tag:blogger.com,1999:blog-91427928688280647692019-12-09T04:48:49.555-05:00The INVRS BlogInvestment Analysis Using INVRS Software.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.comBlogger55125tag:blogger.com,1999:blog-9142792868828064769.post-72590992654130423542019-11-28T12:56:00.000-05:002019-11-28T12:56:22.189-05:00Five Good Canadian Dividend Stocks <h2>Five Good Canadian Dividend Stocks</h2><h3>Analysis Methodology</h3>Refer to the blog post of November 27, 2019 for a description of the method used.<br /><h3>Candidates</h3>As of November 27, 2019, the following companies from the universe of all TSX stocks have a dividend yield between 3.54% and 11.80% and have increased their dividend consecutively for at least five years:<br /><ul><li>AI</li><li>AQN</li><li>BCE</li><li>CGX</li><li>CM</li><li>CPX</li><li>CU.X</li><li>CUP.U</li><li>EIF</li><li>ENF</li><li>FCD.UN</li><li>INE</li><li>IPL</li><li>LB</li><li>MFC</li><li>NA</li><li>PEGI</li><li>PPL</li><li>RY</li><li>T</li><li>TCL.A</li><li>TCL.B</li><li>TD</li><li>UNS</li></ul><h3>Analysis</h3><h4>Dividend Coverage</h4><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/838/2019-11-27-15-40-21.html?0.7252915241358708" width="700"></iframe><br />We're looking for companies with positive coverage and less than 75%.<br />Possible companies include:<br /><ul><li>RY</li><li>TCL.A</li><li>TCL.B</li><li>NA</li><li>UNS</li><li>MFC</li></ul><h4>Valuation</h4><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/839/2019-11-27-15-40-53.html?0.6962909797512948" width="700"></iframe><br />We're looking for companies equal to or greater than one.<br />Possible companies include:<br /><ul><li>UNS</li><li>TCL.A</li><li>TCL.B</li><li>CGX</li><li>ENF</li><li>IPL</li><li>LB</li><li>CU.X</li><li>MFC</li><li>CM</li><li>TD</li><li>T</li><li>PPL</li><li>RY</li><li>BCE</li></ul><h4>Total Return</h4><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/837/2019-11-27-15-33-25.html?0.85320589265384" width="700"></iframe><br />We're going to use a sweet spot criteria of greater than 10% and less than 20%. Companies include:<br /><ul><li>AQN</li><li>ENF</li><li>MFC</li><li>IPL</li><li>CU.X</li><li>TD</li><li>TCL.A</li><li>T</li><li>TCL.B</li><li>CPX</li><li>FCD.UN</li><li>RY</li><li>CM</li><li>PPL</li><li>NA</li><li>CGX</li><li>UNS</li><li>LB</li><li>EIF</li><li>BCE</li></ul><h4>The Trifecta</h4>From a beginning portfolio 99 companies the final five that occupy the centre of this vend diagram are:<br /><ul><li>RY</li><li>TCL.A</li><li>TCL.B (low trading volume)</li><li>UNS</li><li>MFC</li></ul>I bought all of them accept for TCL.B today. So fun to run.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-16848205842672901502019-11-27T16:42:00.001-05:002019-11-27T16:48:50.429-05:00Dividend Analysis Framework<h2>Dividend Analysis Framework Using INVRS</h2><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-n97V7vFkmYA/Xd7qVFwDzUI/AAAAAAAAA8g/Mv9nP7nTmcwTTtbZhFbbwiC1N-ztzPI5ACLcBGAsYHQ/s1600/AdobeStock_297239383.jpeg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Passive Income" border="0" data-original-height="1067" data-original-width="1600" height="426" src="https://1.bp.blogspot.com/-n97V7vFkmYA/Xd7qVFwDzUI/AAAAAAAAA8g/Mv9nP7nTmcwTTtbZhFbbwiC1N-ztzPI5ACLcBGAsYHQ/s640/AdobeStock_297239383.jpeg" title="Dividend Investig" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">A dividend investing framework for creating passive income.</td></tr></tbody></table><br /><br />A complete dividend analysis can be easily conducted in INVRS. Some set up is required, but once complete you can run the analysis at will, with only small tweaks necessary to reflect your personal preferences and changing market conditions.<br /><br /><br />1. Canadian Analysis: Use INVRS to calculate the current dividend yield of the TSX 60 (average dividend yield of the 60 member stocks). US analysis: Use INVRS to calculate the average dividend yield of the 500 member stocks.<br /><br /><i>More details:</i><br /><ol><li><i>Create a portfolio of the 60 Canadian companies and/or a portfolio of the 500 US Companies. </i></li><li><i>Create a template using the dividend yield metric of your choice. Options are <b>Dividend Yield Daily</b> (dividends per share / most recent last close price), <b>Forward Dividend Yield</b> (this is a calculation you create - choose the Dividend Rate (most recent dividend multiplied by the number of times the company pays a dividend) and divide by the Current Price,</i><i><b>Dividend</b></i><i><b> Yield Fiscal</b> or <b>Dividend Yield Security </b>(latter two are calculated using the fiscal period end price). I like Dividend Yield Daily.</i></li><li><i>Click "Add/Update Formula" and write avg(A), which will give you the average dividend yield of all the stocks in the portfolio.</i></li><li><i>Run the portfolio against the template to get the average.</i></li></ol>2. Create a screen to identify all Canadian or US companies in the following dividend yield range:<br /><ul><li>Floor: 1 to 1.5 x the average dividend yield</li><li>Ceiling: 5 x the average dividend yield</li></ul><div><i>More details:</i></div><div><i>Add two separate filters. The first greater than 1.5 x the average dividend yield and the other less than 5 x the average dividend yield. You may wish to use the same dividend yield as you used for the market average.</i><br /><i><br /></i>3. Run the screen and add the candidates to a portfolio. </div><div><i><br /></i></div><div>4. The portfolio is further screened to exclude securities that have not experienced at least 5 consecutive years of dividend growth.<br /><br /><i>More details:</i><br /><i>Create a template with five years (Y to Y-5) of dividends per share data. Write five "if" formulea that assigns the value "1" if the dividends per share is greater than the year previous to it and "0" otherwise (eg. if(A>B,1,0)). Sum the score of the five "if" statements and if the sum is less than five remove the stock from the portfolio.</i><br /><br /></div><div>5. From this group, the following characteristics are examined:</div><div><ul><li>Dividend coverage - calculated as the quotient of dividends per share and free cash flow per share, the sweet spot is greater than zero and less than 75%.</li><li>Forward dividend yield is greater than the five year average. This is our valuation proxy and can be calculated by dividing the forward dividend yield by the five year average dividend yield. If is greater than one, then the it qualifies.</li><li>Total yield - calculated as the sum of the forward dividend yield and the five year growth rate, however look also at the growth trend. Is it declining, constant or accelerating? If it is declining significantly, the 5 year growth rate might not be appropriate. The total yield number is a matter of preference. The highest total yield possible might not be ideal, as very high yields indicate greater risk. The sweet spot may be between 9% and 16%.</li></ul><div>You are looking for companies that check the boxes on all three characteristics. If they do, they are good options for your dividend portfolio.<br /><br /><i><b>Acknowledgement</b></i><br /><br />I wish to thank David Solyomi, author, economist and dividend investor. His website is <a href="https://thefalconmethod.com/" target="_blank">The Falcon Method.</a> I learned these concepts from him, any errors in interpretation are my own.<br /><br /></div></div>Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-58131202314866292082019-11-08T15:10:00.000-05:002019-11-08T15:10:37.000-05:00Huntington Ingalls Industries Dividend Analysis<h2>This is a Dividend Analysis on HII</h2><h3>Pre-Amble</h3>As you may or may not be aware, people can request an analysis on the stock of their choice on INVRS. Sometimes something very interesting comes of of it and I want to present my finding on the blog. However, I need to be respectful of the person who requested the stock and give them "alone" time with the information. <br /><br />In this case, during the period of silence, the company released quarterly earnings which caused the price of the shares to pop approximately $17. I re-ran all of the analysis components to reflect the new numbers, and the company still has some favourable elements, but the weak points have to be looked out more carefully, especially since the margin of safety is not what it was earlier in the week.