Guru Analysis
| Strategy: P/E/Growth Investor
Based on: Peter Lynch |
| 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). |
DETERMINE THE CLASSIFICATION:
This methodology would consider WD a "fast-grower".
P/E/GROWTH RATIO: PASS
The investor should examine the P/E (10.34) relative to the growth rate (30.36%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for WD (0.34) is very favorable.
SALES AND P/E RATIO: NEUTRAL
For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth rate high enough to support a P/E above this threshold. WD, whose sales are $639.6 million, is not considered large enough to apply the P/E ratio analysis. However, an investor can analyze the P/E ratio relative to the EPS growth rate.
EPS GROWTH RATE: PASS
This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for WD is 30.4%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable.
TOTAL DEBT/EQUITY RATIO: NEUTRAL
WD is a financial company so debt to equity rules are not applied to determine the company's financial soundness.
EQUITY/ASSETS RATIO: PASS
This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary's health, as it is a better measure than the Debt/Equity Ratio. WD's Equity/Assets ratio (26.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion.
RETURN ON ASSETS: PASS
This methodology uses Return on Assets as a way to measure a financial intermediary's profitability. WD's ROA (7.14%) is above the minimum 1% that this methodology looks for, thus passing the criterion.
FREE CASH FLOW: BONUS PASS
The Free Cash Flow/Price ratio, though not a requirement, is considered a bonus if it 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 WD (52.22%) is high enough to add to the attractiveness of the stock.
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 WD (-97.57%) 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 |
| 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. |
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. BMA has a market cap of $4,831 million, therefore passing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. BMA's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.20, 1.89 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. BMA passes this test as its EPS growth rate over the past 6 months (894.73%) has beaten that of the S&P (7.43%). BMA's estimated EPS growth for the current year is (1,109.72%), which indicates the company is expected to experience positive earnings growth. As a result, BMA passes this test.
This methodology would utilize four separate criteria to determine if BMA 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. BMA's P/E of 11.10, based on trailing 12 month earnings, meets the bottom 20% criterion (below 13.12), and therefore passes 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. BMA's P/CF of 10.52 does not meet the bottom 20% criterion (below 7.45), 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. BMA's P/B is currently 3.21, which does not meet the bottom 20% criterion (below 1.05), 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%). BMA's P/D of 113.64 does not meet the bottom 20% criterion (below 20.12), 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.
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 BMA is 8.64%, while its historical payout ratio has been 10.58%. 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 16.90%, and would consider anything over 27% to be staggering. The ROE for BMA of 33.22% 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. BMA's pre-tax profit margin is 41.30%, thus passing this criterion.
YIELD: FAIL
The company in question should have a yield that is high and that can be maintained or increased. BMA's current yield is 0.88%, while the market yield is 2.69%. BMA fails this test. |
MICHAEL KORS HOLDINGS LTD |
| Strategy: P/E/Growth Investor
Based on: Peter Lynch |
| Michael Kors Holdings Limited is a designer, marketer, distributor and retailer of branded women's apparel and accessories and men's apparel bearing the Michael Kors tradename and related trademarks MICHAEL KORS, MICHAEL MICHAEL KORS, and various other related trademarks and logos. The Company operates through three segments: retail, wholesale and licensing. The Retail operations consist of collection stores and lifestyle stores, including concessions and outlet stores, located primarily in the Americas (the United States, Canada and Latin America), Europe and Asia, as well as e-commerce. Wholesale revenues are principally derived from major department and specialty stores located throughout the Americas, Europe and Asia. The Company licenses its trademarks on products, such as fragrances, beauty, eyewear, leather goods, jewelry, watches, coats, men's suits, swimwear, furs and ties, as well as through geographic licenses. |
DETERMINE THE CLASSIFICATION:
This methodology would consider KORS a "fast-grower".
P/E/GROWTH RATIO: PASS
The investor should examine the P/E (8.04) relative to the growth rate (52.21%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for KORS (0.15) is very favorable.
SALES AND P/E RATIO: PASS
For companies with sales greater than $1 billion, this methodology likes to see that the P/E ratio remain below 40. Large companies can have a difficult time maintaining a growth high enough to support a P/E above this threshold. KORS, whose sales are $4,627.6 million, needs to have a P/E below 40 to pass this criterion. KORS's P/E of (8.04) is considered acceptable.
INVENTORY TO SALES: PASS
When inventories increase faster than sales, it is a red flag. However an increase of up to 5% is considered bearable if all other ratios appear attractive. Inventory to sales for KORS was 11.89% last year, while for this year it is 11.60%. Since inventory to sales has decreased from last year by -0.29%, KORS passes this test.
