Norbord Inc. (OSB)

This one really caught my eye when it popped up on the screener. Norbord is a Canadian manufacturer of wood-based construction materials, the kind of boring money spinner that Peter Lynch would love. It’s only 30 years old and under 4B in market cap, so it has room to grow. And it has been growing nicely.

Right now it’s trading at a multiple of 7.4, well below its industry and its own five year average. with a dividend yield of 4.3%. However, it is thinly traded and owned largely by institutions, and the analysts don’t even know it exists. It’s a true hidden gem. So is it worth buying?

Profit margins, revenue growth and returns are all strong, and it compares very favorably with its industry peers. Earnings have grown almost 130% over the last year, but projections for the next few years are negative. Hmm. Cash flow has grown a juicy 34% over the past five years.

Debt and payout ratio are also quite manageable. So let’s look at those payouts. Dividends have been growing, but in part because it has been recovering from a few bad years in 2015-16. Overall, dividend history has been erratic. Not the steadily increasing pattern we like to see.

No company is perfect, but on balance this looks like a winner.

- David Goldwich, J.D.

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