<br /><h4>Company Background</h4>Huntington Ingalls Industries, Inc. engages in the shipbuilding business. It operates through the following business segments: Ingalls, Newport News, and Technical Solutions. The Ingalls segment develops and constructs non-nuclear ships, assault ships, and surface combatants. The Newport News segment designs, builds, and maintains nuclear-powered ships which include aircraft carriers and submarines. The Technical Solutions segment provides professional services, including fleet support, integrated missions solutions, nuclear and environmental, and oil and gas services. The company was founded on August 4, 2010 and is headquartered in Newport News, VA.<br />Founded: 2010<br />Number of Employees: 40000<br />Headquarters: Newport News US<br /><h3>The Models Used</h3>This is a dividend analysis that looks at four areas in order to evaluate investment merit:<br /><ul><li>Number of years of uninterrupted dividend growth,</li><li>Total return,</li><li>Dividend coverage,</li><li>Relative valuation,</li></ul>We're running this analysis against a portfolio of 5 stocks. The other companies selected were chosen because they were in a related industry (Aerospace & Defense) and/or sector (Electronic Technology) and have a market cap close to HII's (10.3524B).<br /><br /><span style="font-size: 17.5px; font-weight: 700;">Peer Group:</span><br /><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price</td><td>Market Cap</td></tr><tr><td>HEICO Corporation Class A(HEI/A:XNYS)</td><td>$94.30</td><td>12.6506B</td></tr><tr><td>HEICO Corporation(HEI:XNYS)</td><td>$121.43</td><td>16.2902B</td></tr><tr><td>FLIR Systems, Inc.(FLIR:XNAS)</td><td>$52.97</td><td>7.1061B</td></tr><tr><td>Elbit Systems Ltd(ESLT:XNAS)</td><td>$164.50</td><td>7.0329B</td></tr></tbody></table><h4>Why Are We Running The Model Against a Portfolio?</h4>We could just get the score for your target company and it would be somewhat informative. But when we run it against a portfolio of peers, that score gets much more illuminating. <br />INVRS is designed for peer-based analysis. We believe (and we're not alone) that analyzing a stock without a basis of comparison is like trying to understand the world with blinders on - a narrow perspective that can lead to all sorts of false assumptions and missed opportunities . The ideal is to get as broad a perspective as possible - a panorama across data points, across time and across peers. We call this three-dimensional analysis.<br /><br /><h3>The Analysis</h3><h4>Years of Dividend Growth</h4>This analysis was initially on a larger group of companies but the group was winnowed down to those that had at least five years of uninterrupted dividend growth. Of the remaining companies, below is the number of years each company has grown their dividends per share year over year.<br /><br />HII - 7 years<br />HEI/A - 12 years<br />HEI - 12 years<br />FLIR - 9 years<br />ESLT - 8 years at least<br /><h4>Total Return</h4>For total return we're using the sum of the forward dividend and the 5 year growth rate of dividends.<br /><br />Let's see the results.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/764/2019-11-08-06-56-46.html?0.03535845702885376" width="700"></iframe> <br /><br /> HII has a 48% total return - a 1% dividend yield plus a 5 year growth rate of 47%. However, HII's dividend yield growth is decelerating. Stability is more desirable than stratospheric numbers. HII's 3 year return is 21%. HEI and HEI/A have a 5 year and 3 year return of 15% and 14% respectively. FLIR's 3 year return is higher than its 5 year - 14% to 12% and ESLT is 7% and 8% (3 year and 5 year).<br /><br />This is weakest feature of HII. HEI or HEI/A are better choices for this factor.<br /><h4>Dividend Coverage</h4>We want to see the dividend 75% or less of the free cash flow. Here's a graph of the results.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/759/2019-11-08-11-49-00.html?0.10541120823048145" width="700"></iframe><br />They all have good coverage except for ESLT.<br /><h4>Relative Value</h4>This is a dividend analysis so our basis of value is going to be relative to dividend yield. The calculation we're using divides the forward dividend yield by the five year average dividend yield.<br />Here's the results.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/762/2019-11-08-14-35-22.html?0.7687775229749647" width="700"></iframe><br />Even after it's big price spike yesterday, HII is still trading at a relative discount to it's 5 year history.<br /><h3>Conclusion</h3>The weakest part of this story is HII's total return. I would rather see a higher dividend yield say in the range of 3 to 5% and a steadier growth rate and especially not one that is declining. <br /><br />There are a lot of stocks out there. HII is definitely interesting, but I prefer to wait for the beautiful conjunction of all four factors.<br /><br /><h3>Disclaimer</h3><br />This is not intended to be a comprehensive analysis and we cannot be held responsible for any investment decisions you make.<br /><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-15530933839214011062019-10-23T15:24:00.000-04:002019-10-23T15:32:59.691-04:00UFS is Currently a Strong Dividend Investment<div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-qsloHSM08To/XbCqsqh5AOI/AAAAAAAAA78/syW_JTL9fKACpv0p-zcv7o4_xGzdK2iFACLcBGAsYHQ/s1600/dividend.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="$UFS is a good dividend investment" border="0" data-original-height="387" data-original-width="1600" height="154" src="https://1.bp.blogspot.com/-qsloHSM08To/XbCqsqh5AOI/AAAAAAAAA78/syW_JTL9fKACpv0p-zcv7o4_xGzdK2iFACLcBGAsYHQ/s640/dividend.jpeg" title="Dividend Investing" width="640" /></a></div><br /><br />Domtar Corp. engages in the design, manufacturing, marketing, and distribution of fiber-based products, which includes communication papers, specialty and packaging papers and absorbent hygiene products. It operates through the following segments: Pulp and Paper, and Personal Care. The Pulp and Paper segment is involved in the design, manufacturing, marketing, and distribution of communication, specialty and packaging papers, as well as softwood, fluff, and hardwood market pulp. The Personal Care segment consists of the design, manufacturing, marketing, and distribution of absorbent hygiene products. The company was founded on March 7, 2007 and is headquartered in Fort Mill, SC.<br /><br />Founded: 2007<br /><br />Number of Employees: 10,000<br /><h2>Analysis Framework</h2>We looked for industrial stocks with a dividend yield between 3.69% and 9.6% and found 70. Out of that 70 we removed any that had not increased their dividend each year for the past five years. That left a portfolio of 21 stocks. We then ran three analyses on the group: dividend coverage, value and total dividend return.<br /><h2>Results</h2><h3>Dividend Coverage</h3>We were looking for dividends to be less than 75% of free cash flow. UFS was technically the only one that qualified, although TCP was close at 76%.<br /><iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/714/2019-10-23-14-37-25.html?0.5157659464493081" width="700"></iframe> <br /><div class="separator" style="clear: both; text-align: center;"></div><h3>Value</h3>There are many ways we could look at value, but since this is a dividend analysis, we'll consider a stock to be relatively undervalued if its forward dividend yield is higher than the average of the past five years.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/715/2019-10-23-14-43-54.html?0.1344749965572294" width="700"></iframe><br />UFS has a forward dividend yield 28% higher than its average. With a forward yield of 5.21%, it's also currently above highest dividend yield for the past five years.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/716/2019-10-23-14-50-28.html?0.9663536526356906" width="700"></iframe><br /><h3>Total Return</h3>This number is an estimate comprised of the sum of the forward dividend yield and the 5 year historical dividend growth rate.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/717/2019-10-23-14-53-23.html?0.7548037345953098" width="700"></iframe><br /><div class="separator" style="clear: both; text-align: center;"></div>UFS has an appealing total return of 16%.<br /><br /><h2>Conclusion</h2>We like UFS as a dividend investment. Although the initial cutoff for the portfolio was 5 years of year over year dividend growth, UFS has actually had 10 years.<br /><h2>Disclaimer</h2>Whether or not this stock is appropriate for your portfolio, risk profile and long-term goals is not part of this evaluation. The consequences of your investment decisions are yours and yours alone. INVRS, its parent company, directors, officers and employees cannot be held responsible for any investment decisions you make.