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Rating Change Detail - FLAGSTONE REINSURANCE HOLDINGS LIMITED (FSR) - 3/11/2010
The stock was upgraded from No Interest to Some Interest on 3/11/2010 by the Book/Market Investor Strategy based on the principles of Joseph Piotroski. The score according to this strategy rose from 70% to 80%. A full detailed analysis of FSR using this strategy is included below. For a full detailed analysis of FSR using 12 proven strategies of Wall Street Legends, take a free trial to Validea.com

Detailed Analysis of FLAGSTONE REINSURANCE HOLDINGS LIMITED (FSR)

Strategy: Book/Market Investor - Based on: Joseph Piotroski

BOOK/MARKET RATIO: [PASS]

The first criteria of this strategy requires that a company be in the top 20% of the market based on the Book/Market ratio (which is the inverse of the Price/Book ratio). FSR, which has a book to market ratio of 1.30, meets this criterion and thus this strategy will use the following rules to determine if it is a financially distressed firm or is unfairly trading at a discount to its book value.

The study conducted by Piotroski found that excess returns can be earned by holding a portfolio of high Book/Market stocks. He also found, however, that it is very important to separate companies that trade at a discount because they are financially distressed from companies that are unfairly trading at a discount. The following criteria are used to help provide this distinction.

RETURN ON ASSETS: [PASS]

As a first step to determining whether a firm is not financially distressed, this methodology requires that the return on assets for the most recent fiscal year be positive. FSR's return on assets was 9.27% in the most recent year, therefore it passes this test.

CHANGE IN RETURN ON ASSETS: [PASS]

The next requirement is that the return on assets for the most recent fiscal year must be greater than the return on assets for the previous fiscal year. FSR's return on assets was 9.27% in the most recent year and -8.40% in the previous year, therefore it passes this test.

CASH FLOW FROM OPERATIONS: [PASS]

In addition to the return on assets, the cash flow from operations for the most recent fiscal year must also be positive. This eliminates companies that are burning cash and therefore are more likely to be financially distressed. FSR's cash flow from operations was $338.45 million in the most recent year, therefore it passes this test.

CASH COMPARED TO NET INCOME: [PASS]

This methodology requires that cash from operations for the most current fiscal year must be greater than net income for the most current fiscal year. FSR's cash from operations was $338.45 million in the most recent year, while its net income was $238.15 million, therefore it passes this test.

CHANGE IN LONG TERM DEBT/ASSETS: [PASS]

The long term debt to assets ratio for the most recent fiscal year must be less than or equal to the previous fiscal year. FSR's LTD/Assets was 0.10 in the most recent year and 0.11 in the previous year, therefore it passes this test.

CHANGE IN CURRENT RATIO: [FAIL]

As an additional test of firm solvency, the current ratio for the most recent fiscal year must be greater than the current ratio for the previous fiscal year. FSR's current ratio cannot be calculated, therefore it fails this criterion.

CHANGE IN SHARES OUTSTANDING: [PASS]

The issuance of new stock is considered by this methodology to be a sign that a company is not able to generate enough internal cash to fund its business. Therefore, shares outstanding for the most recent fiscal year must be less than or equal to shares outstanding for the previous fiscal year. FSR's shares outstanding was 83.0 million in the most recent year and 84.8 million in the previous year, therefore it passes this test.

CHANGE IN GROSS MARGIN: [FAIL]

As a sign that a company is expanding its profitability, this strategy requires that gross margin for the most recent fiscal year be greater than gross margin for the previous fiscal year. FSR's gross margin is not available, therefore it fails this criterion.

CHANGE IN ASSET TURNOVER: [PASS]

The final criterion of this strategy requires that asset turnover for the most recent fiscal year be greater than asset turnover for the previous fiscal year. FSR's asset turnover was 0.33 in the most recent year and 0.20 in the previous year, therefore it passes this test.

For a full detailed analysis of FSR using 12 proven strategies of Wall Street Legends,
take a free trial to Validea.com

Rating Change Detail - FLAGSTONE REINSURANCE HOLDINGS LIMITED (FSR) - 3/11/2010

Detailed Analysis of FLAGSTONE REINSURANCE HOLDINGS LIMITED (FSR)

Strategy: Book/Market Investor - Based on: Joseph Piotroski