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Combined Motor Holdings CMH analysis

Combined Motor Holdings

Combined Motor Holdings (CMH) is one of those companies that is just out of favour with the big institutional fund managers. It is clearly a blue chip share with a long track record of rising earnings, and yet because it is in the motor trade, which has been doing badly in the past year, the share has been bid down to a P:E of 7,5. Over the past seven years, CMH’s earnings per share have been as follows:

2010    50,6c

2011    111,2c

2012    121,4c

2013    144,5c

2014    156,8c

2015    162,7c

2016    223,5c

This shows an average annual growth of 19,6% per annum over six years and puts the company on a P:E Growth ratio of 0,38 – indicating excellent value. If management is capable of growing earnings per share by 8% in a year when their turnover fell by 7% (as they did in the year ended February 2017) then you know that this is a highly efficient and well run business.

We also advocate looking at any high-quality share which is trading on a dividend yield of 5% or more. CMH is currently trading on a dividend yield of over 6% – which should at least make it worthy of your attention.

The share’s price chart over the past 8 years is as follows:

Combined Motor Holdings – Chart by ShareFriend Pro

Of course, what would make a huge difference to CMH would be any improvement in the South African economy. Right now, immediately following the downgrade and with some analysts saying that a recession is inevitable, it is difficult to get enthusiastic about any sort of recovery. But that is the nature of being a contrarian of (to quote Warren Buffett) “Being greedy when everyone else is fearful”. If you are not willing to take any risks then you are probably not going to make any money. CMH looks like a good risk to us.

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PDSNET Progress data services

PDSNET (Progress data services) specialises is the development and sale of local as well as internationally acclaimed share trading software and educational programmes. Over the last 30 years, we have become the largest local provider of end of day stock market data, providing data of all equities quoted on the JSE (Johannesburg Stock Exchange), Futures, Unit Trusts, Currencies and Commodities as well as many of the major International Indices.