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-21498804371670727332019-10-16T09:30:00.000-04:002019-10-17T07:57:27.486-04:00Sunny CSIQ<h2></h2><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-xuXfK0SFlUk/XaXZ-_f0V-I/AAAAAAAAA7c/QZznLcUZpWMBvtWeDFwNCVJmDteRMtv0ACLcBGAsYHQ/s1600/9AdobeStock_221252758_Preview10.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Analysis of stock CSIQ" border="0" data-original-height="190" data-original-width="672" height="179" src="https://1.bp.blogspot.com/-xuXfK0SFlUk/XaXZ-_f0V-I/AAAAAAAAA7c/QZznLcUZpWMBvtWeDFwNCVJmDteRMtv0ACLcBGAsYHQ/s640/9AdobeStock_221252758_Preview10.png" title="CSIQ investment analysis" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">CSIQ: quality, value and growth.</td></tr></tbody></table><div><br /></div>Canadian Solar, Inc. engages in the manufacture of solar photovoltaic modules and a provider of solar energy solutions. It operates through the Module and System Solutions (MSS), and Energy segments. The MSS segment involves in the design, development, manufacture, and sales of solar power products and solar system kits, and operation and maintenance services. The Energy segment comprises primarily of the development and sale of solar projects, operating solar power projects and the sale of electricity. The company was founded by Shawn Qu in October 2001 and is headquartered in Guelph, Canada. <br /><br />Founded: 2001<br /><br />Number of Employees: 12,442<br /><br />Headquarters: Guelph CA<br /><h4><span style="color: inherit; font-family: inherit; font-size: 32px;">Analysis Structure</span></h4>This analysis will look at three factors for CSIQ and it's peers:<br /><ul><li>Quality of Earnings,</li><li>Valuation, and </li><li>Growth.</li></ul>We'll look at both relative and absolute numbers.<br /><br />We're running this model against a portfolio of eight stocks including CSIQ. The other companies selected were chosen because they were in a related industry (Electrical Products) and/or sector (Producer Manufacturing) and have a market cap close to CSIQ's of ($1.1121B).<br /><h4><span style="font-size: 17.5px; font-weight: 700;">Peer Group:</span></h4><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price</td><td>Market Cap</td></tr><tr><td>Xinjiang Goldwind Science & Technology Co Ltd - ADR(XNJJY:OOTC)</td><td>$11.50</td><td>889.608M</td></tr><tr><td>Vivint Solar Inc(VSLR:XNYS)</td><td>$7.08</td><td>861.063M</td></tr><tr><td>SunPower Corporation(SPWR:XNAS)</td><td>$9.97</td><td>1.4210B</td></tr><tr><td>Sunrun Inc.(RUN:XNAS)</td><td>$17.51</td><td>2.0593B</td></tr><tr><td>Canadian Solar Inc.(CSIQ:XNAS)</td><td>$18.71</td><td>1.1121B</td></tr><tr><td>Ballard Power Systems Inc.(BLDP:XNAS)</td><td>$5.10</td><td>1.1865B</td></tr><tr><td>AZZ Inc.(AZZ:XNYS)</td><td>$38.90</td><td>1.0173B</td></tr><tr><td>Atkore International Group Inc.(ATKR:XNYS)</td><td>$31.25</td><td>1.4550B</td></tr></tbody></table><h4><span style="color: inherit; font-family: inherit; font-size: 32px; font-weight: 700;">Why Are We Running The Model Against a Portfolio?</span></h4>A single value or score for our target company is somewhat informative, but when we get numbers in context by analyzing a company against a peer group, it gets much more illuminating.<br /><br />INVRS is designed for peer-based analysis. We believe (and we're not alone) that analyzing a stock without a basis of comparison is like trying to understand the world with blinders on - your vision is through a tunnel. The ideal is to get as broad a perspective as possible - a panorama across data points, across time and across peers. We call this three-dimensional analysis.<br /><h4><span style="color: inherit; font-family: inherit; font-size: 32px;">Quality of Earnings</span></h4>This model is based on Lev & Thiagarajan's <a href="https://pdfs.semanticscholar.org/34dd/405c82c404f6e128199f293fc9d95ca06767.pdf" target="_blank">Fundamental Information Analysis.</a> It involves 28 data points spanning over three years and 38 separate calculations. The maximum number of measures is nine (some companies don't have some metrics because of the nature of their business - inventory or R&D for example. The measures are as follows:<br /><ul><li>Inventories</li></ul><ul><li>Receivables</li></ul><ul><li>Research and development</li></ul><ul><li>Capital expenditures</li></ul><ul><li>Gross margin</li></ul><ul><li>Selling, general and administrative expenses</li></ul><ul><li>Employees</li></ul><ul><li>Tax, and</li></ul><ul><li>Unqualified audit report</li></ul>With the exception of the last measure (which is either yes or no), each involves several calculations which ultimately indicate whether the financial results are trustworthy or whether there is possibly some manipulation happening to improve them.<br /><br />Here's an example of how it works. We'll look at the measure for receivables. What we want to see for quality is that the expected percentage change in sales is greater than the expected percentage change in receivables (the same principal applies to inventory, SG&A and employees). We approximate "expected" values by the average of Y-1 and Y-2, where Y represents the most current annual financial information available. The percentage change compares the actual (Y sales and Y receivables) to the expected.<br /><br />When the expected percentage change in sales is greater than the expected percentage change in receivables, we get a quality signal and the algorithm gives that measure a score of "1". If we don't get a quality signal, we give that measure a score of "0".<br /><br />All the scores are summed and that gives us an overall quality score. If all measures are in play, the maximum score is nine.<br /><br />If you want further details about the model, click <a href="https://seekingalpha.com/article/4145580-gaining-advantage-using-quality-earnings" target="_blank">here</a>.<br /><h4><span style="color: inherit; font-family: inherit; font-size: 32px;">The Result</span></h4>Let's see the results.<br /><iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/707/2019-10-15-14-00-06.html?0.7168025849513984" width="700"></iframe> <br /> 6-7 Good. CSIQ has a good quality of earnings score.<br /><h4><span style="color: inherit; font-family: inherit; font-size: 32px;">Ohlson Clean Surplus Valuation</span></h4>This model uses eight data points plus one estimate and makes 13 calculations.<br /><br />You can find a detailed explanation of the model <a href="https://seekingalpha.com/article/4085164-using-ohlson-clean-surplus-theory-valuation?ifp=0&v=1570103100" style="background-color: whitesmoke;" target="_blank">here</a> but the short story is that this model calculates the present value of a company's future abnormal earnings, sums them, and adds them to the current book value to come up with a theoretical price for the stock. If the theoretical price is less than the actual price, you've got a potentially undervalued stock.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/700/2019-10-14-07-19-25.html?0.1770884372918955" width="700"></iframe><br />This first graph shows each stock's actual and theoretical price as calculated by the OCS. Let's look at these numbers in another way: as the difference between theoretical price and actual price as a percentage of actual price.<br /><br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/705/2019-10-14-10-22-10.html?0.4573322176652106" width="700"></iframe><br />CSIQ is trading a large discount relative to theoretical price. Another way to think of this is in terms of margin of error - CSIQ has a good margin of error.<br /><h2>Growth Factors</h2>This next model looks at four factors of growth:<br /><ul><li>1 year revenue growth rate,</li><li>1 year EBITDA growth rate,</li><li>1 year free cash flow growth rate,</li><li>1 year gross margin growth rate.</li></ul>In order to determine which company has the best rate of growth, we calculate each of the four measures and then rank from best to worst. The ranking for each measure is then summed and the stock with the highest score has the best rate of growth for the group.<br /><br />Here's a graph of the results:<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/703/2019-10-14-08-44-59.html?0.597841092920004" width="700"></iframe><br />And here's a graph of the ranking:<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/704/2019-10-14-09-09-10.html?0.38398871507174914" width="700"></iframe><br /><h2>Conclusion</h2>Why is this an article about CSIQ rather than RUN? RUN has the best quality of earnings score and the best overall growth but there is no margin of safety. Given it's trading at a premium relative to its theoretical value, we conclude it is overpriced.