Guru Analysis
| Strategy: Growth Investor
Based on: Martin Zweig |
| Banco Macro SA is an Argnetina-based financial institution (the Bank) that offers traditional bank products and services to companies, including those operating in regional economies, as well as to individuals. In addition, the Bank performs certain transactions through its subsidiaries, including mainly Banco del Tucuman, Macro Bank Ltd, Macro Securities SA, Macro Fiducia SA and Macro Fondos SGFCI SA. It has approximately two categories of customers, such as retail customers, including individuals and entrepreneurs and corporate customers, which include small, medium and large companies and major corporations. In addition, it provides services to over four provincial governments. It provides its corporate customers with traditional banking products and services, such as deposits, lending (including overdraft facilities), check cashing advances and factoring, guaranteed loans and credit lines for financing foreign trade and cash management services. |
P/E RATIO: PASS
The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. BMA's P/E is 11.94, based on trailing 12 month earnings, while the current market PE is 17.00. Therefore, it passes the first test.
REVENUE GROWTH IN RELATION TO EPS GROWTH: PASS
Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. BMA's revenue growth is 43.36%, while it's earnings growth rate is 41.34%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, BMA passes this criterion.
SALES GROWTH RATE: PASS
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (18%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (-62.3%) of the current year. Sales growth for the prior must be greater than the latter. For BMA this criterion has been met.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. BMA's EPS ($1.88) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. BMA's EPS for this quarter last year ($0.16) pass this test.
POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: PASS
The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. BMA's growth rate of 1,075.00% passes this test.
EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: FAIL
Compare the earnings growth rate of the past four quarters with long-term EPS growth rate. Earnings growth in the past 4 quarters should be at least half of the long-term EPS growth rate. A stock should not be considered if it posted several quarters of skimpy earnings. BMA had 2 quarters of skimpy growth in the last 2 years.
This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: PASS
If the growth rate of the prior three quarter's earnings, -42.42%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 1,075.00%, (versus the same quarter one year ago) then the stock passes.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: PASS
The EPS growth rate for the current quarter, 1,075.00% must be greater than or equal to the historical growth which is 41.34%. BMA would therefore pass this test.
EARNINGS PERSISTENCE: PASS
Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. BMA, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.17, 0.27, 0.39, 0.56 and 0.73, passes this test.
LONG-TERM EPS GROWTH: PASS
One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. BMA's long-term growth rate of 41.34%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test. |
| Strategy: Growth Investor
Based on: Martin Zweig |
| Walker & Dunlop, Inc. is a holding company, which conducts its operations through Walker & Dunlop, LLC. The Company provides commercial real estate financial products and services primarily to developers and owners of multifamily properties. The Company originates, sells and services a range of multifamily and other commercial real estate financing products, including Multifamily Finance, Federal Housing Administration (FHA) Finance, Capital Markets, and Proprietary Capital. It originates and sells loans through the programs of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac, and together with Fannie Mae, the government-sponsored enterprises (GSEs)), the Government National Mortgage Association (Ginnie Mae) and the Federal Housing Administration, a division of the United States Department of Housing and Urban Development (together with Ginnie Mae, HUD). |
P/E RATIO: PASS
The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. WD's P/E is 11.38, based on trailing 12 month earnings, while the current market PE is 17.00. Therefore, it passes the first test.
REVENUE GROWTH IN RELATION TO EPS GROWTH: FAIL
Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. WD's revenue growth is 24.75%, while it's earnings growth rate is 30.36%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, WD fails this criterion.
SALES GROWTH RATE: PASS
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (47%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (28.1%) of the current year. Sales growth for the prior must be greater than the latter. For WD this criterion has been met.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. WD's EPS ($1.13) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. WD's EPS for this quarter last year ($0.67) pass this test.
POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: PASS
The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. WD's growth rate of 68.66% passes this test.
EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: FAIL
Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for WD is 15.18%. This should be less than the growth rates for the 3 previous quarters which are -24.24%, 56.72% and 45.45%. WD does not pass this test, which means that it does not have good, reasonably steady earnings.
