Guru Analysis
| Strategy: Contrarian Investor
Based on: David Dreman |
| 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). |
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. WD has a market cap of $1,627 million, therefore failing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. WD's EPS for the past 2 quarters, (from earliest to most recent quarter) 1.13, 1.35 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. WD passes this test as its EPS growth rate over the past 6 months (40.62%) has beaten that of the S&P (1.61%). WD's estimated EPS growth for the current year is (22.47%), which indicates the company is expected to experience positive earnings growth. As a result, WD passes this test.
This methodology would utilize four separate criteria to determine if WD 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. WD's P/E of 11.58, based on trailing 12 month earnings, meets the bottom 20% criterion (below 13.36), 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. WD's P/CF of 6.24 meets the bottom 20% criterion (below 7.43) 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. WD's P/B is currently 2.44, which does not meet the bottom 20% criterion (below 1.08), 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%). WD'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 WD 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 17.03%, and would consider anything over 27% to be staggering. The ROE for WD of 24.74% 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. WD's pre-tax profit margin is 34.04%, thus passing this criterion.
YIELD: FAIL
The company in question should have a yield that is high and that can be maintained or increased. WD's current yield is not available (or one is not paid) at the present time, while the market yield is 2.64%. Hence, this criterion cannot be evaluated. |
| Strategy: P/E/Growth Investor
Based on: Peter Lynch |
| 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. |
DETERMINE THE CLASSIFICATION:
This methodology would consider AGX a "fast-grower".
P/E/GROWTH RATIO: PASS
The investor should examine the P/E (12.36) relative to the growth rate (32.48%), 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 AGX (0.38) 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. AGX, whose sales are $775.2 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.
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 AGX was 0.99% last year, while for this year it is 0.47%. Since inventory to sales has decreased from last year by -0.51%, AGX passes this test.
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 AGX is 32.5%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for AGX (0.00%) to be wonderfully 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 AGX (24.83%) 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: BONUS PASS
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 AGX (52.64%) is considered very favorable. |
MAGNA INTERNATIONAL INC. (USA) |
| Strategy: Growth/Value Investor
Based on: James P. O'Shaughnessy |
| Magna International Inc. (Magna) is a global automotive supplier. The Company's segments are North America, Europe, Asia, Rest of World, and Corporate and Other. The Company's product capabilities include producing body, chassis, exterior, seating, powertrain, electronic, active driver assistance, vision, closure, and roof systems and modules, as well as vehicle engineering and contract manufacturing. The Company has over 320 manufacturing operations and approximately 100 product development, engineering and sales centers in over 30 countries. It provides a range of body, chassis and engineering solutions to its original equipment manufacturer (OEM) customers. It has capabilities in powertrain design, development, testing and manufacturing. It offers bumper fascia systems, exterior trim and modular systems. It offers exterior and interior mirror systems. It offers sealing, trim, engineered glass and module systems. It offers softtops, retractable hardtops, modular tops and hardtops. |
MARKET CAP: PASS
The first requirement of the Cornerstone Growth Strategy is that the company has a market capitalization of at least $150 million. This will screen out the companies that are too illiquid for most investors, but still include a small growth company. MGA, with a market cap of $17,896 million, passes this criterion.
EARNINGS PER SHARE PERSISTENCE: PASS
The Cornerstone Growth methodology looks for companies that show persistent earnings growth without regard to magnitude. To fulfill this requirement, a company's earnings must increase each year for a five year period. MGA, whose annual EPS before extraordinary items for the last 5 years (from earliest to the most recent fiscal year) were 3.05, 3.38, 4.44, 4.72 and 5.16, passes this test.
PRICE/SALES RATIO: PASS
The Price/Sales ratio should be below 1.5. This value criterion, coupled with the growth criterion, identify growth stocks that are still cheap to buy. MGA's Price/Sales ratio of 0.48, based on trailing 12 month sales, passes this criterion.
RELATIVE STRENGTH: PASS
The final criterion for the Cornerstone Growth Strategy requires that the Relative Strength of the company be among the top 50 of the stocks screened using the previous criterion. This gives you the opportunity to buy the growth stocks you are searching for just as the market is embracing them. MGA, whose relative strength is 70, is in the top 50 and would pass this last criterion. |
| Strategy: P/E/Growth Investor
Based on: Peter Lynch |
| 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. |
DETERMINE THE CLASSIFICATION:
This methodology would consider SAFM a "fast-grower".
