Guru Analysis
| Strategy: Contrarian Investor Based on: David Dreman |
Repsol, S.A. (Repsol) is an integrated energy company. The Company's segments include Upstream, Downstream, and Corporation and others. The Upstream segment carries out oil and natural gas exploration and production activities, and manages its project portfolio. The Downstream segment includes covers the supply and trading of crude oil and other products; oil refining and marketing of oil products, and the production and marketing of chemicals. It owns and operates five refineries in Spain (Cartagena, A Coruna, Bilbao, Puertollano and Tarragona) with a combined distillation capacity of approximately 900 thousand barrels of oil per day. The Company operates La Pampilla refinery in Peru, which has an installed capacity of approximately 120 thousand barrels of oil per day. Its Chemicals division produces and commercializes a range of products, and its activities range from basic petrochemicals to derivatives. |
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. REPYY has a market cap of $26,841 million, therefore passing the test.
EARNINGS TREND: PASS
A company should show a rising trend in the reported earnings for the most recent quarters. REPYY's EPS for the past 2 quarters, (from earliest to most recent quarter) 0.41, 0.43 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. REPYY passes this test as its EPS growth rate over the past 6 months (13.15%) has beaten that of the S&P (-1.85%). Unfortunately though, REPYY's estimated EPS growth figures are unavailable and an opinion cannot be rendered on the second part of the test.
This methodology would utilize four separate criteria to determine if REPYY 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. REPYY's P/E of 10.87, based on trailing 12 month earnings, is higher than the bottom 20% criterion (below 10.60), 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. REPYY's P/CF of 5.44 meets the bottom 20% criterion (below 6.02) and therefore passes this test.
PRICE/BOOK (P/B) VALUE: PASS
The P/B value of a company should be in the bottom 20% of the overall market. REPYY's P/B is currently 0.78, which meets the bottom 20% criterion (below 1.00), and it therefore passes this test.
PRICE/DIVIDEND (P/D) RATIO: PASS
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%). REPYY's P/D of 16.64 meets the bottom 20% criterion (below 19.05), and it therefore passes this test.
This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below.
CURRENT RATIO: PASS
A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.18] or greater than 2). This is one identifier of financially strong companies, according to this methodology. REPYY's current ratio of 1.55 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 REPYY is 60.50%, while its historical payout ratio has been 61.02%. Therefore, it passes the payout criterion.
RETURN ON EQUITY: FAIL
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 largest cap stocks, which is 18.02%, and would consider anything over 27% to be staggering. The ROE for REPYY of 7.44% is not 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. REPYY's pre-tax profit margin is 9.15%, thus passing this criterion.
YIELD: PASS
The company in question should have a yield that is high and that can be maintained or increased. REPYY's current yield is 6.01%, while the market yield is 2.60%. REPYY 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 57.58%. REPYY's Total Debt/Equity of 35.72% is considered acceptable. |
ROYAL DUTCH SHELL PLC (ADR) |
| Strategy: Price/Sales Investor Based on: Kenneth Fisher |
The Royal Dutch Shell plc explores for crude oil and natural gas around the world, both in conventional fields and from sources, such as tight rock, shale and coal formations. The Company's segments include Integrated Gas, Upstream, Downstream and Corporate. The Integrated Gas segment is engaged in the liquefaction and transportation of gas and the conversion of natural gas to liquids to provide fuels and other products, as well as projects with an integrated activity, ranging from producing to commercializing gas. The Upstream segment includes the operations of Upstream, which is engaged in the exploration for and extraction of crude oil, natural gas and natural gas liquids, and the marketing and transportation of oil and gas, and Oil Sands, which is engaged in the extraction of bitumen from mined oil sands and conversion into synthetic crude oil. The Downstream segment is engaged in oil products and chemicals manufacturing, and marketing activities. |
PRICE/SALES RATIO: PASS
The prospective company should have a low Price/Sales ratio. Non-cyclical (non-Smokestack) companies with Price/Sales ratios below 0.75 are tremendous values and should be sought. RDS.A's P/S of 0.66 based on trailing 12 month sales, is below 0.75 which is considered quite attractive. It passes this methodology's P/S ratio test with flying colors.