<br /><br />CSIQ came in second place relative to RUN on quality of earnings while still getting a good score. It also came in second place in growth, however, if you click into the top right corner of the Growth Values chart you can see the actual scores for each of the factors. You'll notice that CSIQ grew in every category, unlike RUN which had negative year over year growth in free cash flow (albeit very slight). And importantly, CSIQ has that great margin of safety with a price only 62% of its theoretic value.<br /><br /><h2>Disclaimer</h2>Whether or not this stock is appropriate for your portfolio, risk profile and long-term goals is not part of this evaluation. The consequences of your investment decisions are yours and yours alone. INVRS, its parent company, directors, officers and employees cannot be held responsible for any investment decisions you make.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-51493796401839245922019-09-20T14:11:00.000-04:002019-09-20T14:11:34.989-04:00CNQ: Too Bad About the Price<h2>VALUATION MODEL FOR CNQ</h2><br /><h2>The Model</h2>We'll start by looking at CNQ's value relative to the group and then we'll look at it's dividend yield relative to its five year average. <br /><h3>Group Valuation Metrics</h3>We're looking at four valuation metrics and then ranking them from best to worst. The ranks are summed and a final rank is calculated.<br /><table class="table table-bordered"><tbody><tr><td>Security</td><td>Price to Book<br />Rank</td><td>Price to Sales<br />Rank</td><td>PE Ratio<br />Rank</td><td>EV/EBITDA<br />Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>CNQ</td><td>0.0132<br />3</td><td>1.9171<br />5</td><td>17.86<br />3</td><td>5.92<br />4</td><td>15</td><td>2</td></tr><tr><td>CVE</td><td>.009<br />4</td><td>.5659<br />10</td><td>na (negative)<br />1</td><td>23.14<br />2</td><td>17</td><td>4</td></tr><tr><td>HSE</td><td> .0054<br />9</td><td>.6423<br />9</td><td>7.12<br />8</td><td>4.68<br />6</td><td>32</td><td>10</td></tr><tr><td>ECA</td><td>.0076<br />6</td><td>1.06<br />7</td><td>5.09<br />10</td><td>3.93<br />8</td><td>31</td><td>9<br /><br /></td></tr><tr><td>ALA</td><td>.0089<br />5</td><td>.739<br />8</td><td>na (negative)<br />1</td><td>na (negative)<br />1</td><td>15</td><td>2</td></tr><tr><td>TOU</td><td>.0052<br />10</td><td>2.7331<br />1</td><td>10.099<br />6</td><td>6.50<br />3</td><td>20</td><td>5</td></tr><tr><td>VET</td><td>.0142<br />2</td><td>2.6826<br />2</td><td>12.5324<br />4</td><td>5.87<br />5</td><td>13</td><td>1</td></tr><tr><td>PXT</td><td>.0196<br />1</td><td>2.4163<br />3</td><td>6.8331<br />9</td><td>2.45<br />10</td><td>23</td><td>6</td></tr><tr><td>VII</td><td>.0063<br />8</td><td>1.2609<br />6</td><td>7.57<br />7</td><td>3.24<br />9</td><td>30</td><td>8</td></tr></tbody></table><table class="table table-bordered"><tbody><tr><td>ARX</td><td>.007 <br />7</td><td>2.0627 <br />4 </td><td>11..87 <br />5</td><td>4.50 <br />7 </td><td>23</td><td>6 </td></tr></tbody></table>CNQ doesn't look like good value relative to its peers.<br /><h3>Dividend Yield Relative to 5 Year Average</h3>A rule of thumb for this metric is to only purchase a stock when it's current dividend yield is lower than its 5 year average, or in other words, less than one in the calculation forward dividend yield divided by 5 year average.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/660/2019-09-18-09-15-08.html?0.3211844601282985" width="700"></iframe><br />CNQ looks overvalued at the moment, not surprising, too bad I didn't get to this analysis last week.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-76952500130401174302019-09-18T10:59:00.000-04:002019-09-18T10:59:43.063-04:00CNQ - Great Dividend Profile<h2>INCOME ANALYSIS FOR CNQ</h2><br /><h3>The Model</h3>There are a multitude of ways to look at dividends. This report is going to combine two elements: the sum of the current yield and the five year average growth rate (total return) and the dividend coverage.<br /><h3>The Total Return</h3>The graph below shows the sum of the current yield and the five year average growth rate.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/657/2019-09-17-09-13-08.html?0.16119293169418647" width="700"></iframe><br />CNQ is really high, almost 24%. This is a combination of a 3.95% dividend yield and a 5 year growth rate of 19.95%. Note, the 3 year growth rate was 13.97%.<br /><h3>Dividend Coverage</h3>We want to see that the TTM dividend is less than 75% of the company's free cash flow with this metric.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/658/2019-09-17-09-31-54.html?0.41061888932441826" width="700"></iframe><br />CNQ is 37%. <br /><h3>Summary</h3>CNQ has an impressive total return and good coverage.<br /><h3>Disclaimer</h3>The point of this report is to demonstrate what INVRS can do. This is not a comprehensive analysis and we cannot be held responsible for any investment decisions you make. <br />We may publish this report after three business days.<br /><b>Thank you for your interest in INVRS. Discover and publish your own investment information.</b>Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-17895930360106236112019-09-17T07:31:00.001-04:002019-09-17T07:31:37.072-04:00High Quality CNQ, HSEQuality of Earnings results for a Group of 11 oil and gas companies trading on the TSX.<br /><br /><br /><iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/656/2019-09-16-08-15-44.html?0.4963865232760456" width="700"></iframe> Impressive results (7/8) for CNQ and HSE. <br /><br />Next analysis will look at income potential for the group.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-16696460985509935472019-09-09T13:38:00.000-04:002019-09-27T10:15:36.440-04:0011 Reasons Why INVRS is Better Than Excel Alone<script>function getQueryParameter ( parameterName ) { var queryString = window.location.search.substring(1); var parameterName = parameterName + "="; if ( queryString.length > 0 ) { begin = queryString.indexOf ( parameterName ); if ( begin != -1 ) { begin += parameterName.length; end = queryString.indexOf ( "&" , begin ); if ( end == -1 ) { end = queryString.length } return unescape ( queryString.substring ( begin, end ) ); } } return "null"; } </script> <br /><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-6fzv2eCHny4/XXZb7jJ1QHI/AAAAAAAAA68/IXU2We25KSYzfIyFtWfIPi8YuS-VSW4YgCLcBGAs/s1600/AdobeStock_248467249.jpeg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="INVRS and Excel" border="0" data-original-height="1068" data-original-width="1600" height="426" src="https://1.bp.blogspot.com/-6fzv2eCHny4/XXZb7jJ1QHI/AAAAAAAAA68/IXU2We25KSYzfIyFtWfIPi8YuS-VSW4YgCLcBGAs/s640/AdobeStock_248467249.jpeg" title="INVRS Improves on Excel alone" width="640" /></a></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"></div><br /><div class="MsoNormal">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.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><span style="mso-spacerun: yes;"><br /></span></div><div class="MsoNormal">First, you need good data and it isn’t just lying around in an easy to import format.<span style="mso-spacerun: yes;"> </span>You’re either keying it in yourself or paying money for excel downloads. <span style="mso-spacerun: yes;"> </span><o:p></o:p></div><div class="MsoNormal"><span style="mso-spacerun: yes;"><br /></span></div><div class="MsoNormal">When you need data from numerous sources – price information, data from different statements and across multiple years - you must merge it from multiple sheets.<span style="mso-spacerun: yes;"> It's a</span>n inefficient process which can lead to data corruption.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">After all this data is collected and merged, models built and tested, the net result is one statistic for one company.<span style="mso-spacerun: yes;"> </span>A stand-alone number without context has limited use.<span style="mso-spacerun: yes;"> </span>To be meaningful, you need to compare it to similar companies.<span style="mso-spacerun: yes;"> </span></div><div class="MsoNormal"><span style="mso-spacerun: yes;"> </span><o:p></o:p></div><div class="MsoNormal">This is just a sample of the challenges. You need software that overcomes these problems and is designed for investment model creation.</div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoNormal">Surprise! This software exists, it's INVRS. You can get a free analysis report on the stock of your choice by <i><a href="https://invrs.com/free-investment-report.html?refsrc=li" id="firstLink" target="_blank">clicking here.</a></i><br /><br />Here's how INVRS solves the problems associated with using excel alone for investment analysis.