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.

Sunday, February 3, 2019

NextEra - Good Dividend in the Renewable Energy Sector


  • 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.
Good Dividend Stock
If you want in on renewable energy, we recommend NextEra.

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 companies in the alternative energy sector.  It looks at momentum, quality, growth, income, value and profitability.

Each factor includes several metrics.  Each metric is rated from 1 to 7 with 7 representing the best result.  The sum of each metric rank is calculated and the result is ranked again.  The highest ranking indicates the company with the best result for the particular factor.

The Peer Group


Here is the group of candidates and a brief overview of each one.

Stock Name (Symbol)Last Price
Jan 28, 2019
Market Cap
Northland Power Inc.(NPIFF:OOTC)$17.803.1554B
TerraForm Power, Inc. Class A(TERP:XNAS)$11.392.3821B
NextEra Energy Partners LP(NEP:XNYS)$41.382.3214B
Ormat Technologies, Inc.(ORA:XNYS)$55.592.8169B
Pattern Energy Group, Inc. Class A(PEGI:XNAS)$21.042.0639B
Innergex Renewable Energy Inc.(INGXF:OOTC)$10.881.4444B
Atlantica Yield plc(AY:XNAS)$18.491.8530B

Northland Power Inc. develops, builds, owns, and manages wind facilities. It operates through the following segments: Offshore Wind, Thermal, On-shore Renewables, and Other. The Offshore Wind segment comprises Gemini, Nordsee One, and Deutsche Bucht projects. The Other segment includes investment income and administration activities. The company was founded by James C. Temerty in 1987 and is headquartered in Toronto, Canada.

TerraForm Power, Inc.  acquires renewable energy assets. It operates through Solar and Wind segments. The Solar segment consists of Distributed Generation, North America Utility, and International Utility. The Wind segment comprises of Northeast Wind, Central Wind and Hawaii Wind. The company was founded on January 15, 2014 and is headquartered in Bethesda, MD.

NextEra Energy Partners LP  acquires, manages and owns contracted clean energy projects with long-term cash flows. It owns interests in wind and solar projects in North America, as well as natural gas infrastructure assets in Texas. The company was founded on March 6, 2014 and is headquartered in Juno Beach, FL.

Ormat Technologies, Inc. is a holding company in the geothermal and recovered energy power business. It operates through the Electricity and Products segments. The Electricity segment develops, builds, owns, and operates geothermal and recovered energy-based power plants in the U.S. and geothermal power plants in other countries.  It provides energy storage, demand response, and energy management related services through its Viridity business. The Product segment designs, manufactures, and sells equipment for geothermal and recovered energy-based electricity generation and remote power units.  It also provides services related to the engineering, procurement, construction, operation and maintenance of geothermal and recovered energy-based power plants. The company was founded in 1965 and is headquartered in Reno, NV.

Pattern Energy Group, Inc. is an independent power company, which owns and operates wind and solar power facilities sales contracts. It operates through the following geographical segments: United States, Canada, and Chile. The company was founded on October 2, 2012 and is headquartered in San Francisco, CA.

Innergex Renewable Energy, Inc. develops, acquires, owns and operates run-of-river hydroelectric facilities, wind farms, solar photovoltaic farms and geothermal power generation plants. The company conducts operations in Canada, the United States, France and Iceland. It operates through the following segments: Hydroelectric Generation, Wind Power Generation, Solar Power Generation, and Site Development. The company was founded on October 25, 2002 and is headquartered in Longueuil, Canada.

Atlantica Yield Plc owns, manages and acquires renewable energy.  It specializes in Renewable Energy, Natural Gas, Electrical Transmission and Water. The Renewable Energy segment includes production electricity from solar power and wind plants. The Natural Gas segment is the production of electricity and steam from natural gas. The Electric Transmission segment relates to the operation of electric transmission lines. The Water segment is responsible for desalination plants related activities. It operates through the following geographical segments: North America; South Africa; and Europe, the Middle East and Africa. The company was founded on December 17, 2013 and is headquartered in Brentford, United Kingdom.

The Analysis


The following section describes the analysis process and objective observations of the results.  Head down to the "Putting It All Together" if you just want to read the synthesis and why I think NEP is the strongest contender of the group.

Market & Sector Price Momentum


Let's start by getting a visual perspective on how the market and sector have been performing.