TOTAL DEBT/EQUITY RATIO: PASS
Less debt equals less risk according to this methodology. RDS.A's Debt/Equity of 38.67% is acceptable, 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. RDS.A 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 RDS.A At this Point Is RDS.A a "Super Stock"? NO
PRICE/SALES RATIO: PASS
The prospective company should have a low Price/Sales ratio. Non-cyclical(non-Smokestack) companies with Price/Sales ratios below .75 are tremendous values and should be sought.RDS.A's P/S ratio of 0.66 is below .75 which is considered extremely attractive. It passes this methodology's P/S ratio test with flying colors.
LONG-TERM EPS GROWTH RATE: PASS
This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. RDS.A's inflation adjusted EPS growth rate of 35.96% 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. RDS.A's free cash per share of 3.45 passes this criterion.
THREE YEAR AVERAGE NET PROFIT MARGIN: FAIL
This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. RDS.A, whose three year net profit margin averages 4.07%, fails this evaluation.
|
| Strategy: Value Investor Based on: Benjamin Graham |
NK Lukoil PAO is an energy company. The primary activities of LUKOIL and its subsidiaries are oil exploration, production, refining, marketing and distribution. Its segments include Exploration and Production; Refining, Marketing and Distribution, and Corporate and other. The Exploration and Production segment includes its exploration, development and production operations related to crude oil and gas. These activities are located within Russia, with additional activities in Azerbaijan, Kazakhstan, Uzbekistan, the Middle East, Northern and Western Africa, Norway, Romania and Mexico. The Refining, Marketing and Distribution segment includes refining, petrochemical and transport operations, marketing and trading of crude oil, natural gas and refined products, generation, transportation and sales of electricity, heat and related services. The Corporate and other segment includes operations related to finance activities, production of diamonds and certain other activities. |
SECTOR: PASS
LUKOY 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 $1 billion. LUKOY's sales of $116,710.0 million, based on trailing 12 month sales, pass this test.
CURRENT RATIO: FAIL
The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. LUKOY's current ratio of 1.74 fails 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 LUKOY is $7,828.3 million, while the net current assets are $10,466.9 million. LUKOY passes this test.
LONG-TERM EPS GROWTH: FAIL
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 10 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. LUKOY's EPS growth over that period of -37.3% fails the EPS growth test.
P/E RATIO: PASS
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. LUKOY's P/E of 13.00 (using the 3 year PE) passes this test.
PRICE/BOOK RATIO: PASS
The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. LUKOY's Price/Book ratio is 0.98, while the P/E is 13.00. LUKOY passes the Price/Book test. |
| Strategy: P/E/Growth Investor Based on: Peter Lynch |
Monster Beverage Corporation develops, markets, sells and distributes energy drink beverages, sodas and/or concentrates for energy drink beverages, primarily under various brand names, including Monster Energy, Monster Rehab, Monster Energy Extra Strength Nitrous Technology, Java Monster, Muscle Monster, Mega Monster Energy, Punch Monster, Juice Monster, Ubermonster, BU, Mutant Super Soda, Nalu, NOS, Burn, Mother, Ultra, Play and Power Play, Gladiator, Relentless, Samurai, BPM and Full Throttle. The Company has three segments: Monster Energy Drinks segment, which consists of its Monster Energy drinks, as well as Mutant Super Soda drinks; Strategic Brands segment, which includes various energy drink brands owned through The Coca-Cola Company (TCCC), and Other segment (Other), which includes the American Fruits & Flavors (AFF) third-party products. The Strategic Brands segment sells concentrates and/or beverage bases to authorized bottling and canning operations. |
DETERMINE THE CLASSIFICATION:
This methodology would consider MNST a "fast-grower".
P/E/GROWTH RATIO: FAIL
The investor should examine the P/E (33.56) relative to the growth rate (20.03%), 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 MNST (1.68) is too high to add to the attractiveness of the stock.
