Would Warren Buffett Buy Ezra Holdings?

Warren Buffett wants to buy wonderful companies at fair prices.

Currently, shares in Ezra Holdings (SGX: 5DN) are trading at 70 times below their peak price of S$3.54. That could be a fair price. But does the Oil & Gas support services company conform to Buffett’s idea of a wonderful company?

Buffett is looking for companies with low earnings volatility. In other words he wants to be able to predict with some certainty a company’s profits in the future. With Ezra, that could be difficult. Its Net Profit has been as low as S$15 million and as high as S$248 million over the last 10 years.

High margins are something else that Buffett likes to see. Ezra’s Net Income Margin has been as high at 65%, which is good. But it has also been as low as 4%, which is not so great. The lack of consistency could put off Buffett.

Buffett also likes to see companies make full use of their assets. Ezra has a median Asset Turnover of 0.3%, which is respectable. It has been as high as 0.45, which is even better. But last year it was as low as 0.14.

One thing that Buffett puts great store in is low macroeconomic risk. In other words, he wants to see a strong balance sheet. Ezra had Total Assets of S$2.3 billion and Total Liabilities of S$1.5 billion. That equates to a Leverage Ratio of 2.9, which is high. The median Leverage Ratio for the Singapore market is 1.8.

There is little that Buffett would like about Ezra. But there is one thing in its favour – its Price-to-Book ratio is just 0.2. But that is unlikely to be enough to persuade the Sage of Omaha to whip out his wallet.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.