The INVRS Blog

Quality of Earnings results for a Group of 11 oil and gas companies trading on the TSX.


Impressive results (7/8) for CNQ and HSE. 

Next analysis will look at income potential for the group.

If you work with your own investment models you likely use excel to build them, but excel isn’t ideal for many reasons and it costs you in other ways.
First, you need good data and it isn’t just lying around in an easy to import format.You’re either keying it in yourself or paying money for excel downloads.
When you need data from numerous sources – price information, data from different statements and across multiple years - you must merge it from multiple sheets.  It's an inefficient process which can lead to data corruption.
After all this data is collected and merged, models built and tested, the net result is one statistic for one company.A stand-alone number without context has limited use.To be meaningful, you need to compare it to similar companies. This is just a sample of the challenges.  You need software that overcomes these problems and is designed for investment model creation.
Surprise!  This software exists, it's INVRS.  You can get a free analysis report on …

Tesla creates a lot of polarization.  It's like the industrial equivalent of our current political state.

I find that the main narrative is vitriolic in nature.  The people in the love-camp don't have a tonne to write about because Tesla's financial and operating results aren't meeting expectations, it's difficult to argue back.

I'm going to offer this item of information to the debate.  It's a quality of earnings I ran on the large cap automotive and automotive aftermarket.

TSLA's are good.  Not great, but good and they are the highest, along with two other firms in the group, which further impresses. 

The quality of earnings matter.  They tell us whether what's being presented can be trusted or not.


TSLA got a 6 out of 9, compared to a group average of less than 4.

As the graph indicates, CHU and NTT are trading below value.

According this Ohlson Clean Surplus valuation model, UPS is under-valued. Its "theoretical" price is $199 (why the quotes? because it's ridiculous to suppose that a model could really give you the true value of a stock, but it can be a useful guideline, ball park or an indication of a margin of safety).

CHRW is also trading with a margin of safety of 43%.

An analysis of this 30 stock portfolio (large cap, medical technology, medical specialities) shows three companies with a value greater than price: SSMXF, WAT and HOCPY.

The valuation model is the Ohlson Clean Surplus.

I created a portfolio of the top pharmaceutical companies trading in the US and ran a quality of earnings analysis on them.  With the highest possible score being nine, GSK scored the best with seven.

Here are the results:

Here's the balance of the companies in the portfolio.  We can see that AZN was the worst at two.


Just for laughs, lets see how GSK and AZN have performed from a price perspective.

Interestingly, AZN has been outperforming GSK. It'll be interesting to say if this trend will continue or if it will, more correctly I believe, reverse.

Income  Only three of the six stocks have a dividend: NLSN, JCDXF and IPG, and they all look quite good.  Over the past three years, each company has grown their dividend.

Let's look at the measures, the ranks and the final ranking in this category.  The measures are dividend yield, 3 year dividend per share CAGR and 1 year dividend per share growth.


Dividend
YieldD/S 3 year
CAGR1 year
D/S growthSumFinal RankJCDXF2%
43%
48%
513

4NLSN6%
65%
55%
415

5IPG4%
512%
617%
617

6
IPG has some very nice dividend results.
Value The value metrics are:
price to bookprice to salesprice to earnings (if the company has negative earnings they get a rank of zero)enterprise value to EBITDA.

P/BP/SP/EEV/EBITDASumFinal
RankTTD.21
111.1
1103
243
151RAMP.03
58.1
2173
116
2102NLSN.03
41.3
4negative
09
5133JCDXF.02
61.6
323
313
3155IPG.04
3.8
513
49
4166GRPN.06
2.7
6negative
07
6144 All of the companies in the group have what would generally be considered good P/B ratios except for TTD.  The same can be said fo…

Quality  The quality factor uses five measures:
Standard deviation of earnings - the lower the better,Gross margin - the higher the better,Net margin - the higher the better,Sales/assets - the higher the better,Financial leverage - the lower the better.

SDGMNMS/AFLSumRankTTD.98
176%
618%
643%
10%
6204RAMP.12
549%
53%
376%
523%
5236NLSN.47
247%
3-11%
143%
273%
191JCDXF.27
426%
27%
557%
336%
4183IPG.32
312%
17%
462%
459%
2142GRPN.11
648%
40%
2161%
638%
3215
Based on an equal ranking of the factors, RAMP comes out on top.  This is a factor that you personally might want to weight differently.  Perhaps you don't care about volatility in the stock price or you think a certain amount of debt is desirable.  You then might make other choices for the highest quality stock.

Growth This factor looks at the year over year growth rate in revenue, EBITDA, free cash flow and gross income margin.


RevenueEBITDAFCFGMSumFinal RankTTD55%
655%
6215%
6-3%
2206RAMP30%
51%
30%
423%
6185NLSN-1%
2-10%
1-20%
…

Overview This is a factor-based analysis looking at six mid-sized companies in the marketing and advertising space.  It will look at the relative strengths and weaknesses of the group members with the goal of finding a gem.

Peer Group:Stock Name (Symbol)Last Price (May 31, 2019)Market CapTrade Desk, Inc. Class A(TTD:XNAS)$198.818.8429BLiveRamp Holdings, Inc.(RAMP:XNYS)$51.383.4986BNielsen Holdings PLC(NLSN:XNYS)$22.738.0804BJcdecaux SA(JCDXF:OOTC)$27.805.9161BInterpublic Group of Companies, Inc.(IPG:XNYS)$21.228.1952BGroupon, Inc. Class A(GRPN:XNAS)$3.532.0050B   Analysis Factors This analysis will look at six factors:
Price MomentumQualityGrowthIncomeValueProfitability. Price Momentum This factor includes a long, medium and short-term measure.  Long term is the percentage price change over two years, medium is 12 month less one month price change and short-term is the price less three month moving average.  I'm going to look the market, the sector and then each stock in the group…

NextEra had good results relative to a group of peers in a factor-based analysis.NextEra has an appealing profitability and income profile.Its price momentum looks decent, with a caveat.Its relatively small size (a small mid-cap) coupled with its industry (renewable energy) further weight the odds that this company could be a strong performer in the future.
The Analysis Overview
I created a portfolio of stocks in the alternative energy sector, looking specifically for companies with a market cap over $1B but less than $4B.  This is a sweet spot that offers strong potential for growth but is also substantial enough not to be too speculative.

It's my believe that alternative energy is on the ascendance, where as fossil fuels will inevitably decline (NextEra isn't a pure play in this regard however, natural gas assets are part of its portfolio).  If you share this belief and you want exposure to this market, NextEra looks like a good bet.

This is a factor-based analysis on seven …

This analysis was created on December 29, 2018 using closing prices from December 28, 2018 with the goal to determine if there is a viable investment strategy in Omnicell (OMCL).

It will be a peer based analysis, evaluating OMCL relative to companies in the same sector and industry and having a market cap within 65% of OMCL and over $950M.  When you subscribe to INVRS you can customize the peer group any way you wish. 

Why peer based? It gives the numbers context, you can benchmark and you might find another opportunity.  It provides you with another vital dimension upon which to evaluate your target company.  Once you've established your peer group, you can do analysis on the group as easily as you analyze a single stock. 

OMCL and its peer group will be analyzed on six factors:
Price momentum,Quality,Growth,Income,Value,Profitability. Each factor calculates several metrics each providing different insight.  For example the profitability factor looks at gross profit to assets, ne…

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