Saturday, July 20, 2019

UPS Margin of Safety of 93%

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%.


Thursday, July 18, 2019

THREE STOCKS WITH A VALUE GREATER THAN PRICE ACCORDING TO MODEL

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.

Thursday, July 11, 2019

GlaxoSmithKline Scores High in Quality

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:

Quality of Earnings - Major Pharmaceuticals
Here's the balance of the companies in the portfolio.  We can see that AZN was the worst at two.
Quality of Earnings - Major Pharmaceuticals 2


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.

Friday, June 7, 2019

We've Got a Winner

stock analysis
It's IPG.

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
Yield
D/S 3 year
CAGR
1 year
D/S growth
SumFinal Rank
JCDXF2%
4
3%
4
8%
5
13

4
NLSN6%
6
5%
5
5%
4
15

5
IPG4%
5
12%
6
17%
6
17

6

IPG has some very nice dividend results.

Value

The value metrics are:
  • price to book
  • price to sales
  • price to earnings (if the company has negative earnings they get a rank of zero)
  • enterprise value to EBITDA.


P/BP/SP/EEV/EBITDASumFinal
Rank
TTD.21
1
11.1
1
103
2
43
1
51
RAMP.03
5
8.1
2
173
1
16
2
102
NLSN.03
4
1.3
4
negative
0
9
5
133
JCDXF.02
6
1.6
3
23
3
13
3
155
IPG.04
3
.8
5
13
4
9
4
166
GRPN.06
2
.7
6
negative
0
7
6
144
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 for P/S but you have to exclude RAMP as well as TTD.  IPG PE ratio is good, JCDXF is acceptable and TTD and RAMP is very expensive.  From an EV/EBITDA perspective, GRPN, IPG and NLSN are attractive.  JCDXF is about average, RAMP is becoming more expensive and TTD is very expensive.

Taking it all together, IPG offers the best value.

Profitability

We'll look at six measures for the profitability factor:
  • gross profit to assets
  • net income margin
  • 5 year average pre-tax return on assets
  • 3 year average return on equity
  • operating income margin
  • free cash flow yield.


GP/ANM5 YR Avg
Pre-Tax ROA
3 Yr Ave
ROE
OMFCFSumRank
TTD.32
4
.18
6
.08
6
.07
4
.22
6
.01
2
286
RAMP.37
5
.03
3
.00
2
-.03
2
.04
2
.02
4
183
NLSN.20
3
-.11
1
.03
3
.01
3
.17
5
.06
5
204
JCDXF.15
2
.07
5
.04
4
.09
5
.08
3
-.01
1
204
IPG.08
1
.07
4
.06
5
.28
6
.10
4
.01
3
23

5
GRPN.76
6
.00
2
-.03
1
-.21
1
.02
1
.06
6
172

TTD had the best profitability results followed by IPG.

What I think


My instinct is to be more defensive given the declining momentum.  I'd like a healthy company with a good dividend and IPG fits the profile.  It's dividend is good.  It's profitability factors are appealing and its good value.  On the downside, its momentum is poor and its quality isn't standout.  However, I could live with those factors.

If You Just Want to Know The Highest Score

Here are the results in tabular form.

Price
Momentum
QualityGrowthIncomeValueProfitabilitySumFinal Rank
TTD646016235
RAMP565023214
NLSN111534151
JCDXF232454203
IPG324665266
GRPN453042182

Look at that, IPG has the highest score.  I like it.  I'm going to watch how it does, maybe take a small position.

Thursday, June 6, 2019

Factor-Based Analysis on Mid Cap Advertising/Marketing Firms, Part 2

fundamental analysis

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/AFLSumRank
TTD.98
1
76%
6
18%
6
43%
1
0%
6
204
RAMP.12
5
49%
5
3%
3
76%
5
23%
5
236
NLSN.47
2
47%
3
-11%
1
43%
2
73%
1
91
JCDXF.27
4
26%
2
7%
5
57%
3
36%
4
183
IPG.32
3
12%
1
7%
4
62%
4
59%
2
142
GRPN.11
6
48%
4
0%
2
161%
6
38%
3
215

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 Rank
TTD55%
6
55%
6
215%
6
-3%
2
206
RAMP30%
5
1%
3
0%
4
23%
6
185
NLSN-1%
2
-10%
1
-20%
3
-3%
1
71
JCDXF9%
3
6%
4
-32%
2
-2%
3
122
IPG23%
4
7%
5
-47%
1
0%
4
144
GRPN-7%
1
1%
2
76%
5
8%
5
133

TTD and RAMP are in the top positions.  I like TTD's results more - it's obviously higher than RAMP's but the individual components are also showing well, for the most part.

Tomorrow we'll cover income, value and profitability.

Wednesday, June 5, 2019

Factor Based Analysis, Mid Cap Adv/Mkt - Part 1

investment analysis looking for a gem
Ya, we're excited too.

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 Cap
Trade Desk, Inc. Class A(TTD:XNAS)$198.818.8429B
LiveRamp Holdings, Inc.(RAMP:XNYS)$51.383.4986B
Nielsen Holdings PLC(NLSN:XNYS)$22.738.0804B
Jcdecaux SA(JCDXF:OOTC)$27.805.9161B
Interpublic Group of Companies, Inc.(IPG:XNYS)$21.228.1952B
Groupon, Inc. Class A(GRPN:XNAS)$3.532.0050B

  Analysis Factors

This analysis will look at six factors:
  • Price Momentum
  • Quality
  • Growth
  • Income
  • Value
  • Profitability.

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.


LongMediumShort
Market14%9%-4%
Sector (proxy S&P industrials)5%6%-6%
The conclusion I draw from this is to proceed with caution, as momentum appears to slowing and possibly reversing.
Let's look at all the individual stocks next.  I'm looking at the same long and medium term momentum measures, the short term measure is the price change less the 10 week moving average.  The chart below shows the value each stock calculated for the measure and below that its relative ranking compared to the group.  The higher the number, the better its rank.



LongMediumShortSumFinal Rank
TTD261%
6
159%
6
-2%
5
176
RAMP96%
5
99%
5
-8%
3
135
NLSN-41%
1
-15%
2
-9%
2
51
JCDXF-17%
2
3%
4
-10%
1
72
IPG-15%
3
2%
3
-4%
4
103
GRPN17%
4
-27%
1
0%
6
114
TTD had the best relative momentum score and definitely impressive results from an absolute perspective.  RAMP 's are good too.  Both are showing short term momentum weakness.

Tomorrow I'll review the quality and growth factors.