Are There Irish Stocks That Could Keep the St. Patrick’s Day Celebration Going?

BA is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

While dancing leprechauns and other St. Patty's levity was at the fore last weekend, I got to wondering:  Are there Irish stocks that could keep the feel-good feeling going?

The Irish Stock Sea

There are 19 Irish stocks trading on major US exchanges.

The sector breakdown: 6 healthcare, 4 techs, 4 financials, 3 industrial goods, and 2 services. Size-wise, there are 6 Large Caps, 5 Mid Caps, 6 Small Caps, and 2 Micro Caps.

Ireland's highly-educated workforce and business-friendly environment make it an attractive location, especially for tech, healthcare, and other so-called knowledge industries.

Emerald Isle Stocks’ Performance: A Sea of Green

The Irish stocks’ 1-year performance data is nearly a pure sea of green (up arrows). This might surprise some given the frequency of the “European debt crisis” headlines, especially in 2012. 

One-year performances (to Mar. 20) are positive for 15 of the 19 stocks. There are 3 losers, as one stock has traded for less than a year.

Trinity Biotech's (NASDAQ: TRIB) 64.6% is the top 1-year return. Trinity also has the best 5-year return at 249%. The S&P 500's 1- and 5-year returns are 11.1% and 15.5%, respectively. 

Trinity manufacturers and sells diagnostic test kits and instrumentation for use in labs and healthcare facilities. Its products detect autoimmune, infectious, and sexually transmitted diseases; diabetes and hemoglobin disorders; and disorders of the liver and intestine.

Trinity appears an attractive acquisition candidate for a larger company in this space, such as Johnson & Johnson. The company is small ($362 million market cap), has a clean balance sheet, and 20.7% profit margins. EPS growth forecasts are almost 22% next year and 15% over five years. 

Fishing in the Irish Stock Sea

I set my net out with this basic screen:

  • EPS Growth This Year over 10%
  • EPS Growth Next Year Forecast to be Positive
  • LT Debt/Equity Ratio less than 1 
  • Current Ratio greater than 1 
  • ROE over 10%
  • Operating Margin over 10%

Who’d I haul in?

Five companies (listed in order of 1-year return):

Company

Size      

Sector     

1-Yr Return %  

5-Yr Return %

Ingersoll-Rand (NYSE: IR)             

16.7B 

Indrl. Goods

38.8

28.4

Seagate Tech. (NASDAQ: STX)       

12.5B

Technology     

30.9

58.9 

James Hardie Industries 

4.5B

Indrl. Goods

29.1

86.9 

Ryanair 

12.5B

Services

26.6

51.6 

Accenture Plc (NYSE: ACN)

53.2B

Technology

20.0

110.7 

(S&P 500)

 

 

11.1

15.5 

Finviz   

lngersoll-Rand

Ingersoll-Rand is a diversified industrial company founded in the US in 1871. It's been located in Ireland since 2009.  

Its four divisions are Industrial Technologies, Security Technologies, Climate Solutions & Residential Solutions. Products include tools, material handling systems, golf cars, locks, biometric security systems, HVAC systems, among others. Some of its better known brands include Schlage, Trane, and ThermoKing. 

Ingersoll-Rand was the #1 holding in Billionaire Nelson Peltz's $5 billion hedge fund, Train Partners, as of Q4 2012. At Peltz's urging, Ingersoll-Rand announced plans in December to spin off its security business by early 2014. The company also announced it would raise its quarterly dividend by 31% to $0.21 a share and initiate a $2 billion stock buyback. 

The spin off, buyback, and dividend boost should help the stock continue to out-perform the market.  

Select metrics:  

Forward P/E  5-Yr PEG  Operating Margin (ttm) ROE (ttm)  Debt/Equity (mrq)           EPS Growth This Yr     EPS Gro Next Yr.  Div. Yield
13.8 1.4 10.9% 14.7% 0.45 179.7% 13.3% 1.5%

Finviz

James Hardie Industries

James Hardie manufactures and sells fiber cement products for building construction applications in the US, Canada, Australia, New Zealand, the Philippines, and Europe.

Seagate Technology

Seagate manufactures hard disk drives (HDDs) that are used in servers, mainframes and PCs. Seagate has many positives, including 493% EPS growth this year, a 4.35% dividend yield, 21% operating margin, and a 101% ROE. It's valued at a very low 4.6 P/E and 6.4 forward P/E.

It's cheaply valued because the HDD market's fortunes are closely tied to the PC market, which is in decline. There's a shift to mobile devices and solid state drives (SSDs). So, investors are skittish about the long-term future.  

The stock has a Motley Fool CAPS rating of 3 (of 5) stars, while peer HDD manufacturer Western Digital, which is facing the same headwinds, has 4 stars. You can read the bull and bear arguments here. While I agree the stock is likely too cheaply valued, I think there are better places for most investors to put their money. 

Ryanair

Ryanair is Ireland's largest airline and Europe's largest low-cost carrier. It provides point-to-point routes between Ireland, the U.K., Continental Europe and Morocco.

Accenture

Accenture provides management consulting, technology, and business process outsourcing services worldwide.

Select metrics:  

Forward P/E  5-Yr PEG  Operating Margin (ttm) ROE (ttm)  Debt/Equity (mrq)           EPS Growth This Yr     EPS Gro Next Yr. Div. Yield
16.4 1.6 14.1% 62.5% 0 13.2% 9.6% 2.1%

Finviz

The PEG suggests the stock is pricey. That said, you'd expect to pay up for a stock with no debt, fat ROE, a strong cash flow (TTM free cash flow exceeds net income by 12%), and a decent dividend. 

How does competitor IBM (NYSE: IBM) stack-up? 

Forward P/E  5-Yr PEG  Operating Margin (ttm) ROE (ttm)  Debt/Equity (mrq)           EPS Growth This Yr     EPS Gro Next Yr.  Div. Yield
11.7 1.3 21.1% 84.7% 1.75 10.0% 10.0% 1.6%

Finviz

IBM is a partial competitor, as its services segment provides IT and business consulting. 

Accenture's positives include its zero debt and much smaller size (about one-fifth IBM's market cap), which makes it easier to grow on a percentage basis. It seems a solid holding, but, again, you'll pay up.

IBM's positives include fatter margins and lower valuations. Its hardware and software segments mean that it can provide one-stop shopping for consulting clients. IBM's software segment, which boasts the largest margins among its segments, includes "Watson," IBM's AI system.

Given IBM's exposure to big data, Watson's potential, and the company's ability to adapt to changing markets, Big Blue should remain a solid holding for long-term investors. 

Bottom Line 

Investors looking for Irish stocks to keep the St. Patty's Day cheer going might further investigate Ingersoll-Rand and Accenture.

Ingersoll-Rand's planned spin off, buyback, and dividend boost should help the stock continue to out-perform the market.

Accenture, while a bit pricey using basic valuation measures, has a strong brand name, no debt, fat ROE, strong cash flow, and pays a decent dividend.     


BA McKenna has no position in any stocks mentioned. The Motley Fool recommends Accenture. The Motley Fool owns shares of International Business Machines.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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