EPS GROWTH RATE: FAIL
This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for KORS is 52.2%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered too fast.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for KORS (7.98%) 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 KORS (12.64%) 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 KORS (12.00%) 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: Small-Cap Growth Investor
Based on: Motley Fool |
| Argan, Inc. is a holding company. The Company conducts operations through its subsidiaries, Gemma Power Systems, LLC and affiliates (GPS), Atlantic Projects Company Limited (APC), Southern Maryland Cable, Inc. (SMC) and The Roberts Company (Roberts). Through GPS and APC, the Company's power industry services segment provides engineering, procurement, construction, commissioning, operations management, maintenance, development, technical and consulting services to the power generation and renewable energy markets. Through SMC, the telecommunications infrastructure services segment of the Company provides project management, construction, installation and maintenance services to commercial, local government and federal government customers. Through Roberts, the Company's industrial fabrication and field services segment produces, delivers and installs fabricated steel components specializing in pressure vessels and heat exchangers for industrial plants. |
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. AGX's profit margin of 11.47% 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. AGX, with a relative strength of 93, 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 AGX (182.22% for EPS, and 77.64% for Sales) are good enough to pass.
INSIDER HOLDINGS: FAIL
AGX's insiders should own at least 10% (they own 7.08%) 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. AGX's free cash flow of $15.42 per share passes this test.
PROFIT MARGIN CONSISTENCY: PASS
AGX's profit margin has been consistent or even increasing over the past three years (Current year: 10.42%, Last year: 8.79%, Two years ago: 7.95%), 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 AGX's case.
CASH AND CASH EQUIVALENTS: PASS
AGX's level of cash $523.0 million passes this criteria. If a company is a cash generator, like AGX, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash.
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 AGX was 15.53% last year, while for this year it is 8.12%. Since the AR to sales is decreasing by -7.41% the stock passes this criterion.
LONG TERM DEBT/EQUITY RATIO: PASS
AGX'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 has attractive fundamentals and its Fool Ratio is 0.5 or less (AGX's is 0.46), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. AGX passes this test.
The following criteria for AGX are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: PASS
AGX has not been significantly increasing the number of shares outstanding within recent years which is a good sign. AGX currently has 16.0 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. AGX's sales of $675.1 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
AGX passes the Daily Dollar Volume (DDV of $10.9 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. AGX with a price of $67.45 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
AGX's income tax paid expressed as a percentage of pretax income this year was (32.40%) and last year (33.51%) 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: Price/Sales Investor
Based on: Kenneth Fisher |
| 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. |
PRICE/SALES RATIO: PASS
The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratio between .75 and 1.5 are good values. SAFM's P/S ratio of 0.92 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive.
TOTAL DEBT/EQUITY RATIO: PASS
Less debt equals less risk according to this methodology. SAFM's Debt/Equity of 0.00% is exceptional, thus passing the test.
PRICE/RESEARCH RATIO: PASS
This methodology considers companies in the Technology and Medical sectors to be attractive if they have low Price/Research ratios. SAFM is neither a Technology nor Medical company. Therefore the Price/Research ratio is not available and, hence, not much emphasis should be placed on this particular variable.
PRELIMINARY GRADE: Some Interest in SAFM At this Point
Is SAFM a "Super Stock"? NO
PRICE/SALES RATIO: FAIL
The prospective company should have a low Price/Sales ratio. To be considered a "Super Stock", non-cyclical (non-Smokestack) companies should have Price/Sales ratios below .75. However, SAFM, who has a P/S of 0.92, does not fall within the "Super Stock" range. It does fall between 0.75 and 1.5, which is considered the "good values" range for non-cyclical companies. Nonetheless, it does not pass this "Super Stock" criterion.
LONG-TERM EPS GROWTH RATE: PASS
This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. SAFM's inflation adjusted EPS growth rate of 23.19% passes the test.
FREE CASH PER SHARE: PASS
This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses. This is based on the premise that companies without cash will soon be out of business. SAFM's free cash per share of 2.21 passes this criterion.
