Textainer
Textainer Group Holdings Limited (NYSE:TGH), the world’s largest lessor of intermodal containers based on fleet size, has a GYP ratio of 1.88, which is a result of a forward (2014) EPS growth rate of 11.7%, forward dividend yield of 4.8%, and forward P/E of 8.8x. Textainer Group Holdings Limited (NYSE:TGH)’s long-term EPS CAGR is 9.7%. The company’s GYP ratio is 2.1 times higher than the comparable ratio for the S&P 500. TGH’s dividend payout ratio is 48% of the company’s current-year EPS estimate.
The company controls 18% of the container leasing market. It has been profitable for 27 consecutive years and has paid dividends for 24 years in a row. As an income stock, Textainer Group Holdings Limited (NYSE:TGH) is attractive as its long-term leases provide secured and predictable revenue and cash flow streams. In fact, about 81% of its fleet is contracted on long-term and finance leases. Its financial performance is strong, with a revenue CAGR of 17% and EBITDA CAGR of 24% since 2008. A remarkable sign of TGH’s financial resilience is its ability to sustain profitability during deep recessions—with a strong example of the Great Recession in 2009, when the company’s operating margin dipped but was still high at close to 35%. Since then, Textainer Group Holdings Limited (NYSE:TGH)’s operating margin has climbed to above 50%. The fundamentals are strong as demand for leased containers remains firm, average lease utilization is close to record levels at 95%, and residual values are attractive. The impending acceleration in global economic growth will lead to a further improvement in the company’s fundamentals.
Aircastle
Aircastle Limited (NYSE:AYR), a company that acquires, leases and sells high-utility commercial jets, has a GYP ratio of 1.72, a result of a calculation based on a forward (2014) EPS growth rate of 11%, forward dividend yield of 4.2%, and forward P/E of 8.8x. Aircastle Limited (NYSE:AYR)’s long-term EPS CAGR is 24.4%. The company’s GYP ratio is nearly twice the GYP ratio for the S&P 500. Aircastle’s dividend payout ratio is 40% of the company’s current-year EPS estimate. The company has declared dividends for 28 consecutive quarters.
Aircastle Limited (NYSE:AYR)’s aircraft portfolio consists of some 159 aircraft on lease with 69 customers in 36 countries. The company is in a growth industry, and is projecting a total investment of $850 million or more to capture that growth. In fact, the company is planning to double plane leasing assets to $10 billion over the next five years, according to a Bloomberg article.
We like the fact that the long-term jet leasing market outlook is bullish, as Airbus forecasts a 4.7% CAGR in passenger traffic and a 4.9% CAGR in freight traffic over the next 20 years, above the pace of GDP growth. Especially robust will be growth in Asia-Pacific region. Also positive is the fact that the company has a strong portfolio that is consistently almost fully utilized—portfolio utilization was 98%-to-99% and rental yield was 14% over the past six years (in the first quarter, fleet utilization was 97% and rental yield was 13.6%). The company beat revenue and EPS estimates for the Q1 2013. It reported lease rental and financial lease revenues up 5%, reflecting benefits from new aircraft acquisitions, and adjusted EBITDA up 11%. Aircastle Limited (NYSE:AYR)’s valuation also impresses, as the stock is trading at a 20% discount to book value.
Final thoughts
There are many metrics out there that have beaten the market historically—see another one here—but the GYP ratio is underrated. Aircastle Limited (NYSE:AYR), Textainer Group Holdings Limited (NYSE:TGH), Herbalife Ltd. (NYSE:HLF), Ford Motor Company (NYSE:F) and American Railcar Industries, Inc. (NASDAQ:ARII) may not have much in common from an operational standpoint, but their presence on John Neff’s screen makes them worth watching for the remainder of 2013 and beyond.
Disclosure: none