This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: PASS
If the growth rate of the prior three quarter's earnings, 26.13%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 68.66%, (versus the same quarter one year ago) then the stock passes.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: PASS
The EPS growth rate for the current quarter, 68.66% must be greater than or equal to the historical growth which is 30.36%. WD would therefore pass this test.
EARNINGS PERSISTENCE: FAIL
Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. WD, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.31, 1.21, 1.58, 2.65, and 3.65, fails this test.
LONG-TERM EPS GROWTH: PASS
One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. WD's long-term growth rate of 30.36%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test.
INSIDER TRANSACTIONS: PASS
A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For WD, this criterion has not been met (insider sell transactions are 160, while insiders buying number 35). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion. |
ADVANCED ENERGY INDUSTRIES, INC. |
| Strategy: Small-Cap Growth Investor
Based on: Motley Fool |
| Advanced Energy Industries, Inc. is a provider of engineered, precision power conversion, measurement and control solutions. The Company is engaged in designing, manufacturing, selling and supporting its power conversion products and solutions that transform power into various forms in various applications ranging from manufacturing and industrial processes to instrumentation, and test and measurement. It also provides repair and maintenance services for all of its products. Its process power systems include direct current (DC), pulsed DC, low frequency, high voltage, and radio frequency (RF) power supplies, matching networks, remote plasma sources for reactive gas applications and RF instrumentation. These power conversion systems refine, modify and control the raw electrical power from a utility and convert it into power that may be customized and is predictable and repeatable. Its power control modules and thermal instrumentation products are used in the semiconductor industry. |
PROFIT MARGIN: PASS
This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. AEIS's profit margin of 24.18% passes this test.
RELATIVE STRENGTH: PASS
The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. AEIS, with a relative strength of 91, satisfies this test.
COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: PASS
Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for AEIS (260.71% for EPS, and 55.76% for Sales) are good enough to pass.
INSIDER HOLDINGS: FAIL
AEIS's insiders should own at least 10% (they own 0.97%) of the company's outstanding shares. This does not satisfy the minimum requirement, and companies that do not pass this criteria are less attractive.
CASH FLOW FROM OPERATIONS: PASS
A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. AEIS's free cash flow of $2.81 per share passes this test.
PROFIT MARGIN CONSISTENCY: FAIL
The profit margin in the past must be consistently increasing. The profit margin of AEIS has been inconsistent in the past three years (Current year: 26.35%, Last year: -38.21%, Two years ago: 12.79%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share.
R&D AS A PERCENTAGE OF SALES: FAIL
AEIS has reduced their R&D expenditures(currently $44.4 million) over the past two years which is unacceptable. AEIS is jeopardizing the future in order to boost current EPS numbers. This criterion is particularly important for high-tech and medical stocks because they are so R&D dependant.
CASH AND CASH EQUIVALENTS: PASS
AEIS's level of cash $286.7 million passes this criteria. If a company is a cash generator, like AEIS, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash.
INVENTORY TO SALES: PASS
This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for AEIS was 12.67% last year, while for this year it is 11.53%. Since the inventory to sales is decreasing by -1.14% the stock passes this criterion.
ACCOUNT RECEIVABLE TO SALES: PASS
This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for AEIS was 15.43% last year, while for this year it is 15.95%. Although the AR to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive.
LONG TERM DEBT/EQUITY RATIO: PASS
AEIS's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow.
"THE FOOL RATIO" (P/E TO GROWTH): PASS
The "Fool Ratio" is an extremely important aspect of this analysis. If the company's Fool Ratio is between 0.5 and 0.65 (AEIS's is 0.63), the company demonstrates excellence in its fundamentals and have soundly beat the earnings estimates. AEIS passes this test.
The following criteria for AEIS are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: PASS
AEIS has not been significantly increasing the number of shares outstanding within recent years which is a good sign. AEIS currently has 40.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock.