THREE YEAR AVERAGE NET PROFIT MARGIN: PASS
This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. SAFM, whose three year net profit margin averages 7.80%, passes this evaluation.
|
| Strategy: Growth Investor
Based on: Martin Zweig |
| Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates through two segments: Athletic Stores and Direct-to-Customers. The Company is an athletic footwear and apparel retailer, which include businesses, such as include Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep and SIX:02. The Direct-to-Customers segment is multi-branded and sells directly to customers through 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. Additionally, this segment includes the Websites, both desktop and mobile, aligned with the brand names of its store banners (footlocker.com, ladyfootlocker.com, six02.com kidsfootlocker.com, champssports.com, footaction.com, footlocker.ca, footlocker.eu, runnerspoint.com and sidestep-shoes.com). |
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. FL's P/E is 14.32, based on trailing 12 month earnings, while the current market PE is 18.00. 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. FL's revenue growth is 6.19%, while it's earnings growth rate is 19.84%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, FL 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 (5.3%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (5.1%) of the current year. Sales growth for the prior must be greater than the latter. For FL 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. FL's EPS ($1.42) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. FL's EPS for this quarter last year ($1.14) 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. FL's growth rate of 24.56% 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 FL is 9.92%. This should be less than the growth rates for the 3 previous quarters which are 6.92%, 11.90% and 105.26%. FL 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: FAIL
If the growth rate of the prior three quarter's earnings, 29.15%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, 24.56%, (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 FL is 24.6%, and it would therefore fail this test.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: PASS
The EPS growth rate for the current quarter, 24.56% must be greater than or equal to the historical growth which is 19.84%. FL 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. FL, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 2.58, 2.85, 3.56, 3.84 and 4.92, 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. FL's long-term growth rate of 19.84%, 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. FL's Debt/Equity (4.69%) is not considered high relative to its industry (66.56%) 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 FL, this criterion has not been met (insider sell transactions are 236, while insiders buying number 346). 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 |
| Ternium S.A. is a producer of steel products. The Company produces finished and semi-finished steel products and iron ore, which are sold either directly to steel manufacturers, steel processors or end users. The Company operates through two segments: Steel and Mining. The Steel segment includes the sales of steel products and the Mining segment includes the sales of iron ore products, which are primarily inter-company. The Steel segment comprises three operating segments: Mexico, the Southern Region and Other Markets. In the steel segment, steel products include slabs, billets and round bars (steel in its basic, semi-finished state), hot-rolled coils and sheets, bars and stirrups, wire rods, cold-rolled coils and sheets, tin plate, hot dipped galvanized and electrogalvanized sheets and pre-painted sheets, steel pipes and tubular products, beams, roll-formed products, and other products. In the mining segment, iron ore is sold as concentrates (fines) and pellets. |
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. TX has a market cap of $5,014 million, therefore passing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. TX's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.13, 1.33 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. TX passes this test as its EPS growth rate over the past 6 months (2,116.66%) has beaten that of the S&P (7.43%). TX's estimated EPS growth for the current year is (943.33%), which indicates the company is expected to experience positive earnings growth. As a result, TX passes this test.
This methodology would utilize four separate criteria to determine if TX 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. Dreman uses the PE based on five year average earnings for cyclicals to counteract the fluctations in earnings they experience. TX's P/E of 250.10 is higher than the bottom 20% criterion (below 13.12), and therefore fails 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. TX's P/CF of 3.86 meets the bottom 20% criterion (below 7.45) 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. TX's P/B is currently 1.05, which does not meet the bottom 20% criterion (below 1.05), 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%). TX's P/D of 25.00 does not meet the bottom 20% criterion (below 20.12), 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: FAIL
A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.97] or greater than 2). This is one identifier of financially strong companies, according to this methodology. TX's current ratio of 1.46 fails 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 TX is 23.17%, while its historical payout ratio has been 481.12%. 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 16.90%, and would consider anything over 27% to be staggering. The ROE for TX of 17.42% 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. TX's pre-tax profit margin is 16.84%, thus passing this criterion.
YIELD: PASS
The company in question should have a yield that is high and that can be maintained or increased. TX's current yield is 4.00%, while the market yield is 2.69%. TX passes 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 66.52%. TX's Total Debt/Equity of 30.59% is considered acceptable. |
| Strategy: Contrarian Investor
Based on: David Dreman |
| Cooper Tire & Rubber Company is a manufacturer and marketer of replacement tires. The Company specializes in the design, manufacture, marketing and sales of passenger car, light truck, medium truck, motorcycle, and racing tires. The Company operates through four segments: North America, Latin America, Europe, and Asia. The North America segment comprises its operations in the United States and Canada. The Americas Tire Operations segment manufactures and markets passenger car and light truck tires, for sale in the United States replacement markets. The Latin America segment comprises its operations in Mexico, Central America, and South America. The European segment has operations in the United Kingdom and the Republic of Serbia. Its the United Kingdom entity manufactures and markets passenger car, light truck, motorcycle and racing tires and tire retread material. As of December 31, 2016, the Company operated nine manufacturing facilities and 20 distribution centers in 10 countries. |
MARKET CAP: FAIL
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. CTB has a market cap of $1,895 million, therefore failing the test.
