DHT HOLDINGS INC (NYSE:DHT) Passes Key Peter Lynch Investment Screen

The investment philosophy created by Peter Lynch has long been a guide for investors looking for growing companies at sensible prices. This method, often grouped as Growth at a Reasonable Price (GARP), focuses on lasting business growth, sound financials, and an appealing price. Lynch's system steers clear of speculative high-growth stocks, preferring companies with steady, controlled growth along with good foundational metrics. A recent filter using his standards has found DHT HOLDINGS INC (NYSE:DHT) as a possible option for more study by long-term investors.

Fit with Lynch's Main Standards

DHT Holdings seems to fit well with a number of important filters from the Peter Lynch screen. The plan focuses on companies with strong but maintainable growth, good profit generation, a healthy balance sheet, and a price that is not too high for future expectations.

• Maintainable Earnings Growth: Lynch preferred companies with a 5-year earnings per share (EPS) growth between 15% and 30%. DHT's EPS has increased at an average yearly pace of 16.14% over the last five years, putting it directly within this desired zone. This shows a record of controlled, maintainable growth instead of erratic, uncertain jumps.
• Appealing Price via PEG Ratio: A key part of the Lynch method is the Price/Earnings to Growth (PEG) ratio, which should be at or below 1.0. A PEG ratio under 1 implies the stock could be priced low compared to its earnings growth. DHT's PEG ratio of 0.78 satisfies this important standard, indicating its growth might not be completely priced into its current share price.
• Good Profit Generation: The screen looks for a Return on Equity (ROE) above 15%, a gauge of how well a company produces profits from shareholder equity. DHT's ROE of 17.48% is higher than this level, pointing to capable management and a good business.
• Cautious Financial Health: Lynch was cautious about high debt. The screen selects for companies with a Debt-to-Equity ratio below 0.6, and DHT's ratio of 0.23 is not only much lower than this ceiling but also matches Lynch's own liking for a ratio under 0.25. This shows a financial structure funded mainly by equity, lowering money-related risk.
• Adequate Liquidity: The plan also verifies near-term financial stability using the Current Ratio, which should be at least 1.0. DHT's Current Ratio of 2.33 indicates a good ability to meet its short-term liabilities, offering a safety net for operational issues.

Full Fundamental Picture

A more detailed examination of the company's total fundamental condition, as described in the full fundamental analysis report, supports the results from the Lynch screen. DHT Holdings receives a good total fundamental rating of 7 out of 10, placing it well within the Oil, Gas & Consumable Fuels industry.

The company's positive points are especially clear in two areas:

• Profitability: With a score of 8/10, DHT shows very good measures, including a profit margin of 36.58% that does better than over 90% of its industry competitors. Its return on assets and equity are also good.
• Financial Health: Scoring a high 9/10, the company displays a sound balance sheet. This is backed by a healthy Altman-Z score, a low Debt-to-Free-Cash-Flow ratio, and the already noted strong liquidity measures.

While the company provides an appealing dividend yield, the report highlights questions about its long-term viability due to the high payout ratio. The growth rating is average, with previous revenue growth being slow, although analysts forecast a notable pickup in both revenue and earnings in the next few years.

Investment Points

For investors using a GARP plan, DHT Holdings offers a strong case. It represents the Lynch idea of a company increasing at a maintainable speed while being available at a sensible price. Its very good financial health limits potential loss, and its high profitability suggests a well-run operation. The forecasted pickup in growth, if it happens, could offer an additional positive driver. Still, investors should be aware of the cyclical character of the tanker industry and watch the long-term viability of its dividend policy.

To see other companies that meet the Peter Lynch investment screen, you can check the full list of results here.

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Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer or solicitation to buy or sell any securities. The opinions expressed are based on current market conditions and available data, which are subject to change. Investors should conduct their own independent research and consult with a qualified financial advisor before making any investment decisions.