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. MNST, whose sales are $3,693.3 million, needs to have a P/E below 40 to pass this criterion. MNST's P/E of (33.56) 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 MNST was 5.31% last year, while for this year it is 7.59%. 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 (2.28%) 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 MNST is 20.0%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for MNST (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 MNST (2.67%) 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 MNST (3.64%) 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: Growth Investor Based on: Martin Zweig |
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. |
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. ESNT's P/E is 9.27, based on trailing 12 month earnings, while the current market PE is 15.00. 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. ESNT's revenue growth is 32.87%, while it's earnings growth rate is 43.45%, based on the average of the 3, 4 and 5 year historical eps growth rates. Sales growth is not at least 85% of EPS growth so the initial part of this criteria is not met, however, since both sales growth and eps growth are greater than 30%, that requirement is waived and the company passes this test.
SALES GROWTH RATE: FAIL
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (19.9%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (23.2%) of the current year. Sales growth for the prior must be greater than the latter. For ESNT this criterion has not been met and fails this test.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. ESNT's EPS ($1.31) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. ESNT's EPS for this quarter last year ($0.79) 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. ESNT's growth rate of 65.82% 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 ESNT is 21.73%. This should be less than the growth rates for the 3 previous quarters, which are 56.94%, 48.05%, and 43.90%. ESNT 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, 49.35%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 65.82%, (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, 65.82% must be greater than or equal to the historical growth which is 43.45%. ESNT 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. ESNT, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.03, 1.72, 2.41, 3.10 and 4.77, 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. ESNT's long-term growth rate of 43.45%, 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 ESNT, this criterion has not been met (insider sell transactions are 7, while insiders buying number 7). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion. |
| Strategy: P/E/Growth Investor Based on: Peter Lynch |
CBRE Group, Inc. is a holding company that conducts all of its operations through its subsidiaries. The Company operates as a commercial real estate services and investment company. The Company operates through the segments: The Americas; Europe, Middle East and Africa (EMEA); Asia Pacific; Global Investment Management, and Development Services. The Company provides commercial real estate services under the CBRE brand name, investment management services under the CBRE Global Investors brand name and development services under the Trammell Crow Company brand name. The Company's business is focused on commercial property, corporate facilities, project and transaction management, tenant/occupier and property/agency leasing, capital markets solutions (property sales, commercial mortgage brokerage, loan origination and servicing) real estate investment management, valuation, development services and proprietary research. |
DETERMINE THE CLASSIFICATION:
This methodology would consider CBRE a "fast-grower".
P/E/GROWTH RATIO: PASS
The investor should examine the P/E (16.12) relative to the growth rate (24.91%), 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 CBRE (0.65) makes it 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. CBRE, whose sales are $21,340.1 million, needs to have a P/E below 40 to pass this criterion. CBRE's P/E of (16.12) 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 CBRE is 24.9%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good.
TOTAL DEBT/EQUITY RATIO: PASS
This methodology would consider the Debt/Equity ratio for CBRE (62.75%) to be mediocre. If the Debt/Equity ratio is this high, the other ratios and financial statistics for CBRE should be good enough to compensate. |
TD AMERITRADE HOLDING CORP. |
| Strategy: Growth Investor Based on: Martin Zweig |
TD Ameritrade Holding Corporation is a provider of securities brokerage services and related technology-based financial services. The Company provides its services to retail investors, traders and independent registered investment advisors (RIAs). The Company provides its services through the Internet, a national branch network and relationships with RIAs. The Company's products and services include common and preferred stock, exchange-traded funds, options, futures, foreign exchange, mutual funds, fixed income, new and secondary issue securities, margin lending, cash management services and annuities. The Company uses its platform to offer brokerage services to retail investors and investment advisors. In addition, it also offers various products and services to retail clients, such as touch-tone trading, trading over the Internet, real-time quotes, extended trading hours and direct access to market destinations. |
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. AMTD's P/E is 17.93, based on trailing 12 month earnings, while the current market PE is 15.00. 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. AMTD's revenue growth is 16.01%, while it's earnings growth rate is 15.92%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, AMTD passes this criterion.