P/E/GROWTH RATIO: PASS
The investor should examine the P/E (12.11) relative to the growth rate (25.52%), based on the average of the 3 and 4 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 SAFM (0.47) 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. SAFM, whose sales are $3,009.2 million, needs to have a P/E below 40 to pass this criterion. SAFM's P/E of (12.11) 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 SAFM was 7.09% last year, while for this year it is 7.82%. Since inventory has been rising, this methodology would not look favorably at the stock but would not completely eliminate it from consideration as the inventory increase (0.73%) is below 5%.
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 SAFM is 25.5%, based on the average of the 3 and 4 year historical eps growth rates, which is acceptable.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for SAFM (0.00%) to be wonderfully 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 SAFM (1.87%) 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 SAFM (9.02%) 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: P/E/Growth Investor
Based on: Peter Lynch |
| 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. |
DETERMINE THE CLASSIFICATION:
This methodology would consider BMA a "fast-grower".
P/E/GROWTH RATIO: PASS
The investor should examine the P/E (12.94) relative to the growth rate (41.33%), 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 BMA (0.31) 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. BMA, whose sales are $1,777.0 million, needs to have a P/E below 40 to pass this criterion. BMA's P/E of (12.94) is considered acceptable.
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 BMA is 41.3%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered 'OK'. However, it may be difficult to sustain such a high growth rate.
TOTAL DEBT/EQUITY RATIO: NEUTRAL
BMA 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. BMA's Equity/Assets ratio (14.00%) is very 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. BMA's ROA (4.88%) is above the minimum 1% that this methodology looks for, thus passing the criterion.
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 BMA (12.61%) 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 BMA (-4.81%) 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: P/E/Growth Investor
Based on: Peter Lynch |
| Credit Acceptance Corporation offers financing programs that enable automobile dealers to sell vehicles to consumers. The Company's financing programs are offered through a network of automobile dealers. The Company has two Dealers financing programs: the Portfolio Program and the Purchase Program. Under the Portfolio Program, the Company advances money to dealers (Dealer Loan) in exchange for the right to service the underlying consumer loans. Under the Purchase Program, the Company buys the consumer loans from the dealers (Purchased Loan) and keeps the amounts collected from the consumer. Dealer Loans and Purchased Loans are collectively referred to as Loans. As of December 31, 2016, the Company's target market included approximately 60,000 independent and franchised automobile dealers in the United States. The Company has market area managers located throughout the United States that market its programs to dealers, enroll new dealers and support active dealers. |
DETERMINE THE CLASSIFICATION:
CACC is considered a "Stalwart", according to this methodology, for its earnings growth of 17.04%. This is based on based on the average of the 3, 4 and 5 year historical eps growth rates, which lies within a moderate 10%-19% range. 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. However, CACC is not considered a "True Stalwart" for its sales of $1,004 million are less than the multi-billion dollar level.
YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: PASS
The Yield-adjusted P/E/G ratio for CACC (0.82), 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. CACC's EPS ($17.39) would satisfy this criterion.
TOTAL DEBT/EQUITY RATIO: NEUTRAL
CACC 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. CACC'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. CACC's ROA (8.52%) is above the minimum 1% that this methodology looks for, thus passing the criterion.
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 CACC (10.17%) 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 CACC (-59.83%) 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 |
| Ameris Bancorp is a financial holding company. The Company's business is conducted through its banking subsidiary, Ameris Bank (the Bank), which provides a range of banking services to its retail and commercial customers. The Company operates through four segments: the Banking Division, the Retail Mortgage Division, the Warehouse Lending Division and the SBA Division. The Banking Division is engaged in the delivery of financial services, which include commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division is engaged in the origination, sales and servicing of one- to four-family residential mortgage loans. The Warehouse Lending Division is engaged in the origination and servicing of warehouse lines to other businesses that are secured by underlying one- to four-family residential mortgage loans. The SBA Division is engaged in the origination, sales and servicing of small business administration (SBA) loans. |
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. ABCB's profit margin of 24.04% passes this test.
