Hubbell B (HUBB)
By
J. Royden Ward, Analyst and Editor of
Cabot Benjamin Graham Value LetterFrom Cabot Wealth Advisory, 5/13/09
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Hubbell B (symbol: HUBB or sometimes HUB. B or HUB/B) fully qualifies as an undervalued Benjamin Graham stock selection. The S&P Earnings and Dividend Rating for HUBB is A-, which is better than the minimum requirement of B. The company's Total Debt to Current Asset ratio is 0.54, which is well below the maximum 1.10 required. HUBB's Current Ratio is 2.18—more than the 1.50 minimum. EPS growth during the past five years is 7.4%. There are no earnings deficits during the past five years. HUBB's P/E ratio is 9.0, which meets the requirement of 9.0 or lower. The P/BV ratio for Hubbell is 1.14, which is less than the 1.20 requirement. The company is currently paying dividends, which equate to a healthy dividend yield of 4.2%. The company's management team is combating the current weak economy by cutting costs and taking advantage of attractive acquisition opportunities to enhance future revenue and earnings growth.
Hubbell designs and manufactures a wide range of electrical equipment products for industrial, utility, and residential customers. Low voltage products include indoor and outdoor lighting fixtures as well as outlet boxes. High voltage products consist of insulators, surge arresters and test equipment. Foreign sales make up 14% of total sales.
Hubbell is affected by slower demand for low voltage products from industrial and residential customers. Demand for high voltage products from industrial and utility customers increased 16% in the first quarter of 2009. Additional demand could materialize for HUBB in 2009 and 2010 if President Barack Obama and Congress spend heavily on a new power grid. In addition, Hubbell will likely benefit from overseas expansion and new acquisitions. We expect EPS to decline by 5% in 2009, followed by noticeable improvement in 2010 and beyond. HUBB's balance sheet is strong and the dividend provides a worthwhile 4.2% yield.
Hubbell B shares are undervalued at 9.0 times latest 12-month earnings per share. HUBB shares have declined 50% during the past one and a half years, which is unwarranted because of the company's bright outlook for 2010 and future years. We believe HUBB shares will recover to our Minimum Sell Price within two to three years. I'm not going to reveal my Minimum Sell Price here, but my subscribers know what price to sell HUBB, because I give them an update every month to let them know well ahead of time when to sell and at what price.
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