SALES GROWTH RATE: FAIL
Another important issue regarding sales growth is that the rate of quarterly sales growth is rising. To evaluate this, the change from this quarter last year to the present quarter (20.6%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (42.2%) of the current year. Sales growth for the prior must be greater than the latter. For AMTD this criterion has not been met and fails this test.
The earnings numbers of a company should be examined from various different angles. Three of these angles are stability in the trend of earnings, earnings persistence, and earnings acceleration. To evaluate stability, the stock has to pass the following four criteria.
CURRENT QUARTER EARNINGS: PASS
The first of these criteria is that the current EPS be positive. AMTD's EPS ($1.07) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. AMTD's EPS for this quarter last year ($0.40) 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. AMTD's growth rate of 167.50% 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 AMTD is 7.96%. This should be less than the growth rates for the 3 previous quarters, which are 20.00%, 79.55%, and 100.00%. AMTD 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, 66.94%, (versus the same three quarters a year earlier) is less than the growth rate of the current quarter earnings, 167.50%, (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, 167.50% must be greater than or equal to the historical growth which is 15.92%. AMTD 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. AMTD, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 1.42, 1.49, 1.58, 1.64 and 2.46, 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. AMTD's long-term growth rate of 15.92%, 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. For AMTD, this criterion has been met, indicating an insider buy signal. |
| Strategy: Growth Investor Based on: Martin Zweig |
MasterCard Incorporated is a technology company that connects consumers, financial institutions, merchants, governments and businesses across the world, enabling them to use electronic forms of payment. The Company operates through Payment Solutions segment. The Company allows user to make payments by creating a range of payment solutions and services using its brands, which include MasterCard, Maestro and Cirrus. The Company provides a range of products and solutions that support payment products, which customers can offer to their cardholders. The Company's services facilitate transactions on its network among cardholders, merchants, financial institutions and governments. The Company's products include consumer credit and charge, commercial, debit, prepaid, commercial and digital. The Company's consumer credit and charge offers a range of programs that enables issuers to provide consumers with cards allowing users to defer payment. |
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. MA's P/E is 39.72, based on trailing 12 month earnings, while the current market PE is 15.00. 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. MA's revenue growth is 13.37%, while it's earnings growth rate is 16.71%, based on the average of the 3, 4 and 5 year historical eps growth rates. Therefore, MA 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 (14.9%) must be examined, and then compared to the previous quarter last year compared to the previous quarter (14.7%) of the current year. Sales growth for the prior must be greater than the latter. For MA 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. MA's EPS ($0.79) pass this test.
QUARTERLY EARNINGS ONE YEAR AGO: PASS
The EPS for the quarter one year ago must be positive. MA's EPS for this quarter last year ($0.94) pass this test.
POSITIVE EARNINGS GROWTH RATE FOR CURRENT QUARTER: FAIL
The growth rate of the current quarter's earnings compared to the same quarter a year ago must also be positive. MA's growth rate of -15.96% fails 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 MA is 8.36%. This should be less than the growth rates for the 3 previous quarters, which are 41.00%, 36.36%, and 35.82%. MA 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: FAIL
If the growth rate of the prior three quarter's earnings, 37.50%, (versus the same three quarters a year earlier) is greater than the growth rate of the current quarter earnings, -15.96%, (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 MA is -16.0%, and it would therefore fail this test.
