Layne Christensen and its Uncommon Markets

The O'Shaugnessy-Based Strategy

The O'Shaughnessy strategy likes Layne's size. Its market cap of $856 million is far north of the strategy's $150 million minimum. Also in the company's favor is its enviable record of consistently increasing earnings growth. Over the past five years, earnings per share have increased each year, going from $0.19 to $2.20.

Another point of interest to the O'Shaughnessy strategy is the price-to-sales ratio, a measure of how desirable a stock's price is, or put another way, how much you are paying for sales. This ratio needs to be below 1.5, a hurdle that Layne easily overcomes with its P/S ratio of 0.99 (you pay $0.99 for every $1.00 of sales).

The strategy's last criterion looks at relative strength, which is a measure of how well the stock has done during the past year as compared to the overall market. Layne's relative strength is 86, meaning its stock has outperformed 86% of the other stocks in the market during the past year. This is excellent.

The Fisher-Based Strategy

That covers the O'Shaughnessy strategy's analysis, but as I mentioned earlier, another of my other strategies likes what it sees in Layne. This one is based on Ken Fisher's thinking. Those familiar with this strategy are not surprised it likes Layne because the price-to-sales ratio is an important component of this strategy, just as it is for the O'Shaughnessy strategy.

The P/S ratio is not the only aspect of Layne that impresses the Fisher strategy. Layne's relatively low debt level (debt is 14.17% of equity) is another. And the company's positive free cash flow per share ($0.40) is a further plus.

All of these positives makes Layne worthy of your consideration. Layne is involved with municipal and national infrastructure (water), unconventional energy sources and mineral extraction. These are all strong markets, and I think likely to remain so for some time. The stock is reasonably priced, the company has a long track record of being well run, earnings have been steadily growing and it has relatively little debt. Layne provides an easy way to invest in markets you are probably not in now. This is an excellent time to get involved.

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A note: I'll be a featured speaker at the Las Vegas Money Show on May 13 and 14, talking about how to profit from Guru Analysis. I would be happy to meet any of my readers there.

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At the time of publication, Reese had no positions in the stocks mentioned, although holdings can change at any time.

John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of the best-selling book, The Market Gurus: Stock Investing Strategies You Can Use From Wall Street's Best. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.

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