SALES: PASS
Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. AEIS's sales of $483.7 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". AEIS passes the sales test.
DAILY DOLLAR VOLUME: FAIL
AEIS does not pass the Daily Dollar Volume (DDV of $28.0 million) test. It exceeds the maximum requirement of $25 million. Stocks that fail the test are too liquid for a small individual investor and many institutions have already discovered it.
PRICE: PASS
This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. AEIS with a price of $66.66 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions.
INCOME TAX PERCENTAGE: FAIL
AEIS's income tax paid expressed as a percentage of pretax income either this year (8.69%) or last year (20.83%) is below 20% which is cause for concern. Because the tax rate is below 20% this could mean that the earnings that were reported are unrealistically inflated due to the lower level of income tax paid. However, we have utilized a sophisticated formula so that the appropriate figures reflect a 'normal' tax rate (35%). |
CHIMERA INVESTMENT CORPORATION |
| Strategy: Growth Investor
Based on: Martin Zweig |
| Chimera Investment Corporation is a real estate investment trust (REIT). The company is engaged in the business of investing in a portfolio of mortgage assets, including agency residential mortgage-backed security (RMBS), non-agency RMBS, agency commercial mortgage-backed securities (CMBS), residential mortgage loans and real estate related securities. The Company's objective is to provide risk-adjusted returns to its investors over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses to achieve this objective by investing in an investment portfolio of RMBS, agency CMBS, residential mortgage loans, commercial mortgage loans, real estate-related securities and various other asset classes. The MBS and real estate-related securities the Company purchases include investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes. It also invests in investment grade and non-investment grade RMBS. |
P/E RATIO: PASS
The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. CIM's P/E is 6.93, based on trailing 12 month earnings, while the current market PE is 17.00. Therefore, it passes the first test.
REVENUE GROWTH IN RELATION TO EPS GROWTH: FAIL
Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. CIM's revenue growth is 13.32%, while it's earnings growth rate is 22.88%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, CIM fails this criterion.
SALES GROWTH RATE: PASS
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (29.2%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (18.4%) of the current year. Sales growth for the prior must be greater than the latter. For CIM this criterion has been met.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. CIM's EPS ($1.16) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. CIM's EPS for this quarter last year ($0.61) pass this test.
POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: PASS
The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. CIM's growth rate of 90.16% passes this test.
EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: FAIL
Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for CIM is 11.44%. This should be less than the growth rates for the 3 previous quarters which are 33.33%, -30.36% and 483.33%. CIM does not pass this test, which means that it does not have good, reasonably steady earnings.
This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: PASS
If the growth rate of the prior three quarter's earnings, 169.23%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 90.16%, (versus the same quarter one year ago) then the stock fails, with one exception: if the growth rate in earnings between the current quarter and the same quarter one year ago is greater than 30%, then the stock would pass. The growth rate over this period for CIM is 90.2%, and it would therefore pass this test.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: PASS
The EPS growth rate for the current quarter, 90.16% must be greater than or equal to the historical growth which is 22.88%. CIM would therefore pass this test.
EARNINGS PERSISTENCE: FAIL
Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. CIM, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.60, 1.76, 2.87, 1.25, and 2.92, fails this test.
LONG-TERM EPS GROWTH: PASS
One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. CIM's long-term growth rate of 22.88%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test.
INSIDER TRANSACTIONS: PASS
A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For CIM, this criterion has not been met (insider sell transactions are 9, while insiders buying number 84). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion. |
| Strategy: Contrarian Investor
Based on: David Dreman |
| Essent Group Ltd. is a private mortgage insurance company. The Company is engaged in offering private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its products and services include mortgage insurance, contract underwriting, and Bermuda-based insurance and reinsurance. The Company's primary mortgage insurance is offered to customers on individual loans at the time of origination on a flow basis, but can also be written in bulk transactions. Its pool insurance provides additional credit enhancement for certain secondary market and other mortgage transactions. The primary mortgage insurance operations were conducted through Essent Guaranty, Inc. which is a mortgage insurer licensed to write mortgage insurance in all 50 states and the District of Columbia, as of December 31, 2016. It offers primary mortgage insurance, pool insurance and master policy. It provides contract underwriting services through CUW Solutions, LLC. |
MARKET CAP: PASS
Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. ESNT has a market cap of $3,430 million, therefore passing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. ESNT's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.65, 0.68 have been increasing, and therefore the company passes this test.
EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: PASS
This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. ESNT passes this test as its EPS growth rate over the past 6 months (19.29%) has beaten that of the S&P (5.76%). ESNT's estimated EPS growth for the current year is (21.58%), which indicates the company is expected to experience positive earnings growth. As a result, ESNT passes this test.
This methodology would utilize four separate criteria to determine if ESNT is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest".
P/E RATIO: FAIL
The P/E of a company should be in the bottom 20% of the overall market. ESNT's P/E of 15.22, based on trailing 12 month earnings, is higher than the bottom 20% criterion (below 13.40), and therefore fails this test.
PRICE/CASH FLOW (P/CF) RATIO: FAIL
The P/CF of a company should be in the bottom 20% of the overall market. ESNT's P/CF of 15.13 does not meet the bottom 20% criterion (below 7.57), and therefore fails this test.
PRICE/BOOK (P/B) VALUE: FAIL
The P/B value of a company should be in the bottom 20% of the overall market. ESNT's P/B is currently 2.54, which does not meet the bottom 20% criterion (below 1.07), and it therefore fails this test.
PRICE/DIVIDEND (P/D) RATIO: FAIL
The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). ESNT's P/D is not available, and hence an opinion cannot be rendered at this time.
This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below.
PAYOUT RATIO: PASS
A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for ESNT is 0.00%. Unfortunately, its historical payout ratio is not available. Nonetheless it passes the payout criterion, as this is a very low payout.
RETURN ON EQUITY: PASS
The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 16.09%, and would consider anything over 27% to be staggering. The ROE for ESNT of 18.08% is high enough to pass this criterion.
PRE-TAX PROFIT MARGINS: PASS
This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. ESNT's pre-tax profit margin is 68.06%, thus passing this criterion.
YIELD: FAIL
The company in question should have a yield that is high and that can be maintained or increased. ESNT's current yield is not available (or one is not paid) at the present time, while the market yield is 2.62%. Hence, this criterion cannot be evaluated. |
| Strategy: Growth Investor
Based on: Martin Zweig |
| NIC Inc. is a provider of digital government services that help governments use technology to provide services to businesses and citizens. The Company operates through Outsourced Portals segment. The Company offers its services through two channels: primary outsourced portal businesses, and software and services businesses. In the primary outsourced portal businesses, the Company enters into contracts with state and local governments to design, build, and operate Internet-based, enterprise-wide portals on their behalf. Its software and services businesses include its subsidiaries that provide software development and payment processing services, other than outsourced portal services, to state and local governments, as well as federal agencies. The Company's outsourced portal businesses include interactive government services (IGS), driver history records (DHR), Portal software development and services, and Portal management. |
P/E RATIO: PASS
The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. EGOV's P/E is 23.96, based on trailing 12 month earnings, while the current market PE is 17.00. Therefore, it passes the first test.
REVENUE GROWTH IN RELATION TO EPS GROWTH: FAIL
Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. EGOV's revenue growth is 10.40%, while it's earnings growth rate is 19.66%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, EGOV fails this criterion.
SALES GROWTH RATE: PASS
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (10.1%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (7.1%) of the current year. Sales growth for the prior must be greater than the latter. For EGOV this criterion has been met.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. EGOV's EPS ($0.20) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. EGOV's EPS for this quarter last year ($0.14) pass this test.
POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: PASS
The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. EGOV's growth rate of 42.86% passes this test.
EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: PASS
Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for EGOV is 9.83%. This should be less than the growth rates for the 3 previous quarters, which are 35.71%, 17.65%, and 26.32%. EGOV passes this test, which means that it has good, reasonably steady earnings.