<br /><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>1.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> </span><!--[endif]--><b>It fetches your data for you. </b><o:p></o:p></div><div class="MsoNormal">Just point and click for the data points you want. <o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>2.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b></span><!--[endif]--><b>You build the model in the software using familiar operators and not in an obscure programming language.</b><o:p></o:p></div><div class="MsoNormal">Suppose you want to calculate the forward dividend yield and compare it to the five year average and score/rank the quotient. You can create this in INVRS using the same operators and shortcuts you use in excel, optionally validating your equations as you go.</div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>3.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> </span><!--[endif]--><b>Each model is a template that you can use repeatedly.</b><o:p></o:p></div><div class="MsoNormal">No need to establish another data source, no risk of it breaking and no need to copy and paste each time you have a new stock to analyze. Once you’ve built your model you can run it repeatedly on different stocks. <o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>4.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> </span><!--[endif]--><b>You can experiment.</b><o:p></o:p></div><div class="MsoNormal">Change any of the elements in your models, whether data or formula. <o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>5.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> <b></b></span><!--[endif]--><b>Perform peer-based analysis.</b><o:p></o:p></div><div class="MsoNormal">Running a model against one stock hardly seems worth it because there’s no context for the result. With peer-based analysis, you can answer the question “how does my target company compare to similar companies?” <o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>6.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> </span><!--[endif]--><b>It archives every analysis automatically.</b><o:p></o:p></div><div class="MsoNormal">In excel, refreshing data can lead to the loss of an old analysis. Your ideal software would never let that happen. </div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>7.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> </span><!--[endif]--><b>Find every archived analysis easily. </b><o:p></o:p></div><div class="MsoNormal">You can search chronologically, by portfolio and by template. An important feature when you are doing hundreds or thousands of analyses. </div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>8.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> </span><!--[endif]--><b>No flipping between data source and formula.</b><o:p></o:p></div><div class="MsoNormal">Best practice in excel separates data and formula. Sometimes you can keep everything on one sheet, often you can’t. Flipping between sheets is a pain when you are checking a complicated formula and if you combine your formulas and data, reproducing it or changing variables becomes difficult.</div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal">INVRS separates data and formula while keeping it all visible on screen.<o:p></o:p></div><div class="MsoNormal"><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>9.</b><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"><b> </b> <b></b></span><!--[endif]--><b>Fast graphing.</b><o:p></o:p></div><div class="MsoNormal">You can create graphs of your analyses. You can sort the results, add a benchmark, annotate and export. It's easier than in excel and supports other options specific to investment analysis, such as price graphing.</div><div class="MsoNormal"><o:p></o:p><br /><br /></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>10.<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span><!--[endif]-->Create notes or articles.</b></div><div class="MsoNormal">If you discover interesting information, you might want to share it. Make notes as you go along and evolve them into articles you can publish or share.</div><div class="MsoNormal"><br /><o:p></o:p></div><div class="MsoListParagraph" style="mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><b>11.<span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span><!--[endif]-->It pays you.</b><o:p></o:p></div><div class="MsoNormal">You get paid to use the software, whether it is posting your analyses or recommending it to other users.<o:p></o:p><br /><br /></div><div class="MsoNormal">Go to <a href="https://invrs.com/" id="signupLink">invrs.com</a> and sign up for a free trial or <a href="https://invrs.com/free-investment-report.html" id="analysisLink">request a sample analysis</a>. Experience the power of INVRS for investment research.</div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br /></div><script> var ref = getQueryParameter("refsrc"); if( ref && ref != "null" && ref != '') { document.getElementById("signupLink").setAttribute("href","https://invrs.com?refsrc="+ref); document.getElementById("analysisLink").setAttribute("href","https://invrs.com/free-investment-report.html?refsrc="+ref); document.getElementById("firstLink").setAttribute("href","https://invrs.com/free-investment-report.html?refsrc="+ref); } </script>Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-56646180347739142692019-08-10T07:28:00.000-04:002019-08-10T07:28:41.797-04:00TSLA Shows Decent Quality of EarningsTesla creates a lot of polarization. It's like the industrial equivalent of our current political state.<br /><br />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.<br /><br />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.<br /><br />TSLA's are good. Not great, but good and they are the highest, along with two other firms in the group, which further impresses. <br /><br />The quality of earnings matter. They tell us whether what's being presented can be trusted or not.<br /><br /><br /><iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/652/2019-08-10-07-00-37.html?0.36562977354922843" width="700"></iframe> TSLA got a 6 out of 9, compared to a group average of less than 4.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-61434182867218606182019-07-24T16:22:00.000-04:002019-07-24T16:22:45.584-04:00Two Undervalued Major Telecom Stocks<iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/651/2019-07-24-14-42-38.html?0.09565194120224274" width="700"></iframe>As the graph indicates, CHU and NTT are trading below value.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-66431854055011209262019-07-20T06:48:00.000-04:002019-07-20T07:03:56.222-04:00UPS Margin of Safety of 93%<iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/650/2019-07-19-07-16-56.html?0.8525965474728683" width="700"></iframe> 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).<br /><br />CHRW is also trading with a margin of safety of 43%.<br /><br /><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-35096388327045068912019-07-18T12:39:00.000-04:002019-07-18T12:39:29.803-04:00THREE STOCKS WITH A VALUE GREATER THAN PRICE ACCORDING TO MODEL<iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/649/2019-07-18-11-55-59.html?0.07892134644686166" width="700"></iframe> 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.<br /><br />The valuation model is the Ohlson Clean Surplus.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-76815256396086471052019-07-17T08:49:00.000-04:002019-07-17T08:49:56.664-04:00ABT and IDXX Score 7 Out of 9 for Quality<iframe allowfullscreen="" frameborder="0" height="600" scrolling="no" src="https://graphs.invrs.com/A8CC643D555345B86C19795B4E07B741/648/2019-07-17-08-45-07.html?0.4734051768890666" width="700"></iframe>Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-24813354707503298602019-07-11T18:26:00.001-04:002019-07-11T18:26:49.907-04:00GlaxoSmithKline Scores High in QualityI 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.<br /><br />Here are the results:<br /><br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-scIiGxpHJpA/XSe1kw7QwsI/AAAAAAAAA4U/qa48lLmoAkMUFW3s7k48pRlxXmJZUaA5wCLcBGAs/s1600/chart%2B-%2B2019-07-11T181713.814.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="800" data-original-width="1600" height="320" src="https://1.bp.blogspot.com/-scIiGxpHJpA/XSe1kw7QwsI/AAAAAAAAA4U/qa48lLmoAkMUFW3s7k48pRlxXmJZUaA5wCLcBGAs/s640/chart%2B-%2B2019-07-11T181713.814.png" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Quality of Earnings - Major Pharmaceuticals</td></tr></tbody></table>Here's the balance of the companies in the portfolio. We can see that AZN was the worst at two.