In Focus – LXK

Lexmark International (LXK) is one of the highest paying dividend stocks we cover. But the purpose of this report is to reveal whether it is also one of the best stocks to buy now. Unfortunately the answer is a clear and resounding no.

Background

Lexmark International (LXK) is a provider of printing and imaging products and software. The company operates in two segments: 1) Imaging Solutions and Services, 2) Perceptive Software.

Stock Fundamentals

We can sometimes recommend a company that has had below average (or even negative) sales growth as long as that firm used that period of consolidation to solidify its operations, improve its efficiency and profitability, and lay the groundwork for future growth and prosperity. Unfortunately, LXK fails this litmus test.

Any way you slice it, Lexmark’s performance has been bad. Its growth in profits, cash flows, sales, free cash flows and many other financial metrics over the previous seven – eight years has been practically non-existent or even negative. To make matters worse, Lexmark’s balance sheet is weak in absolute and relative terms.

LXK should be priced like the inferior company that it is. It should be priced at a deep discount to the average stock. Unfortunately for holders of this stock, it is not. Therefore, the potential for this stock to underperform is high. We would not recommend LXK at this point.

Stat Sheet – Lexmark International 4/25/16

Ticker LXK
Industry  Computer Peripherals
Price $ 38.45
Market Cap  $ 2,372
Dividend Yield 3.75
Dividend/CFOp 0.461
Equity/Assets 0.290
Average Equity/Assets 0.333
Financial Strength Below Average
Growth Prospects Below Average
Beta 1.49
Price Volatility Above Average
Stock Fundamentals D

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

If you would like to see research on some of the other very good stocks we cover, click the link below.

Best Stocks to Buy Now

If you would like to see why we have a preference for the best dividend stocks, click the link below.

Why the Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

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In Focus – LXK

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