This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: PASS
If the growth rate of the prior three quarter's earnings, 26.00%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 42.86%, (versus the same quarter one year ago) then the stock passes.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: PASS
The EPS growth rate for the current quarter, 42.86% must be greater than or equal to the historical growth which is 19.66%. EGOV would therefore pass this test.
EARNINGS PERSISTENCE: PASS
Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. EGOV, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.40, 0.49, 0.59, 0.63 and 0.84, passes this test.
LONG-TERM EPS GROWTH: PASS
One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. EGOV's long-term growth rate of 19.66%, based on the average of the 3, 4 and 5 year historical eps growth rates, passes this test.
TOTAL DEBT/EQUITY RATIO: PASS
A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. EGOV's Debt/Equity (0.00%) is not considered high relative to its industry (201.60%) and passes this test.
INSIDER TRANSACTIONS: PASS
A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For EGOV, this criterion has not been met (insider sell transactions are 376, while insiders buying number 4). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion. |
| Strategy: Small-Cap Growth Investor
Based on: Motley Fool |
| National Beverage Corp. is a holding company. The Company develops, produces, markets and sells a diverse portfolio of flavored beverage products primarily in North America. The Company's brands consist of beverages geared to the active and health-conscious consumer (Power+ Brands), including sparkling waters, energy drinks and juices, and carbonated soft drinks in a range of flavors, including regular, sugar-free and reduced calorie options. In addition, the Company produces soft drinks for certain retailers, such as allied brands. The Company's portfolio of Power+ Brands includes LaCroix, LaCroix Curate, LaCroix NiCola and Shasta sparkling water products; Rip It energy drinks and shots, and Everfresh, Everfresh Premier Varietals and Mr. Pure juice and juice-based products. The Company's carbonated soft drinks include Shasta and Faygo, iconic brands. The Company had, as of April 30, 2016, 12 production facilities located near metropolitan markets across the continental United States. |
PROFIT MARGIN: PASS
This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. FIZZ's profit margin of 12.02% passes this test.
RELATIVE STRENGTH: PASS
The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. FIZZ, with a relative strength of 92, satisfies this test.
COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: FAIL
Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for FIZZ (116.67% for EPS, and 20.33% for Sales) are not good enough to pass.
INSIDER HOLDINGS: PASS
FIZZ's insiders should own at least 10% (they own 75.04% ) of the company's outstanding shares which is extremely attractive since the minimum requirement is 10%. A high percentage indicates that the insiders are confident that the company will do well.
CASH FLOW FROM OPERATIONS: PASS
A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. FIZZ's free cash flow of $1.43 per share passes this test.
PROFIT MARGIN CONSISTENCY: PASS
FIZZ's profit margin has been consistent or even increasing over the past three years (Current year: 8.68%, Last year: 7.64%, Two years ago: 6.81%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise.
R&D AS A PERCENTAGE OF SALES: NEUTRAL
This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in FIZZ's case.
CASH AND CASH EQUIVALENTS: FAIL
FIZZ does not have a sufficiently large amount of cash, $105.58 million, on hand relative to its size. Although this criteria does not apply to companies of this size, we defined anything greater than $500 million in cash as having 'a lot of cash' to allow analysis of these companies. FIZZ will have more of a difficult time paying off debt (if it has any) or acquiring other companies than a company that passes this criterion.
INVENTORY TO SALES: PASS
This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for FIZZ was 6.65% last year, while for this year it is 6.80%. Although the inventory to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive.
ACCOUNT RECEIVABLE TO SALES: PASS
This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for FIZZ was 9.28% last year, while for this year it is 8.66%. Since the AR to sales is decreasing by -0.62% the stock passes this criterion.
LONG TERM DEBT/EQUITY RATIO: PASS
FIZZ's trailing twelve-month Debt/Equity ratio (0.00%) is at a great level according to this methodology because the superior companies that you are looking for don't need to borrow money in order to grow.