<br /><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-_33l3d35CbI/XSe2CQvseMI/AAAAAAAAA4c/tI2uzzJLngks1No5_Nps7hPG9HAqEo_iwCLcBGAs/s1600/chart%2B-%2B2019-07-11T181908.751.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="800" data-original-width="1600" height="320" src="https://1.bp.blogspot.com/-_33l3d35CbI/XSe2CQvseMI/AAAAAAAAA4c/tI2uzzJLngks1No5_Nps7hPG9HAqEo_iwCLcBGAs/s640/chart%2B-%2B2019-07-11T181908.751.png" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Quality of Earnings - Major Pharmaceuticals 2</td></tr></tbody></table><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: left;">Just for laughs, lets see how GSK and AZN have performed from a price perspective.</div><div class="separator" style="clear: both; text-align: left;"><br /></div><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-Xg-L6JMLvlU/XSe3D-k2dWI/AAAAAAAAA4o/7MyP1pIzrawjzxGhjTPPkgg-WmoZIO2EACLcBGAs/s1600/chart%2B-%2B2019-07-11T182357.600.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="800" data-original-width="1600" height="320" src="https://1.bp.blogspot.com/-Xg-L6JMLvlU/XSe3D-k2dWI/AAAAAAAAA4o/7MyP1pIzrawjzxGhjTPPkgg-WmoZIO2EACLcBGAs/s640/chart%2B-%2B2019-07-11T182357.600.png" width="640" /></a></div><div class="separator" style="clear: both; text-align: left;"><br /></div>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.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-38955713976786659612019-06-07T10:50:00.002-04:002019-06-07T10:55:54.496-04:00We've Got a Winner<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-xuGXtOEGINg/XPp2JJpf49I/AAAAAAAAA3M/PzJyT0ngW6wm8s2Auj-h8mDHH0-YnQLLwCLcBGAs/s1600/3Untitled-110.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="stock analysis" border="0" data-original-height="398" data-original-width="397" height="640" src="https://1.bp.blogspot.com/-xuGXtOEGINg/XPp2JJpf49I/AAAAAAAAA3M/PzJyT0ngW6wm8s2Auj-h8mDHH0-YnQLLwCLcBGAs/s640/3Untitled-110.png" title="investment analysis on mid cap advertising/marketing firms" width="638" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">It's IPG.</td></tr></tbody></table><br /><h3>Income </h3>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.<br /><br />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.<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Dividend<br />Yield</td><td>D/S 3 year<br />CAGR</td><td>1 year<br />D/S growth</td><td>Sum</td><td>Final Rank</td></tr><tr><td>JCDXF</td><td>2%<br />4</td><td>3%<br />4</td><td>8%<br />5</td><td>13<br /><br /></td><td>4</td></tr><tr><td>NLSN</td><td>6%<br />6</td><td>5%<br />5</td><td>5%<br />4</td><td>15<br /><br /></td><td>5</td></tr><tr><td>IPG</td><td>4%<br />5</td><td>12%<br />6</td><td>17%<br />6</td><td>17<br /><br /></td><td>6</td></tr></tbody></table><br />IPG has some very nice dividend results.<br /><h3>Value</h3>The value metrics are:<br /><ul><li>price to book</li><li>price to sales</li><li>price to earnings (if the company has negative earnings they get a rank of zero)</li><li>enterprise value to EBITDA.</li></ul><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>P/B</td><td>P/S</td><td>P/E</td><td>EV/EBITDA</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>TTD</td><td>.21<br />1</td><td>11.1<br />1</td><td>103<br />2</td><td>43<br />1</td><td>5</td><td>1</td></tr><tr><td>RAMP</td><td>.03<br />5</td><td>8.1<br />2</td><td>173<br />1</td><td>16<br />2</td><td>10</td><td>2</td></tr><tr><td>NLSN</td><td>.03<br />4</td><td>1.3<br />4</td><td>negative<br />0</td><td>9<br />5</td><td>13</td><td>3</td></tr><tr><td>JCDXF</td><td>.02<br />6</td><td>1.6<br />3</td><td>23<br />3</td><td>13<br />3</td><td>15</td><td>5</td></tr><tr><td>IPG</td><td>.04<br />3</td><td>.8<br />5</td><td>13<br />4</td><td>9<br />4</td><td>16</td><td>6</td></tr><tr><td>GRPN</td><td>.06<br />2</td><td>.7<br />6</td><td>negative<br />0</td><td>7<br />6</td><td>14</td><td>4</td></tr></tbody></table>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.<br /><br />Taking it all together, IPG offers the best value.<br /><br /><h3>Profitability</h3>We'll look at six measures for the profitability factor:<br /><ul><li>gross profit to assets</li><li>net income margin</li><li>5 year average pre-tax return on assets</li><li>3 year average return on equity</li><li>operating income margin</li><li>free cash flow yield.</li></ul><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>GP/A</td><td>NM</td><td>5 YR Avg<br />Pre-Tax ROA</td><td>3 Yr Ave<br />ROE</td><td>OM</td><td>FCF</td><td>Sum</td><td>Rank</td></tr><tr><td>TTD</td><td>.32<br />4</td><td>.18<br />6</td><td>.08<br />6</td><td>.07<br />4</td><td>.22<br />6</td><td>.01<br />2</td><td>28</td><td>6</td></tr><tr><td>RAMP</td><td>.37<br />5</td><td>.03<br />3</td><td>.00<br />2</td><td>-.03<br />2</td><td>.04<br />2</td><td>.02<br />4</td><td>18</td><td>3</td></tr><tr><td>NLSN</td><td>.20<br />3</td><td>-.11<br />1</td><td>.03<br />3</td><td>.01<br />3</td><td>.17<br />5</td><td>.06<br />5</td><td>20</td><td>4</td></tr><tr><td>JCDXF</td><td>.15<br />2</td><td>.07<br />5</td><td>.04<br />4</td><td>.09<br />5</td><td>.08<br />3</td><td>-.01<br />1</td><td>20</td><td>4</td></tr><tr><td>IPG</td><td>.08<br />1</td><td>.07<br />4</td><td>.06<br />5</td><td>.28<br />6</td><td>.10<br />4</td><td>.01<br />3</td><td>23<br /><br /></td><td>5</td></tr><tr><td>GRPN</td><td>.76<br />6</td><td>.00<br />2</td><td>-.03<br />1</td><td>-.21<br />1</td><td>.02<br />1</td><td>.06<br />6</td><td>17</td><td>2</td></tr></tbody></table><br />TTD had the best profitability results followed by IPG.<br /><br /><h2>What I think</h2><div><br /></div>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.<br /><h2>If You Just Want to Know The Highest Score</h2>Here are the results in tabular form.<br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Price<br />Momentum</td><td>Quality</td><td>Growth</td><td>Income</td><td>Value</td><td>Profitability</td><td>Sum</td><td>Final Rank</td></tr><tr><td>TTD</td><td>6</td><td>4</td><td>6</td><td>0</td><td>1</td><td>6</td><td>23</td><td>5</td></tr><tr><td>RAMP</td><td>5</td><td>6</td><td>5</td><td>0</td><td>2</td><td>3</td><td>21</td><td>4</td></tr><tr><td>NLSN</td><td>1</td><td>1</td><td>1</td><td>5</td><td>3</td><td>4</td><td>15</td><td>1</td></tr><tr><td>JCDXF</td><td>2</td><td>3</td><td>2</td><td>4</td><td>5</td><td>4</td><td>20</td><td>3</td></tr><tr><td>IPG</td><td>3</td><td>2</td><td>4</td><td>6</td><td>6</td><td>5</td><td>26</td><td>6</td></tr><tr><td>GRPN</td><td>4</td><td>5</td><td>3</td><td>0</td><td>4</td><td>2</td><td>18</td><td>2</td></tr></tbody></table><br />Look at that, IPG has the highest score. I like it. I'm going to watch how it does, maybe take a small position.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-2397582364991901892019-06-06T06:18:00.000-04:002019-06-06T06:20:40.550-04:00Factor-Based Analysis on Mid Cap Advertising/Marketing Firms, Part 2<div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-wjipPca3G0k/XPjnMJT5J1I/AAAAAAAAA28/UDd0GWiQRIUPyP4_sHt40HDVRm3ji6TQgCLcBGAs/s1600/2Untitled-110.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="fundamental analysis" border="0" data-original-height="398" data-original-width="397" height="640" src="https://1.bp.blogspot.com/-wjipPca3G0k/XPjnMJT5J1I/AAAAAAAAA28/UDd0GWiQRIUPyP4_sHt40HDVRm3ji6TQgCLcBGAs/s640/2Untitled-110.png" title="Stock Analysis" width="638" /></a></div><div class="separator" style="clear: both; text-align: center;"></div><br /><h2>Quality </h2>The quality factor uses five measures:<br /><ul><li>Standard deviation of earnings - the lower the better,</li><li>Gross margin - the higher the better,</li><li>Net margin - the higher the better,</li><li>Sales/assets - the higher the better,</li><li>Financial leverage - the lower the better.</li></ul><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>SD</td><td>GM</td><td>NM</td><td>S/A</td><td>FL</td><td>Sum</td><td>Rank</td></tr><tr><td>TTD</td><td>.98<br />1</td><td>76%<br />6</td><td>18%<br />6</td><td>43%<br />1</td><td>0%<br />6</td><td>20</td><td>4</td></tr><tr><td>RAMP</td><td>.12<br />5</td><td>49%<br />5</td><td>3%<br />3</td><td>76%<br />5</td><td>23%<br />5</td><td>23</td><td>6</td></tr><tr><td>NLSN</td><td>.47<br />2</td><td>47%<br />3</td><td>-11%<br />1</td><td>43%<br />2</td><td>73%<br />1</td><td>9</td><td>1</td></tr><tr><td>JCDXF</td><td>.27<br />4</td><td>26%<br />2</td><td>7%<br />5</td><td>57%<br />3</td><td>36%<br />4</td><td>18</td><td>3</td></tr><tr><td>IPG</td><td>.32<br />3</td><td>12%<br />1</td><td>7%<br />4</td><td>62%<br />4</td><td>59%<br />2</td><td>14</td><td>2</td></tr><tr><td>GRPN</td><td>.11<br />6</td><td>48%<br />4</td><td>0%<br />2</td><td>161%<br />6</td><td>38%<br />3</td><td>21</td><td>5</td></tr></tbody></table><br />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.