A quick calculation reveals that the broader market increased about 30% compared to the utility sector increased 22% with less volatility over this randomly chosen time period.

Momentum




Longer term -
% price change over 2 years
Medium term -
12 month less 1 month price change
Short term -
Price less three month moving average
Market16%-11%-1%
Utilities Sector10%4%-1%


 Looking at the market over the longer time frame, momentum is positive. Over the medium term, there's a wave of negative momentum rolling through but it looks to be slowing down, as the short term price momentum is barely negative.

In the utilities sector, we see strong positive price momentum weakening as we move into the medium term, yet still remaining positive. In the short term the momentum is weakly bearish, similar to the market.

Price Momentum of the Group


Let's look at the price momentum for the group. We're using the following three metrics that reflect a long, medium and short-term perspective:

  1. Percentage price change over two years,
  2. 12 month less one month price change,
  3. Price less 10 week moving average change.


Long-term
Value and rank
Medium term
Value and rank
Short term
Value and rank
SumFinal
Rank
NPIFF-1%
2
-14%
3
7%
6
114
TERP-4%
1
3%
6
1%
3
103
NEP31%
6
-4%
5
-5%
1
125
ORA4%
4
-25%
1
4%
4
92
PEGI7%
5
-10%
4
5%
5
146
INGXF3%
3
-18%
2
11%
7
125
AY nana-4%
2
21

PEGI got the best overall score, however each investor should consider other momentum profiles for ones that might be more suited to their investing objectives.

I find NEP to be more attractive with its very strong long term momentum. It is negative in the medium and short term and be aware that the short-term is more negative than the medium term, possibly indicating the negative momentum could be accelerating.

Quality


There are six metrics for quality:

  1. Earnings volatility (measured as the standard deviation of six years of earnings),
  2. Gross margin (gross profit divided by sales),
  3. Net margin (net profit divided by sales)
  4. Total asset turnover (sales divided by total assets),
  5. Financial leverage (debt as a percentage of total capital)
  6. Operating leverage 


Earnings Volatility
Value & Rank
Gross Margin
Value & Rank
Net Margin
Value & Rank
Asset Turnover
Value & Rank
Financial Leverage
Value & Rank
Operating Leverage
Value & Rank
SumFinal
Rank
NPIFF.54
6
.63
6
.20
5
.13
6
.84
1
1.55
6
305
TERP1.51
2
.28
2
-.37
1
.10
4
.6
4
10.62
2
151
NEP1.24
3
.40
4
.35
7
.08
1
.38
7
1.86
4
264
ORA2.44
1
.39
3
.25
6
.27
7
.41
6
1.26
7
305
PEGI.81
5
.15
1
-.20
2
.09
3
.45
5
10.96
1
172
INGXF.37
7
.53
5
-.20
3
.09
2
.83
2
1.76
5
243
AY.81
4
.66
7
-.10
4
.10
5
.76
3
2.23
3
264

 NPIFF and ORA tied for the highest quality score, followed by NEP and AY.

It's important to note that the lower the leverage (both financial and operational) the better the score.  That's the quality consideration, but that isn't necessarily what you might want as an investor.

My opinion is some leverage is good.  Looking at the top four candidates, they all had a decent blend of leverage.

Growth


There are four metrics for the factor growth:

  1. Total revenue change over 1 year
  2. EBITDA change over 1 year
  3. Free cash flow change over 1 year
  4. Gross margin change over 1 year


Revenue d
Value & Rank
EBITDA d
Value & Rank
FCF d
Value & Rank
GM d
Value & Rank
SumFinal
Rank
NPIFF28%
7
38%
7
78%
6
5%
7
277
TERP-6%
2
-28%
1
-60%
4
-24%
3
102
NEP-4%
3
-8%
3
427%
7
-1%
4
17

6
ORA5%
5
4%
6
-286%
1
-5%
4
154
PEGI9%
6

2%
4
9%
5
-49%
2
165
INGXF-12%
1
-12%
2
-114%
2
1%
6
113
AY4%
4
3%
5
nana91

NPIFF is clearly the stock with the best growth.

Income


I looked at three income factors:
  1. Dividend yield
  2. Dividend/share 3 year CAGR
  3. Dividend/share 1 year change.
Not every share offers a dividend, and dividends aren't important to every investor.  Weight this factor as you will.