"THE FOOL RATIO" (P/E TO GROWTH): FAIL
The "Fool Ratio" is an extremely important aspect of this analysis. The methodology says consider shorting shares when the company's Fool Ratio is greater than 1.30. FIZZ's PEG Ratio of 4.87 is excessively high.
The following criteria for FIZZ are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: PASS
FIZZ has not been significantly increasing the number of shares outstanding within recent years which is a good sign. FIZZ currently has 47.0 million shares outstanding. This means the company is not taking any measures, with regards to the number of shares, that will dilute or devalue the stock.
SALES: FAIL
Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. FIZZ's sales of $793.9 million based on trailing 12 month sales, are too high and would therefore fail the test. It is companies with $500 million or less in sales that are most likely to double or triple in size in the next few years.
DAILY DOLLAR VOLUME: PASS
FIZZ passes the Daily Dollar Volume (DDV of $24.4 million) test. It is required that this number be less than $25 million because these are the stocks that remain relatively undiscovered by institutions. "You'll be scoring touchdowns against the big guys on your turf."
PRICE: PASS
This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. FIZZ with a price of $84.69 passes the price test, even though it doesn't fall in the preferred range. The price should be above $7 in order to eliminate penny stocks and below $20 since most stocks in this price range are undiscovered by the institutions.
INCOME TAX PERCENTAGE: PASS
FIZZ's income tax paid expressed as a percentage of pretax income this year was (33.99%) and last year (34.00%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern. |
| Strategy: P/E/Growth Investor
Based on: Peter Lynch |
| Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates through two segments: Athletic Stores and Direct-to-Customers. The Company's Athletic Stores segment is an athletic footwear and apparel retailer whose formats include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, SIX:02, Runners Point Group, including Runners Point and Sidestep. The Company's Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and its international e-commerce businesses, which sell to customers through their Internet and mobile sites and catalogs. The Direct-to-Customers segment operates the Websites for eastbay.com, final-score.com, eastbayteamsales.com, and sp24.com. It operates over 3,383 primarily mall-based stores in the United States, Canada, Europe, Australia and New Zealand. The Company operates over 60 franchised stores that are located in the Middle East, Germany and Switzerland, and Republic of Korea. |
DETERMINE THE CLASSIFICATION:
FL is considered a "True Stalwart", according to this methodology, as its earnings growth of 19.84% lies within a moderate 10%-19% range and its annual sales of $7,766 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. FL is attractive if FL can hold its own during a recession.
YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: PASS
The Yield-adjusted P/E/G ratio for FL (0.68), based on the average of the 3, 4 and 5 year historical eps growth rates, is O.K.
EARNINGS PER SHARE: PASS
The EPS for a stalwart company must be positive. FL's EPS ($4.92) would satisfy this criterion.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for FL (4.69%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company.
FREE CASH FLOW: NEUTRAL
The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it is above 35%. A positive Cash Flow (the higher the better) separates a wonderfully reliable investment from a shaky one. This methodology prefers not to invest in companies that rely heavily on capital spending. This ratio for FL (4.12%) is too low to add to the attractiveness of the stock. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria.
NET CASH POSITION: NEUTRAL
Another bonus for a company is having a Net Cash/Price ratio above 30%. Lynch defines net cash as cash and marketable securities minus long term debt. According to this methodology, a high value for this ratio dramatically cuts down on the risk of the security. The Net Cash/Price ratio for FL (9.56%) is too low to add to the attractiveness of this company. Keep in mind, however, that it does not adversely affect the company as it is a bonus criteria. |
| Strategy: Contrarian Investor
Based on: David Dreman |
| Corning Incorporated is engaged in manufacturing specialty glass and ceramics. Its segments include Display Technologies, Optical Communications, Environmental Technologies, Specialty Materials, Life Sciences and All Other. The Display Technologies segment manufactures glass substrates for flat panel liquid crystal displays (LCDs). The Optical Communications segment manufactures carrier and enterprise network components for the telecommunications industry. The Environmental Technologies segment manufactures ceramic substrates and filters for automotive and diesel emission control applications. As of December 31, 2016, the Specialty Materials segment manufactured products, which provided more than 150 material formulations for glass, glass ceramics and fluoride crystals. The Life Sciences segment manufactures glass and plastic labware, equipment, media and reagents. The All Other segment consists of its Pharmaceutical Technologies business and non-LCD glass business, and among others. |
MARKET CAP: PASS
Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. GLW has a market cap of $24,826 million, therefore passing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. GLW's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.26, 1.48 have been increasing, and therefore the company passes this test.
EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: FAIL
This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. GLW fails this test as its EPS growth rate for the past 6 months (-20.00%) does not beat that of the S&P (5.76%).
This methodology would utilize four separate criteria to determine if GLW is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest".
P/E RATIO: PASS
The P/E of a company should be in the bottom 20% of the overall market. GLW's P/E of 8.31, based on trailing 12 month earnings, meets the bottom 20% criterion (below 13.40), and therefore passes this test.
PRICE/CASH FLOW (P/CF) RATIO: PASS
The P/CF of a company should be in the bottom 20% of the overall market. GLW's P/CF of 5.18 meets the bottom 20% criterion (below 7.57) and therefore passes this test.
PRICE/BOOK (P/B) VALUE: FAIL
The P/B value of a company should be in the bottom 20% of the overall market. GLW's P/B is currently 1.59, which does not meet the bottom 20% criterion (below 1.07), and it therefore fails this test.
PRICE/DIVIDEND (P/D) RATIO: FAIL
The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). GLW's P/D of 43.10 does not meet the bottom 20% criterion (below 20.83), and it therefore fails this test.
This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below.
CURRENT RATIO: PASS
A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.27] or greater than 2). This is one identifier of financially strong companies, according to this methodology. GLW's current ratio of 3.29 passes the test.
PAYOUT RATIO: PASS
A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for GLW is 14.97%, while its historical payout ratio has been 28.41%. Therefore, it passes the payout criterion.
RETURN ON EQUITY: PASS
The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 16.09%, and would consider anything over 27% to be staggering. The ROE for GLW of 22.43% is high enough to pass this criterion.
PRE-TAX PROFIT MARGINS: PASS
This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. GLW's pre-tax profit margin is 39.32%, thus passing this criterion.
YIELD: FAIL
The company in question should have a yield that is high and that can be maintained or increased. GLW's current yield is 2.32%, while the market yield is 2.62%. GLW fails this test.
LOOK AT THE TOTAL DEBT/EQUITY: PASS
The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 191.55%. GLW's Total Debt/Equity of 21.81% is considered acceptable. |
| Strategy: Growth Investor
Based on: Martin Zweig |
| Sanderson Farms, Inc. is a poultry processing company. The Company is engaged in the production, processing, marketing and distribution of fresh and frozen chicken, and also preparation, processing, marketing and distribution of processed and minimally prepared chicken. It sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, under the Sanderson Farms brand name to retailers, distributors, casual dining operators, customers reselling frozen chicken into export markets. The Company, through its subsidiaries, Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division), conducts its chicken operations. Sanderson Farms, Inc. (Production Division) is engaged in the production of chickens to the broiler-stage. Sanderson Farms, Inc. (Foods Division) is engaged in the processing, sale and distribution of chickens. The Company, through Sanderson Farms, Inc. (Foods Division), conducts its prepared chicken business. |
P/E RATIO: PASS
The P/E of a company must be greater than 5 to eliminate weak companies, but not more than 3 times the current Market P/E because the situation is much too risky, and never greater than 43. SAFM's P/E is 11.75, based on trailing 12 month earnings, while the current market PE is 17.00. Therefore, it passes the first test.
REVENUE GROWTH IN RELATION TO EPS GROWTH: FAIL
Revenue Growth must not be substantially less than earnings growth. For earnings to continue to grow over time they must be supported by a comparable or better sales growth rate and not just by cost cutting or other non-sales measures. SAFM's revenue growth is 2.92%, while it's earnings growth rate is 25.52%, based on the average of the 3 and 4 year historical eps growth rates. Therefore, SAFM fails this criterion.