<br /><br /><h2>Growth</h2>This factor looks at the year over year growth rate in revenue, EBITDA, free cash flow and gross income margin.<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Revenue</td><td>EBITDA</td><td>FCF</td><td>GM</td><td>Sum</td><td>Final Rank</td></tr><tr><td>TTD</td><td>55%<br />6</td><td>55%<br />6</td><td>215%<br />6</td><td>-3%<br />2</td><td>20</td><td>6</td></tr><tr><td>RAMP</td><td>30%<br />5</td><td>1%<br />3</td><td>0%<br />4</td><td>23%<br />6</td><td>18</td><td>5</td></tr><tr><td>NLSN</td><td>-1%<br />2</td><td>-10%<br />1</td><td>-20%<br />3</td><td>-3%<br />1</td><td>7</td><td>1</td></tr><tr><td>JCDXF</td><td>9%<br />3</td><td>6%<br />4</td><td>-32%<br />2</td><td>-2%<br />3</td><td>12</td><td>2</td></tr><tr><td>IPG</td><td>23%<br />4</td><td>7%<br />5</td><td>-47%<br />1</td><td>0%<br />4</td><td>14</td><td>4</td></tr><tr><td>GRPN</td><td>-7%<br />1</td><td>1%<br />2</td><td>76%<br />5</td><td>8%<br />5</td><td>13</td><td>3</td></tr></tbody></table><br />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.<br /><br />Tomorrow we'll cover income, value and profitability.<br /><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-6796915041811448472019-06-05T12:35:00.000-04:002019-06-07T15:16:25.002-04:00Factor Based Analysis, Mid Cap Adv/Mkt - Part 1<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-SA1w_Zy4UlI/XPfunh6VFsI/AAAAAAAAA2c/FOk2PBsH5B8YQtCwp61cuQcFa6bB8gdjACLcBGAs/s1600/15Untitled-110.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="investment analysis looking for a gem" border="0" data-original-height="398" data-original-width="397" height="640" src="https://1.bp.blogspot.com/-SA1w_Zy4UlI/XPfunh6VFsI/AAAAAAAAA2c/FOk2PBsH5B8YQtCwp61cuQcFa6bB8gdjACLcBGAs/s640/15Untitled-110.png" title="treasure hunt stock analysis" width="638" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Ya, we're excited too.</td></tr></tbody></table><div class="separator" style="clear: both; text-align: center;"></div><h2></h2><h2>Overview</h2>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.<br /><br /><h4>Peer Group:</h4><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price (May 31, 2019)</td><td>Market Cap</td></tr><tr><td>Trade Desk, Inc. Class A(TTD:XNAS)</td><td>$198.81</td><td>8.8429B</td></tr><tr><td>LiveRamp Holdings, Inc.(RAMP:XNYS)</td><td>$51.38</td><td>3.4986B</td></tr><tr><td>Nielsen Holdings PLC(NLSN:XNYS)</td><td>$22.73</td><td>8.0804B</td></tr><tr><td>Jcdecaux SA(JCDXF:OOTC)</td><td>$27.80</td><td>5.9161B</td></tr><tr><td>Interpublic Group of Companies, Inc.(IPG:XNYS)</td><td>$21.22</td><td>8.1952B</td></tr><tr><td>Groupon, Inc. Class A(GRPN:XNAS)</td><td>$3.53</td><td>2.0050B</td></tr></tbody></table><h2> Analysis Factors</h2>This analysis will look at six factors:<br /><ul><li>Price Momentum</li><li>Quality</li><li>Growth</li><li>Income</li><li>Value</li><li>Profitability.</li></ul><h3>Price Momentum</h3>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.<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Long</td><td>Medium</td><td>Short</td></tr><tr><td>Market</td><td>14%</td><td>9%</td><td>-4%</td></tr><tr><td>Sector (proxy S&P industrials)</td><td>5%</td><td>6%</td><td>-6%</td></tr></tbody></table>The conclusion I draw from this is to proceed with caution, as momentum appears to slowing and possibly reversing.<br />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.<br /><br /><br /><table class="table table-bordered"><tbody><tr><td><span style="background-color: blue;"><br /></span></td><td>Long</td><td>Medium</td><td>Short</td><td>Sum</td><td>Final Rank</td></tr><tr><td>TTD</td><td>261%<br />6</td><td>159%<br />6</td><td>-2%<br />5</td><td>17</td><td>6</td></tr><tr><td>RAMP</td><td>96%<br />5</td><td>99%<br />5</td><td>-8%<br />3</td><td>13</td><td>5</td></tr><tr><td>NLSN</td><td>-41%<br />1</td><td>-15%<br />2</td><td>-9%<br />2</td><td>5</td><td>1</td></tr><tr><td>JCDXF</td><td>-17%<br />2</td><td>3%<br />4</td><td>-10%<br />1</td><td>7</td><td>2</td></tr><tr><td>IPG</td><td>-15%<br />3</td><td>2%<br />3</td><td>-4%<br />4</td><td>10</td><td>3</td></tr><tr><td>GRPN</td><td>17%<br />4</td><td>-27%<br />1</td><td>0%<br />6</td><td>11</td><td>4</td></tr></tbody></table>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.<br /><br />Tomorrow I'll review the quality and growth factors.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-10697233720739327932019-02-03T20:44:00.000-05:002019-02-06T11:38:03.023-05:00NextEra - Good Dividend in the Renewable Energy Sector<br /><ul><li>NextEra had good results relative to a group of peers in a factor-based analysis.</li><li>NextEra has an appealing profitability and income profile.</li><li>Its price momentum looks decent, with a caveat.</li><li>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.</li></ul><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-6ZYBEC9_ZHw/XFbsicyAjTI/AAAAAAAAAz4/VyLctQ0tYTIB1_YAJbua3jDGiXwMJW17wCLcBGAs/s1600/12Artboard%2B110.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Good Dividend Stock" border="0" data-original-height="562" data-original-width="900" height="399" src="https://4.bp.blogspot.com/-6ZYBEC9_ZHw/XFbsicyAjTI/AAAAAAAAAz4/VyLctQ0tYTIB1_YAJbua3jDGiXwMJW17wCLcBGAs/s640/12Artboard%2B110.png" title="Renewable Energy Investment" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">If you want in on renewable energy, we recommend NextEra.</td></tr></tbody></table><div><!-- x-tinymce/html --><br /><h3>The Analysis Overview</h3><br />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.<br /><br />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.<br /><br />This is a factor-based analysis on seven companies in the alternative energy sector. It looks at momentum, quality, growth, income, value and profitability.<br /><br />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.<br /><br /><h3>The Peer Group</h3><br /><!-- x-tinymce/html -->Here is the group of candidates and a brief overview of each one.<br /><br /></div><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price<br />Jan 28, 2019</td><td>Market Cap</td></tr><tr><td>Northland Power Inc.(NPIFF:OOTC)</td><td>$17.80</td><td>3.1554B</td></tr><tr><td>TerraForm Power, Inc. Class A(TERP:XNAS)</td><td>$11.39</td><td>2.3821B</td></tr><tr><td>NextEra Energy Partners LP(NEP:XNYS)</td><td>$41.38</td><td>2.3214B</td></tr><tr><td>Ormat Technologies, Inc.(ORA:XNYS)</td><td>$55.59</td><td>2.8169B</td></tr><tr><td>Pattern Energy Group, Inc. Class A(PEGI:XNAS)</td><td>$21.04</td><td>2.0639B</td></tr><tr><td>Innergex Renewable Energy Inc.(INGXF:OOTC)</td><td>$10.88</td><td>1.4444B</td></tr><tr><td>Atlantica Yield plc(AY:XNAS)</td><td>$18.49</td><td>1.8530B</td></tr></tbody></table><b><br /></b><b>Northland Power Inc.</b> 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.<br /><br /><b>TerraForm Power, Inc.</b> 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.<br /><br /><b>NextEra Energy Partners LP</b> 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.<br /><br /><b>Ormat Technologies, Inc.</b> 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.<br /><br /><b>Pattern Energy Group, Inc.</b> 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.<br /><br /><b>Innergex Renewable Energy, Inc.</b> 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.<br /><br /><b>Atlantica Yield Plc</b> 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.<br /><br /><h3>The Analysis</h3><br /><!-- x-tinymce/html -->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.<br /><br /><h3>Market & Sector Price Momentum</h3><br /><!-- x-tinymce/html -->Let's start by getting a visual perspective on how the market and sector have been performing.<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-IlOFn7umwDI/XFbusDc_f1I/AAAAAAAAA0E/nNxxb3Ktg8cP5EN_ho5OqKUDmRD4pEj7wCLcBGAs/s1600/1chart.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="800" data-original-width="1400" height="363" src="https://1.bp.blogspot.com/-IlOFn7umwDI/XFbusDc_f1I/AAAAAAAAA0E/nNxxb3Ktg8cP5EN_ho5OqKUDmRD4pEj7wCLcBGAs/s640/1chart.png" width="640" /></a></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://4.bp.blogspot.com/-DOJGE9vP4xI/XFbutj7RNII/AAAAAAAAA0I/9LRTeKWt-MU-9kdUgs5wj6apxuynHzBFwCLcBGAs/s1600/2chart.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="800" data-original-width="1400" height="364" src="https://4.bp.blogspot.com/-DOJGE9vP4xI/XFbutj7RNII/AAAAAAAAA0I/9LRTeKWt-MU-9kdUgs5wj6apxuynHzBFwCLcBGAs/s640/2chart.png" width="640" /></a></div><br /><br /><!