Here's the results:



Dividend Yield
Value & Rank
Dividend/share 3yr CAGR
Value & Rank
Dividend/share 1yr d
Value & Rank
SumFinal
Rank
NPIFF5%
4
0%
3
3%
3
105
TERP0%
1
na

na11
NEP4%
3
10%
5
15%
5
136
ORA1%
2
16%
6
-21%
1
93
PEGI8%
7
5%
4
6%
4
157
INGXF6%
6
-5%
2
-11%
2
104
AY5%
5


52

PEGI has the best score for income.

Value


We'll look at four value factors:

  1. Price to book
  2. Price to sales
  3. Price to earning
  4. Enterprise value over EBITDA.


PB
Value & Rank
PS
Value & Rank
PE
Value & Rank
EV/EBITDA
Value & Rank
SumFinal
Rank
NPIFF.05
1
3.1
5
28
1
12
6
134
TERP.01
6
2.0
7
-3
na
18
3
166
NEP.01
5
4.2
4
14
3
21
2
14

5

ORA.02
3
4.7
2
19
2
13
5
123
PEGI.02
4
4.9
1
-106
na
24
1
6

1

INGXF.04
2
4.3
3
-38
na
16
4
92
AY.01
7
2.1
6
-16
0
11
7
207


AY has the highest score for value, however it has negative earnings. Some investors might wish to confine their search to companies with positive earnings, in which case NEP would be the best candidate.

Profitability


There are six profitability factors:
  1. Gross profits to assets
  2. Net profit margin
  3. 5 year average pretax return on assets
  4. 3 year average ROE
  5. Net operating income margin
  6. Free cash flow yield

Here are the results:



GP/A
Value & Rank
NPM
Value & Rank
5yr avg ROA
Value & Rank
3yr avg ROE
Value & Rank
Net OIM
Value & Rank
FCF Yield
Value & Rank
SumFinal
Rank
NPIFF.08
6
.20
5
.02
5
.12
7
.44
7
-.09
3
336
TERP.03
2
-.37
1
-.02
1
-.19
1
.04
2
-.18
2
91
NEP.03
3
.35
7
.03
6
.04
5
.38
5
.01
5
315
ORA.10
7
.25
6
.05
7
.12
6
.30
3
-.01
4
336
PEGI.01
1
-.20
2
-.01
3
-.03
3
.02
1
.02
6
162
INGXF.05
4
-.20
3
-.01
2
-.05
2
.44
6
-.24
1
183
AY.06
5
-.10
4
0.00
4
-.02
4
.37
4
.16
7
284

NIPFF and ORA are tied for the most profitable companies.

Putting It All Together


Let's summarize what we've learned.  This is more than the score, this is interpreting the results and bringing our personal observations and preferences into the mix.

The utilities sector displays less price volatility than the overall market and is showing less negative price momentum.

PEGI received the best momentum score, but I preferred the NEP's results with the very strong long term momentum. It was bearish in the medium & short term, but it was fairly weak. However, the trend in it's momentum could be deteriorating.

AY had the highest quality score, but looking at the next two, NEP and NPIFF (with a tied score), I like the look of NEP. Some leverage is a good thing, but maybe not a high degree in both operating and financial. NPIFF is highly leveraged in both categories, but NEP only in operating. It was actually the most conservative from a financial leverage perspective.

NPIFF is showing excellent growth results. It came in number one and I like it more than I like the next highest growth company (NEP) as it didn't grow consistently across all categories.

In the income cagtegory, PEGI is the best. NEP is good too, but I want to look at income in conjunction with profitability, which we'll get to shortly.

AY offers the best value, but if you need positive earnings, NEP is the obvious choice. Note, in the world of factor investing, value tends to outperform growth over the long term. NEP scores well in both.

As mentioned, NPIFF and ORA are the most profitable. PEGI, with the best income score was the second worst company from a profitability perspective. NEP, which scored well in income, is actually the second most profitable company (after the two that tied). If income is an important consideration then NEP is a better bet.

NEP didn't come out with the top score in any of the categories, but when I look deeper into the numbers, it's appealing to me as an investor and I find interesting that it performed well across most of the factors interesting.

Final Notes


This model was created in INVRS.  Create anything you want in INVRS, have fun doing it and get insight no one else has.  Sign up for a free trial today.