EARNINGS TREND: FAIL
A company should show a rising trend in the reported earnings for the most recent quarters. CTB's EPS for the latest quarter is not greater than the prior quarter, (from earliest to most recent quarter) 1.28, 0.57. Hence the stock fails this test, but the investor should evaluate this company qualitatively to see if it qualifies under this methodology's "exception rule".
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. CTB fails this test as its EPS growth rate for the past 6 months (-36.66%) does not beat that of the S&P (7.43%).
This methodology would utilize four separate criteria to determine if CTB 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. Dreman uses the PE based on five year average earnings for cyclicals to counteract the fluctations in earnings they experience. CTB's P/E of 10.60 meets the bottom 20% criterion (below 13.12), 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. CTB's P/CF of 5.34 meets the bottom 20% criterion (below 7.45) 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. CTB's P/B is currently 1.72, which does not meet the bottom 20% criterion (below 1.05), 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%). CTB's P/D of 85.47 does not meet the bottom 20% criterion (below 20.12), 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 [2.10] or greater than 2). This is one identifier of financially strong companies, according to this methodology. CTB's current ratio of 2.85 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 CTB is 10.26%, while its historical payout ratio has been 13.68%. 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 16.90%, and would consider anything over 27% to be staggering. The ROE for CTB of 20.78% 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. CTB's pre-tax profit margin is 11.06%, thus passing this criterion.
YIELD: FAIL
The company in question should have a yield that is high and that can be maintained or increased. CTB's current yield is 1.17%, while the market yield is 2.69%. CTB 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 57.45%. CTB's Total Debt/Equity of 28.40% is considered acceptable. |
| 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 $3,380 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) 0.68, 0.72 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 (10.76%) has beaten that of the S&P (7.43%). 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 13.89, based on trailing 12 month earnings, is higher than the bottom 20% criterion (below 13.12), 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 13.78 does not meet the bottom 20% criterion (below 7.45), 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 2.39, which does not meet the bottom 20% criterion (below 1.05), 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 16.90%, and would consider anything over 27% to be staggering. The ROE for ESNT of 18.60% 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 68.56%, 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 2.69%. Hence, this criterion cannot be evaluated. |
| Strategy: Value Investor
Based on: Benjamin Graham |
| Masimo Corporation is a medical technology company that develops, manufactures and markets a range of non-invasive patient monitoring technologies. The Company's business is Measure-through Motion and Low Perfusion pulse oximetry monitoring, known as Masimo Signal Extraction Technology (SET) pulse oximetry. Its product offerings include non-invasive monitoring of blood constituents with an optical signature, optical organ oximetry monitoring, electrical, brain function monitoring, acoustic respiration monitoring and exhaled gas monitoring. In addition, the Company has developed the Root patient monitoring and connectivity platform, the Radical-7 bedside and portable patient monitor, and the Radius-7 wearable wireless patient monitor. It offers Patient SafetyNet remote patient surveillance monitoring system, which allows patients to be monitored through a personal computer-based monitor or by care providers through their pagers, voice-over-Internet Protocol (IP) phones or smartphones. |
SECTOR: PASS
MASI is neither a technology nor financial Company, and therefore this methodology is applicable.
SALES: PASS
The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. MASI's sales of $709.8 million, based on trailing 12 month sales, pass this test.
CURRENT RATIO: PASS
The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. MASI's current ratio of 2.74 passes the test.
LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: PASS
For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for MASI is $0.0 million, while the net current assets are $353.6 million. MASI passes this test.
LONG-TERM EPS GROWTH: PASS
Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. MASI's EPS growth over that period of 306.7% passes the EPS growth test.
P/E RATIO: FAIL
The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. MASI's P/E of 30.00 (using the 3 year PE) fails this test.
PRICE/BOOK RATIO: FAIL
The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. MASI's Price/Book ratio is 6.85, while the P/E is 30.00. MASI fails the Price/Book test. |
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 |
62% |
| MGA |
MAGNA INTERNATIONAL INC. (USA) |
Auto & Truck Parts |
59% |
| NTRI |
NUTRISYSTEM INC. |
Personal Services |
55% |
| HIBB |
HIBBETT SPORTS, INC. |
Retail (Specialty) |
53% |
| FIZZ |
NATIONAL BEVERAGE CORP. |
Beverages (Non-Alcoholic) |
49% |
| ATH |
ATHENE HOLDING LTD |
Insurance (Life) |
47% |
| RACE |
FERRARI NV |
Auto & Truck Manufacturers |
47% |
| SIG |
SIGNET JEWELERS LTD. |
Retail (Specialty) |
47% |
| MAN |
MANPOWERGROUP INC. |
Business Services |
46% |
| LMAT |
LEMAITRE VASCULAR INC |
Medical Equipment & Supplies |
44% |
|
