 31, 2023

One thing to remember about the markets is they are forward-looking.

So even when things look uncertain, as they do right now with inflation… and a high cost of living…

Stocks are looking six months ahead.

And that’s how I came across this week’s Stock of the Week.

It may seem like a surprising choice, given it’s in the building services sector. After all, the real estate and construction sectors are on shaky ground.

But the numbers look good… especially the cash return on capital invested. The stock’s on a strong upward trend… and is significantly undervalued.

Plus, the company’s 120 years of experience can’t be beat.

Get all the details on the stock – including the ticker – in this week’s video.

Click on the image below to watch it.



Hi, Manward family, and a big shout-out to my GVI Investor followers as well.

Well, we have another Stock of the Week. Now, my team has come up – as they always do – with interesting, fascinating stocks. They give me a short list, and I then narrow that down and bring you the Stock of the Week.

And what’s caught my eye in particular this week is a company called Limbach Holdings (LMB). It’s an integrated building systems solution firm with expertise in design, installation management service and the maintenance of mechanical, electrical, plumbing and control systems.

Now, you might say, “Wait a minute, again, cost-of-living crisis, rising interest rates… Who would go into anything to do with homes, basically, and buildings?”

Well, remember, the market looks ahead, it looks through the immediate problems.

And that’s what’s caught my eye with this company. It was founded in 1901, by the way. It had revenue of half a billion dollars, or just shy of that, back in 2021. And it is very much focused on quality of profit margins, on cash flow, on profitability.

It has 1,500 team members and 17 offices located throughout the United States as well. So whilst it’s only in the U.S., it’s got some geographical diversification at least, and earnings, or profitability, are expected to grow.

So what caught my eye?

Well, as you know, I have a proprietary algorithm which scores stocks out of 10. It measures things such as valuation (or the share price relative to profitability), and it measures things such as revenue growth, cash flows and dividend yields.

This stock got a 9 out of 10. Now, anything with a 7, 8 or 9 (or 10 of course, but that rarely happens), I treat them all the same. They’ve met the bare minimum benchmark. This definitely has.

Cash return on capital invested (CROCI) on this one is 22.9%. Now, you’ll know, CROCI was a formula invented by Deutsche Bank Wealth Management, now used by Goldman Sachs Wealth Management, to select stocks for their wealthiest clients.

And if you want to know why it’s so important, have a look at the links below.

Good performance in the recent past with the stock. The only downside is that sharp rise in performance has led to high volatility.

But having said that, the Sortino ratio is good for this company at 0.8. It’s a measure of the volatility, or the risk, of the stock and its average gains. And those average gains have been sufficiently good that the risk has been acceptable, even though the volatility is at 43%.

And alpha is good. In other words, it’s outperforming the markets, which is, of course, what you want as well.

So other good numbers… Return on equity and return on capital employed, those are good. Turnover is not forecast to grow significantly, but profits before interest and tax are. And so are profits per share, which are set to grow at 39.7% according to forecasts.

Valuation is not too expensive either. Forecast P/E, or price to profit, is at a multiple of 14, which ties in with its three-year average.

But overall, in absolute terms, not particularly expensive on that. Turnover’s been holding up well over the last few years. Borrowing’s been coming down, which is good. And profits have also been steadily rising or at least holding up. Assets have been growing as well.

Let’s look at the share price. Well, it came off a low at about $4. It’s now pretty much quadrupled your money since then. Yes, I know… “Alpesh, why didn’t you tell us in July?”

But I think it can still, even though it’s at highs, can still have a little bit more way to go even though it’s a little bit overbought on what you might call the technical MACD indicator.

But I think that direction upward can continue, mainly because I look at the discounted cash flow, and it’s significantly undervalued on that basis.

As mentioned, profits have grown 60.7% over the past five years. Profits are forecast to grow 41% per year. So some good forecast numbers there as well, but it’s still undervalued.

So you can see all the reasons why this became a Stock of the Week – not least its recent performance, getting it onto our radar and catching my eye.

Thank you all very much. I hope you find these Stock of the Week videos informative and instructive and educational… as well as just companies which we think have got some potential as well. Of course, this was just the tip of the iceberg. GVI Investor goes into a lot more depth when we pick individual stocks there.

Thank you very much.