Wednesday, January 9, 2019

Omnicell - No Stand-Out Features

No Compelling Hypothesis

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, net profit margin, the five-year average pre-tax return on assets, the three year return on equity, net operating income margin and the free cash flow yield.

Each metric is ranked from highest to lowest with the best performing stock earning the highest score.  The scores for each metric are summed and re-ranked.  The stock with the highest ranking is the best performing company for that particular factor.

Overview:

Omnicell, Inc. engages in the provision of automation and business analytics software solutions for patient-centric medication and supply management. It operates through Automation and Analytics, and Medication Adherence segments. The Automation and Analytics segment designs, manufactures, and sells medication and supply dispensing systems, pharmacy inventory management systems, and related software. The Medication Adherence segment includes consumable medication blister cards, packaging equipment, medication synchronization platform, and ancillary products and services. The company was founded by Randall A. Lipps in September 1992 and is headquartered in Mountain View, CA.
Founded: 1992
Number of Employees: 2350
Headquarters: Mountain View US
CEO: Randall A. Lipps

Peer Group:

Stock Name (Symbol)Last PriceMarket Cap
HMS Holdings Corp.(HMSY:XNAS)$28.232.3692B
National Research Corporation Class A (NRCIA:XNAS)$38.67957.55447M
Allscripts Healthcare Solutions, Inc.(MDRX:XNAS)$9.461.6527B
Stericycle, Inc.(SRCL:XNAS)$36.603.3160B
Syneos Health Inc, Class A (SYNH:XNAS)$38.243.9473B
Healthcare Services Group, Inc.(HCSG:XNAS)$39.462.9117B
CompuGroup Medical SE Unsponsored ADR(CMPUY:OOTC)$29.401.4569B
Omnicell, Inc.(OMCL:XNAS)$60.482.3959B

Market and Sector Price Momentum Analysis

Let's start by getting a visual perspective on how the market and sector have been performing.

It's been quite a volatile year, coming off a couple years of pleasant growth. 

Let's look next at market and sector momentum.


Longer Term -
% Price Change over Two Years
Medium Term -
12 Month Less 1 Month Price Change
Short Term -
Price Less 3 Month Moving Average
Market - S&P 50011.03% (bullish)3.2% (weakly bullish)-11.07% (bearish)
Sector - S&P Health Care Select Sector23.91% (strongly bullish)14.69% (bullish)-8.14% (bearish)

It looks like both the market and the sector are at an inflection point with momentum possibly changing from positive to negative.  We'll keep this trend in mind as we evaluate the opportunity,

Price Momentum

Let's look at the price momentum for the group.  We're using the following three metrics that reflect a long, medium and short-term perspective:
  1. Percentage price change over two years,
  2. 12 month less one month price change,
  3. Price less 3 month moving average change.


Long Term -
% Price Change over Two Years
/Rank
Medium Term -
12 Month Less 1 Month Price Change
/ Rank
Short Term -
Price Less 3 Month Moving Average
/ Rank
SumFinal Rank
HMSY55%/6111%/8-14%/3176
NRCIA104%/87%/51%/8218
MDRX-7%/3-30%/1-9%/592
SRCL-52%/1-29%/2-18%/141
SYNH-27%/219%/6-17%/2103
HCSG1%/5-10%/3-8%/6144
CMPUY0%/40%/40%/7155
OMCL78%/759%/7-12%/4187

NRCIA had the best price momentum, OMCL has the second best score, but it is demonstrating a pattern similar to what we saw in the market and sector with a possible change in momentum turning from positive to negative.

Quality

There are five metrics for quality:
  1.   Earnings volatility (measured as the standard deviation of six years of earnings),
  2.   Gross margin (gross profit divided by sales),
  3.   Net margin (net profit divided by sales)
  4.   Total asset turnover (sales divided by total assets),
  5.   Financial leverage (debt as a percentage of total capital)


SD of Earnings
/ Rank
GM
/ Rank
NM
/ Rank
Asset Turnover
/ Rank
Financial
Leverage
/ Rank
Sum
/ Final
Rank
HMSY14%/830%/38%/753%/428%/628/7
NRCIA21%/754%/819%/892%/71%/838/8
MDRX44%/341%/6-9%/143%/250%/315/2
SRCL116%/241%/51%/351%/349%/417/3
SYNH131%/117%/2-1%/237%/150%/28/1
HCSG28%/414%/15%/5273%/88%/725/5
CMPUY21%/635%/45%/665%/561%/122/4
OMCL27%/545%/73%/473%/629%/527/6

NRCIA got the highest score for quality and OMCL came in third.