EPS GROWTH FOR CURRENT QUARTER MUST BE GREATER THAN THE HISTORICAL GROWTH RATE: FAIL
The EPS growth rate for the current quarter, -15.96% must be greater than or equal to the historical growth which is 16.71%. Since this is not the case MA would therefore fail 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. MA, whose annual EPS growth before extraordinary items for the previous 5 years (from the earliest to the most recent fiscal year) were 3.09, 3.35, 3.69, 4.38 and 5.52, 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. MA's long-term growth rate of 16.71%, 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 MA, this criterion has not been met (insider sell transactions are 2, while insiders buying number 5). Despite the lack of an insider buy signal, there also is not an insider sell signal, so the stock passes this criterion. |
PENSKE AUTOMOTIVE GROUP, INC. |
| Strategy: P/E/Growth Investor Based on: Peter Lynch |
Penske Automotive Group, Inc. is an international transportation services company. The Company operates automotive and commercial truck dealerships principally in the United States, Canada and Western Europe, and distributes commercial vehicles, diesel engines, gas engines, power systems, and related parts and services principally in Australia and New Zealand. The Company's segments include Retail Automotive, consisting of its retail automotive dealership operations; Retail Commercial Truck, consisting of its retail commercial truck dealership operations in the United States and Canada; Other, consisting of its commercial vehicle and power systems distribution operations and other non-automotive consolidated operations, and Non-Automotive Investments, consisting of its equity method investments in non-automotive operations. The Company holds interests in Penske Truck Leasing Co., L.P. (PTL), a provider of transportation services and supply chain management. |
DETERMINE THE CLASSIFICATION:
PAG is considered a "True Stalwart", according to this methodology, as its earnings growth of 14.31% lies within a moderate 10%-19% range and its annual sales of $22,785 million are greater than the multi billion dollar level. This methodology looks for the "Stalwart" securities to gain 30%-50% in value over a two year period if they can be purchased at an attractive price based on the P/E to Growth ratio. PAG is attractive if PAG can hold its own during a recession.
YIELD ADJUSTED P/E TO GROWTH (PEG) RATIO: PASS
The Yield-adjusted P/E/G ratio for PAG (0.45), based on the average of the 3, 4 and 5 year historical eps growth rates, is excellent.
EARNINGS PER SHARE: PASS
The EPS for a stalwart company must be positive. PAG's EPS ($5.52) would satisfy this criterion.
TOTAL DEBT/EQUITY RATIO: FAIL
PAG's Debt/Equity (228.02%) is above 80% and is considered very weak. Therefore, PAG fails this test. |
MONOLITHIC POWER SYSTEMS, INC. |
| Strategy: P/E/Growth Investor Based on: Peter Lynch |
Monolithic Power Systems, Inc. designs, develops and markets integrated power semiconductor solutions and power delivery architectures. The Company operates in the design, development, marketing and sale of power solutions for the communications, storage and computing, consumer and industrial markets segment. The Company's product families include Direct Current (DC) to DC Products, and Lighting Control Products. The Company's DC to DC integrated circuits (ICs) are used to convert and control voltages within a range of electronic systems, such as portable electronic devices, wireless local area network (LAN) access points, computers, monitors, automobiles and medical equipment. Lighting control ICs are used in backlighting and general illumination products. In addition to Alternating Current (AC)/DC offline solutions for lighting illumination applications, the Company also offers AC/DC power conversion solutions for end products that plug into a wall outlet. |
DETERMINE THE CLASSIFICATION:
This methodology would consider MPWR a "fast-grower".
P/E/GROWTH RATIO: FAIL
The investor should examine the P/E (56.33) relative to the growth rate (33.03%), 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 MPWR (1.71) is too high to add to the attractiveness of the stock.
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. MPWR, whose sales are $582.4 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 MPWR was 21.08% last year, while for this year it is 23.42%. 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 (2.34%) 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 MPWR is 33.0%, 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 MPWR (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. |
Watch List
The top scoring stocks not currently in the Hot List portfolio.
Ticker |
Company Name |
Industry |
Current Score |
NSIT |
INSIGHT ENTERPRISES, INC. |
Software & Programming |
75% |
TX |
TERNIUM SA (ADR) |
Iron & Steel |
72% |
CDW |
CDW CORP |
Software & Programming |
70% |
BMA |
BANCO MACRO SA (ADR) |
Money Center Banks |
59% |
TSCO |
TRACTOR SUPPLY COMPANY |
Personal & Household Prods. |
53% |
TECK |
TECK RESOURCES LTD (USA) |
Coal |
53% |
ATH |
ATHENE HOLDING LTD |
Insurance (Life) |
53% |
HBI |
HANESBRANDS INC. |
Apparel/Accessories |
52% |
NSP |
INSPERITY INC |
Business Services |
52% |
PCTY |
PAYLOCITY HOLDING CORP |
Software & Programming |
52% |
|