RELATIVE STRENGTH: FAIL
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. Although ABCB's relative strength of 85 is below the acceptable level, yet it is very close. Keep an eye on the stock as it could move into the acceptable range.
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 ABCB (59.46% for EPS, and 22.89% for Sales) are not good enough to pass.
INSIDER HOLDINGS: FAIL
ABCB's insiders should own at least 10% (they own 2.49%) 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: FAIL
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. ABCB's free cash flow of $-2.57 per share fails this test.
PROFIT MARGIN CONSISTENCY: PASS
ABCB's profit margin has been consistent or even increasing over the past three years (Current year: 30.16%, Last year: 21.46%, Two years ago: 23.53%), 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 ABCB's case.
CASH AND CASH EQUIVALENTS: PASS
ABCB's level of cash $127.2 million passes this criteria. If a company is a cash generator, like ABCB, it has the ability to pay off debt (if it has any) or acquire other companies. Most importantly, good operations generate cash.
"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 (ABCB's is 0.57), the company demonstrates excellence in its fundamentals and have soundly beat the earnings estimates. ABCB passes this test.
The following criteria for ABCB are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: FAIL
ABCB has either issued a significant amount of new shares over the past year or has been issuing more and more shares over the past five years. ABCB currently has 36.0 million shares outstanding. Neither of these are a good sign. Generally when a small-cap company issues more stock, the existing stock becomes devalued by the market, and hence diluted.
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. ABCB's sales of $251.6 million based on trailing 12 month sales, are fine, making this company one such "prospective gem". ABCB passes the sales test.
DAILY DOLLAR VOLUME: PASS
ABCB passes the Daily Dollar Volume (DDV of $7.8 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. ABCB with a price of $47.25 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
ABCB's income tax paid expressed as a percentage of pretax income this year was (31.50%) and last year (28.02%) 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. |
IPG PHOTONICS CORPORATION |
| Strategy: Growth Investor
Based on: Martin Zweig |
| IPG Photonics Corporation is a developer and manufacturer of a line of fiber lasers, fiber amplifiers, diode lasers, laser systems and optical accessories that are used for various applications. The Company offers a line of lasers and amplifiers, which are used in materials processing, communications and medical applications. The Company sells its products globally to original equipment manufacturers (OEMs), system integrators and end users. The Company's manufacturing facilities are located in the United States, Germany and Russia. The Company offers laser-based systems for certain markets and applications. Its products are designed to be used as general-purpose energy or light sources. Its product line includes High-Power Ytterbium CW (1,000-100,000 Watts), Mid-Power Ytterbium CW (100-999 Watts), Pulsed Ytterbium (0.1 to 200 Watts), Pulsed and CW, Quasi-CW Ytterbium (100-4,500 Watts), Erbium Amplifiers and Transceivers. |
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. IPGP's P/E is 28.63, based on trailing 12 month earnings, while the current market PE is 19.00. 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. IPGP's revenue growth is 15.83%, while it's earnings growth rate is 15.70%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, IPGP 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 (37.9%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (25.3%) of the current year. Sales growth for the prior must be greater than the latter. For IPGP 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. IPGP's EPS ($1.38) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. IPGP's EPS for this quarter last year ($0.92) 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. IPGP's growth rate of 50.00% 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 IPGP is 7.85%. This should be less than the growth rates for the 3 previous quarters, which are 8.70%, 9.32%, and 23.01%. IPGP 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, 13.58%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 50.00%, (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, 50.00% must be greater than or equal to the historical growth which is 15.70%. IPGP 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. IPGP, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 2.82, 2.97, 3.80, 4.53 and 4.85, 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. IPGP's long-term growth rate of 15.70%, 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. IPGP's Debt/Equity (2.40%) is not considered high relative to its industry (54.28%) 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 IPGP, this criterion has not been met (insider sell transactions are 568, while insiders buying number 263). 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: Growth Investor
Based on: Martin Zweig |