Growth

There are five metrics for the factor growth:
  1. Total revenue change over 1 year
  2. EBITDA change over 1 year
  3. Free cash flow change over 1 year
  4. Gross margin change over 1 year
  5. Number of year over year growth in earnings.


Revenue d
Over 1 Year 
/ Rank
EBITDA d
Over 1 Year
/ Rank
FCF d
Over 1 Year
/ Rank
GM d
Over 1 Year
/ Rank
Number of
Years Growth
/ Rank
(max score 6)
Sum
/ Final
Rank
HMSY6%/3-2%/3-8%/4-0%/64/723/5
NRCIA7%/510%/63%/6             -0%/7*3/630/7
MDRX17%/610%/7-0%/5-1%/52/528/6
SRCL1%/1-65%/1-11%/3-1%/43/615/3
SYNH66%/846%/898%/8-23%/1*3/631/8
HCSG19%/78%/5-94%/1-4%/25/823/5
CMPUY7%/42%/456%/74%/84/730/7
OMCL3%/2-21%/2-74%/2-1%/3 5/817/4

OMCL got the second to worst score.  SYNH got the best.

Income

Most of these companies including OMCL don't offer dividends so we won't be looking at this factor.

Value

We'll look at five value factors:
  1. Enterprise value over EBITDA
  2. Price to book
  3. Price to earnings
  4. Price to sales
  5. Price to theoretical price (as calculated using the Ohlson Clean Surplus (OCS), for more information on the valuation tool, please review this article).
Here are the results:


EV/EBITDA
/ Rank
P/B
/ Rank
P/E
/ Rank
P/S
/ Rank
P/TP
/ Rank
Sum
/ Final
Rank
HMSY15/8.04/560/42.8/34/424/6
NRCIA41/1.3/173/314/18/28/2
MDRX17/6.02/6na**/01.5/710/120/4
SRCL35/3.011/8513/11.6/62/826/7
SYNH16/7.014/7na**/01.2/83.1/628/8
HCSG29/4.07/233/62.1/53.3/522/5
CMPUY27/5.05/341/54.9/22.8/722/5
OMCL36/2.04/4114/22.6/46/315/3

OMCL is the second most expensive.

Profitability

There are six profitability factors:
  1. Gross profits to assets
  2. Net profit margin
  3. 5 year average pretax return on assets
  4. 3 year average ROE
  5. Net operating income margin
  6. Free cash flow yield
 Here are the results:


GP/Assets
/ Rank
NPM
/ Rank
5 yr avg
Pretax ROA
/ Rank
3 yr avg
ROE
/ Rank
Net
OIM
/ Rank
FCF
Yield
/ Rank
Sum
/ Final
Rank
HMSY16%/28%/75%/46%/410%/63%/427/5
NRCIA50%/819%/824%/825%/829%/80%/242/8
MDRX18%/3-9%/1-3%/1-6%/12%/314%/817/1
SRCL21%/41%/36%/55%/30%/111%/723/4
SYNH6%/1-5%/23%/224%/76%/45%/622/3
HCSG38%75%/517%/723%/67%/5-2%/131/6
CMPUY23%/55%/67%/619%/514%/74%/534/7
OMCL33%/63%/45%/34%/21%/20%/320/2

OMCL is the second least profitable, NRCIA is the most profitable.

Summary

OMCL is not demonstrating strength in any of the factors.  It came in third in quality and was second from the bottom in growth, value and profitability.  Its best showing was in price momentum in the number two position, but that number needs to be looked at in context.  In all levels of analysis - market, sector and security - it looks like momentum is changing from positive to negative.

Given these results, there is no investment hypothesis for OMCL at this time.

Disclaimer

Part of intelligent investing involves taking on risk levels appropriate to one's circumstances.  We don't know what yours are and this analysis should not be construed as investment advice.  INVRS, its parent company, its officers, directors and employees cannot be held responsible for any investment decisions you make.

Analysis Notes

* SYNH and NRCIA only had five years of EPS data.
**Negative number