Washington H. Soul Pattinson and Co. Ltd. : A good buy now? Relative to peers, maybe.

Washington H. Soul Pattinson and Co. Ltd. relative valuation is now UNDERVALUED. It was previously rated OVERVALUED, and has a fundamental analysis score of 68.

Our analysis is based on comparing Washington H. Soul Pattinson and Co. Ltd. with the following peers – New Hope Corporation Limited, Aspire Mining Limited, Wollongong Coal Ltd and East Energy Resources Limited (NHC-AU, AKM-AU, WLC-AU and EER-AU).

Relative Valuation

Washington H. Soul Pattinson and Co. Ltd.’s price of AUD 14.80 is lower than CapitalCube’s implied price of AUD 24.81. CapitalCube believes that at these levels, Washington H. Soul Pattinson and Co. Ltd. is undervalued and has upside potential. Over the last 52 week period, the stock has fluctuated between AUD 12.18 and AUD 15.97.

Relative Valuation

Company Overview

  • Relative outperformance over the last year and the last month suggest a leading position.
  • Washington H. Soul Pattinson and Co. Ltd. currently trades at a higher Price/Book ratio (0.92) than its peer median (0.57).
  • We classify SOL-AU as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • SOL-AU has a successful operating model with relatively high net profit margins and asset turns.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • SOL-AU‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • While SOL-AU‘s revenue growth in recent years has been above the peer median, the stock’s PE ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • SOL-AU‘s operating performance may not allow it to raise additional debt.

Investment Outlook

Washington H. Soul Pattinson and Co. Ltd. has a fundamental score of 68 and has a relative valuation of UNDERVALUED.

Washington H. Soul Pattinson and Co. Ltd. is on the top left quadrant of the CapitalCube Value – Price Matrix. We classify this space a ‘Value Play’. Here, Washington H. Soul Pattinson and Co. Ltd. is potentially undervalued, since it trades below its CapitalCube Implied Price of 24.81. At the same time, Washington H. Soul Pattinson and Co. Ltd. is also fundamentally strong with a score of 68. This is a classic value stock definition.

Fundamentals Vs Relative Valuation

Drivers of Valuation

SOL-AU has a Harvesting profile relative to its peers.

We classify SOL-AU as Harvesting because of the market’s low expectations of growth (PE of 26.90 compared to peer median of 164.26) despite its relatively high returns (ROE of 3.47% compared to the peer median ROE of -4.94%).

The company currently trades at a higher Price/Book ratio of 0.92 compared to its peer median of 0.57.

Valuation Drivers

SOL-AU has moved to an Harvesting from a relatively high ROE profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

Washington H. Soul Pattison & Co. Ltd. engages in the ownership of shares, coal mining, distribution and retail of pharmaceutical products and manufacture of building products. The company operates through its wholly owned subsidiaries in four segments: Investment, Coal Mining, Copper Processing and Consulting. The Investment segment engages in investments, including cash, term deposits and equity investments. The Coal Mining segment engages in coal mining activities, which include exploration, development, production, processing, associated transport infrastructure and ancillary activities. The Copper Processing segment engages in copper mining activities, including the mining and processing of copper ore into copper concentrate and crystal. The Consulting segment is involved in the provision of consulting services. WHSP is a diversified investor in basic commodities such as building products, property, coal, equities, telecommunications, rural services, financial services and pharmaceuticals. The company was founded by Caleb Soul in 1872 and is headquartered in Sydney, Australia.

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