SALES GROWTH RATE: FAIL
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (13.7%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (16.4%) of the current year. Sales growth for the prior must be greater than the latter. For SAFM this criterion has not been met and fails this test.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. SAFM's EPS ($1.03) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. SAFM's EPS for this quarter last year ($0.47) pass this test.
POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: PASS
The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. SAFM's growth rate of 119.15% passes this test.
EARNINGS GROWTH RATE FOR THE PAST SEVERAL QUARTERS: FAIL
Compare the earnings growth rate of the previous three quarters with long-term EPS growth rate. Earnings growth in the previous 3 quarters should be at least half of the long-term EPS growth rate. Half of the long-term EPS growth rate for SAFM is 12.76%. This should be less than the growth rates for the 3 previous quarters which are -65.24%, 6.61% and 173.17%. SAFM does not pass this test, which means that it does not have good, reasonably steady earnings.
This strategy looks at the rate which earnings grow and evaluates this rate of growth from different angles. The 4 tests immediately following are detailed below.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN PRIOR 3 QUARTERS: PASS
If the growth rate of the prior three quarter's earnings, -17.55%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 119.15%, (versus the same quarter one year ago) then the stock passes.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: PASS
The EPS growth rate for the current quarter, 119.15% must be greater than or equal to the historical growth which is 25.52%. SAFM would therefore pass this test.
EARNINGS PERSISTENCE: FAIL
Companies must show persistent yearly earnings growth. To fulfill this requirement a company's earnings must increase each year for a five year period. SAFM, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 2.35, 5.68, 10.80, 9.52, and 8.37, fails this test.
LONG-TERM EPS GROWTH: PASS
One final earnings test required is that the long-term earnings growth rate must be at least 15% per year. SAFM's long-term growth rate of 25.52%, based on the average of the 3 and 4 year historical eps growth rates, passes this test.
TOTAL DEBT/EQUITY RATIO: PASS
A final criterion is that a company must not have a high level of debt. A high level of total debt, due to high interest expenses, can have a very negative effect on earnings if business moderately turns down. If a company does have a high level, an investor may want to avoid this stock altogether. SAFM's Debt/Equity (0.00%) is not considered high relative to its industry (145.11%) and passes this test.
INSIDER TRANSACTIONS: PASS
A factor that adds to a stock's attractiveness is if insider buy transactions number 3 or more, while insider sell transactions are zero. Zweig calls this an insider buy signal. For SAFM, this criterion has not been met (insider sell transactions are 1,076, while insiders buying number 303). Despite the fact that insider sells out number insider buys for this company, Zweig considers even one insider buy transaction enough to prevent an insider sell signal, therefore there is not an insider sell signal and the stock passes this criterion. |
Watch List
The top scoring stocks not currently in the Hot List portfolio.
| Ticker |
Company Name |
Industry |
Current
Score |
| WLDN |
WILLDAN GROUP, INC. |
Business Services |
65% |
| GGAL |
GRUPO FINANCIERO GALICIA S.A. (ADR) |
Regional Banks |
57% |
| RTEC |
RUDOLPH TECHNOLOGIES INC |
Semiconductors |
57% |
| FB |
FACEBOOK INC |
Computer Services |
55% |
| SIG |
SIGNET JEWELERS LTD. |
Retail (Specialty) |
54% |
| MGA |
MAGNA INTERNATIONAL INC. (USA) |
Auto & Truck Parts |
54% |
| MAN |
MANPOWERGROUP INC. |
Business Services |
49% |
| MASI |
MASIMO CORPORATION |
Medical Equipment & Supplies |
48% |
| KORS |
MICHAEL KORS HOLDINGS LTD |
Apparel/Accessories |
48% |
| NLS |
NAUTILUS, INC. |
Recreational Products |
46% |
|
