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TheBarnacle (87.56)

Time To Look at HollyFrontier

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October 11, 2013 – Comments (0) | RELATED TICKERS: HFC

What is puzzling about this HollyFrontier is that it has been able to get any traction in what has been a profitable year for value stocks.  Both the Motley Fool andSeeking Alpha wrote earlier this year that it would fit a Benjamin Graham philosophy, and it appears that nothing has substantially changed since then.  The median analyst target price sits at $50.05, which gives it a more than a fair 17% margin of safety.

My thinking is that one should take a hard look at this stock while it is selling so cheap.  Currently the P/E(ttm) is around 5.5, and the Price-to-Sales ratio is 0.41.  Here is how I look at it:

The revenue growth rate has averaged 33%, and the earnings growth rate is just short of 23%.  Add to this an attractive 21% return on equity, and one sees a profitable growing company.If one values dividends, they have grown 21% annually in the last five years.With operations in the American West and Canada, they are a domestic business so your money is close to home.The debt is under control at 0.16; half the average debt ratio for its peers.The current P/E is well under the five year average for HFC’s P/E of 24.7, which means it is selling at a discount to its historical levels.The margin of safety, as we see it, is strong enough to warrant this in a portfolio.  The 3% dividend is a nice cushion while one waits for the price to go up over time.  Given that the focus on this site is a buy and watch philosophy, one can do worst than HFC.More at www.tdpresearch.wordpress.com 

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