| Evercore Partners Inc. is an independent investment banking advisory company. The Company operates through two business segments: Investment Banking and Investment Management. The Company's Investment Banking segment includes its Advisory services, through which Evercore provides advice to clients on mergers, acquisitions, divestitures and other strategic corporate transactions, with a particular focus on advising multinational corporations and private equity firms on various transactions. Its Investment Management segment focuses on Institutional Asset Management, through which Evercore manages financial assets for institutional investors and provide independent fiduciary services to corporate employee benefit plans; Wealth Management, through which it provides wealth management services for high-net-worth individuals, and Private Equity, through which it manages private equity funds. Private Equity holds interests in entities that manage middle-market private equity funds in Mexico. |
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. EVR's P/E is 17.64, based on trailing 12 month earnings, while the current market PE is 19.00. 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. EVR's revenue growth is 22.24%, while it's earnings growth rate is 31.52%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, EVR 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 (50.5%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (9.4%) of the current year. Sales growth for the prior must be greater than the latter. For EVR 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. EVR's EPS ($1.76) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. EVR's EPS for this quarter last year ($0.12) 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. EVR's growth rate of 1,366.67% 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 EVR is 15.76%. This should be less than the growth rates for the 3 previous quarters, which are 111.54%, 393.75%, and 117.78%. EVR 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, 166.67%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 1,366.67%, (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, 1,366.67% must be greater than or equal to the historical growth which is 31.52%. EVR 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. EVR, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 0.88, 1.46, 2.08, 0.98, and 2.43, 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. EVR's long-term growth rate of 31.52%, 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 EVR, this criterion has not been met (insider sell transactions are 199, while insiders buying number 2). 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: Contrarian Investor
Based on: David Dreman |
| 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). |
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. FL has a market cap of $6,377 million, therefore passing the test.
EARNINGS TREND: FAIL
A company should show a rising trend in the reported earnings for the most recent quarters. FL's EPS for the latest quarter is not greater than the prior quarter, (from earliest to most recent quarter) 1.42, 1.36. 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: 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. FL passes this test as its EPS growth rate over the past 6 months (16.23%) has beaten that of the S&P (1.61%). FL's estimated EPS growth for the current year is (4.27%), which indicates the company is expected to experience positive earnings growth. As a result, FL passes this test.
This methodology would utilize four separate criteria to determine if FL 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. FL's P/E of 9.94, based on trailing 12 month earnings, meets the bottom 20% criterion (below 13.36), 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. FL's P/CF of 7.84 does not meet the bottom 20% criterion (below 7.43), 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. FL's P/B is currently 2.26, which does not meet the bottom 20% criterion (below 1.08), 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%). FL's P/D of 39.22 does not meet the bottom 20% criterion (below 20.37), 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 [2.63] or greater than 2). This is one identifier of financially strong companies, according to this methodology. FL's current ratio of 4.90 passes the test.
PAYOUT RATIO: FAIL
A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for FL is 23.12%, while its historical payout ratio has been 23.06%. Therefore, it fails 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 17.03%, and would consider anything over 27% to be staggering. The ROE for FL of 23.76% 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. FL's pre-tax profit margin is 12.53%, thus passing this criterion.
YIELD: FAIL
The company in question should have a yield that is high and that can be maintained or increased. FL's current yield is 2.55%, while the market yield is 2.64%. FL 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 66.00%. FL's Total Debt/Equity of 4.50% is considered acceptable. |
Watch List
The top scoring stocks not currently in the Hot List portfolio.
| Ticker |
Company Name |
Industry |
Current
Score |
| ESNT |
ESSENT GROUP LTD |
Insurance (Prop. & Casualty) |
58% |
| LMAT |
LEMAITRE VASCULAR INC |
Medical Equipment & Supplies |
52% |
| ATH |
ATHENE HOLDING LTD |
Insurance (Life) |
50% |
| KORS |
MICHAEL KORS HOLDINGS LTD |
Apparel/Accessories |
48% |
| MAN |
MANPOWERGROUP INC. |
Business Services |
48% |
| MASI |
MASIMO CORPORATION |
Medical Equipment & Supplies |
42% |
| CTB |
COOPER TIRE & RUBBER CO |
Tires |
42% |
| MC |
MOELIS & CO |
Investment Services |
40% |
| AGO |
ASSURED GUARANTY LTD. |
Insurance (Prop. & Casualty) |
40% |
| AVY |
AVERY DENNISON CORP |
Containers & Packaging |
39% |
|