-- x-tinymce/html -->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.<br /><br /><h4>Momentum</h4><br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Longer term -<br />% price change over 2 years</td><td>Medium term -<br />12 month less 1 month price change</td><td>Short term -<br />Price less three month moving average</td></tr><tr><td>Market</td><td>16%</td><td>-11%</td><td>-1%</td></tr><tr><td>Utilities Sector</td><td>10%</td><td>4%</td><td>-1%<br /><br /></td></tr></tbody></table><br /> 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.<br /><br /><!-- x-tinymce/html -->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.<br /><br /><h3>Price Momentum of the Group</h3><br />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:<br /><!-- x-tinymce/html --><br /><ol><li>Percentage price change over two years,</li><li>12 month less one month price change,</li><li>Price less 10 week moving average change.</li></ol><div><br /></div><table class="table table-bordered"><tbody><tr><td><br /></td><td>Long-term<br />Value and rank</td><td>Medium term<br />Value and rank</td><td>Short term<br />Value and rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>NPIFF</td><td>-1%<br />2</td><td>-14%<br />3</td><td>7%<br />6</td><td>11</td><td>4</td></tr><tr><td>TERP</td><td>-4%<br />1</td><td>3%<br />6</td><td>1%<br />3</td><td>10</td><td>3</td></tr><tr><td>NEP</td><td>31%<br />6</td><td>-4%<br />5</td><td>-5%<br />1</td><td>12</td><td>5</td></tr><tr><td>ORA</td><td>4%<br />4</td><td>-25%<br />1</td><td>4%<br />4</td><td>9</td><td>2</td></tr><tr><td>PEGI</td><td>7%<br />5</td><td>-10%<br />4</td><td>5%<br />5</td><td>14</td><td>6</td></tr><tr><td>INGXF</td><td>3%<br />3</td><td>-18%<br />2</td><td>11%<br />7</td><td>12</td><td>5</td></tr><tr><td>AY </td><td>na</td><td>na</td><td>-4%<br />2</td><td>2</td><td>1</td></tr></tbody></table><div></div><br />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.<br /><br /><!-- x-tinymce/html -->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.<br /><br /><h3>Quality</h3><br />There are six metrics for quality:<br /><!-- x-tinymce/html --><br /><ol><li>Earnings volatility (measured as the standard deviation of six years of earnings),</li><li>Gross margin (gross profit divided by sales),</li><li>Net margin (net profit divided by sales)</li><li>Total asset turnover (sales divided by total assets),</li><li>Financial leverage (debt as a percentage of total capital)</li><li>Operating leverage </li></ol><div><br /></div><table class="table table-bordered"><tbody><tr><td><br /></td><td>Earnings Volatility<br />Value & Rank</td><td>Gross Margin<br />Value & Rank</td><td>Net Margin<br />Value & Rank</td><td>Asset Turnover<br />Value & Rank</td><td>Financial Leverage<br />Value & Rank</td><td>Operating Leverage<br />Value & Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>NPIFF</td><td>.54<br />6</td><td>.63<br />6</td><td>.20<br />5</td><td>.13<br />6</td><td>.84<br />1</td><td>1.55<br />6</td><td>30</td><td>5</td></tr><tr><td>TERP</td><td>1.51<br />2</td><td>.28<br />2</td><td>-.37<br />1</td><td>.10<br />4</td><td>.6<br />4</td><td>10.62<br />2</td><td>15</td><td>1</td></tr><tr><td>NEP</td><td>1.24<br />3</td><td>.40<br />4</td><td>.35<br />7</td><td>.08<br />1</td><td>.38<br />7</td><td>1.86<br />4</td><td>26</td><td>4</td></tr><tr><td>ORA</td><td>2.44<br />1</td><td>.39<br />3</td><td>.25<br />6</td><td>.27<br />7</td><td>.41<br />6</td><td>1.26<br />7</td><td>30</td><td>5</td></tr><tr><td>PEGI</td><td>.81<br />5</td><td>.15<br />1</td><td>-.20<br />2</td><td>.09<br />3</td><td>.45<br />5</td><td>10.96<br />1</td><td>17</td><td>2</td></tr><tr><td>INGXF</td><td>.37<br />7</td><td>.53<br />5</td><td>-.20<br />3</td><td>.09<br />2</td><td>.83<br />2</td><td>1.76<br />5</td><td>24</td><td>3</td></tr><tr><td>AY</td><td>.81<br />4</td><td>.66<br />7</td><td>-.10<br />4</td><td>.10<br />5</td><td>.76<br />3</td><td>2.23<br />3</td><td>26</td><td>4</td></tr></tbody></table><br /> NPIFF and ORA tied for the highest quality score, followed by NEP and AY.<br /><br /><!-- x-tinymce/html -->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.<br /><br />My opinion is some leverage is good. Looking at the top four candidates, they all had a decent blend of leverage.<br /><br /><h3>Growth</h3><br />There are four metrics for the factor growth:<br /><!-- x-tinymce/html --><br /><ol><li>Total revenue change over 1 year</li><li>EBITDA change over 1 year</li><li>Free cash flow change over 1 year</li><li>Gross margin change over 1 year</li></ol><div><br /></div><table class="table table-bordered"><tbody><tr><td><br /></td><td>Revenue d<br />Value & Rank</td><td>EBITDA d<br />Value & Rank</td><td>FCF d<br />Value & Rank</td><td>GM d<br />Value & Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>NPIFF</td><td>28%<br />7</td><td>38%<br />7</td><td>78%<br />6</td><td>5%<br />7</td><td>27</td><td>7</td></tr><tr><td>TERP</td><td>-6%<br />2</td><td>-28%<br />1</td><td>-60%<br />4</td><td>-24%<br />3</td><td>10</td><td>2</td></tr><tr><td>NEP</td><td>-4%<br />3</td><td>-8%<br />3</td><td>427%<br />7</td><td>-1%<br />4</td><td>17<br /><br /></td><td>6</td></tr><tr><td>ORA</td><td>5%<br />5</td><td>4%<br />6</td><td>-286%<br />1</td><td>-5%<br />4</td><td>15</td><td>4</td></tr><tr><td>PEGI</td><td>9%<br />6<br /><br /></td><td>2%<br />4</td><td>9%<br />5</td><td>-49%<br />2</td><td>16</td><td>5</td></tr><tr><td>INGXF</td><td>-12%<br />1</td><td>-12%<br />2</td><td>-114%<br />2</td><td>1%<br />6</td><td>11</td><td>3</td></tr><tr><td>AY</td><td>4%<br />4</td><td>3%<br />5</td><td>na</td><td>na</td><td>9</td><td>1</td></tr></tbody></table><br /><!-- x-tinymce/html -->NPIFF is clearly the stock with the best growth.<br /><br /><h3>Income</h3><br />I looked at three income factors:<br /><ol><li>Dividend yield</li><li>Dividend/share 3 year CAGR</li><li>Dividend/share 1 year change.</li></ol>Not every share offers a dividend, and dividends aren't important to every investor. Weight this factor as you will.<br /><!-- x-tinymce/html --><br />Here's the results:<br /><br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Dividend Yield<br />Value & Rank</td><td>Dividend/share 3yr CAGR<br />Value & Rank</td><td>Dividend/share 1yr d<br />Value & Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>NPIFF</td><td>5%<br />4</td><td>0%<br />3</td><td>3%<br />3</td><td>10</td><td>5</td></tr><tr><td>TERP</td><td>0%<br />1</td><td>na<br /><br /></td><td>na</td><td>1</td><td>1</td></tr><tr><td>NEP</td><td>4%<br />3</td><td>10%<br />5</td><td>15%<br />5</td><td>13</td><td>6</td></tr><tr><td>ORA</td><td>1%<br />2</td><td>16%<br />6</td><td>-21%<br />1</td><td>9</td><td>3</td></tr><tr><td>PEGI</td><td>8%<br />7</td><td>5%<br />4</td><td>6%<br />4</td><td>15</td><td>7</td></tr><tr><td>INGXF</td><td>6%<br />6</td><td>-5%<br />2</td><td>-11%<br />2</td><td>10</td><td>4</td></tr><tr><td>AY</td><td>5%<br />5</td><td><br /></td><td><br /></td><td>5</td><td>2</td></tr></tbody></table><br /><!-- x-tinymce/html -->PEGI has the best score for income.<br /><br /><h3>Value</h3><br />We'll look at four value factors:<br /><!-- x-tinymce/html --><br /><ol><li>Price to book</li><li>Price to sales</li><li>Price to earning</li><li>Enterprise value over EBITDA.</li></ol><div><br /></div><table class="table table-bordered"><tbody><tr><td><br /></td><td>PB<br />Value & Rank</td><td>PS<br />Value & Rank</td><td>PE<br />Value & Rank</td><td><span style="background-color: transparent;">EV/EBITDA</span><br />Value & Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>NPIFF</td><td>.05<br />1</td><td>3.1<br />5</td><td>28<br />1</td><td>12<br />6</td><td>13</td><td>4</td></tr><tr><td>TERP</td><td>.01<br />6</td><td>2.0<br />7</td><td>-3<br />na</td><td>18<br />3</td><td>16</td><td>6</td></tr><tr><td>NEP</td><td>.01<br />5</td><td>4.2<br />4</td><td>14<br />3</td><td>21<br />2</td><td>14<br /><br /></td><td>5<br /><br /></td></tr><tr><td>ORA</td><td>.02<br />3</td><td>4.7<br />2</td><td>19<br />2</td><td>13<br />5</td><td>12</td><td>3</td></tr><tr><td>PEGI</td><td>.02<br />4</td><td>4.9<br />1</td><td>-106<br />na</td><td>24<br />1</td><td>6<br /><br /></td><td>1<br /><br /></td></tr><tr><td>INGXF</td><td>.04<br />2</td><td>4.3<br />3</td><td>-38<br />na</td><td>16<br />4</td><td>9</td><td>2</td></tr><tr><td>AY</td><td>.01<br />7</td><td>2.1<br />6</td><td>-16<br />0</td><td>11<br />7</td><td>20</td><td>7</td></tr></tbody></table><!-- x-tinymce/html --><br /><h2></h2><br />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.<br /><br /><h3>Profitability</h3><br />There are six profitability factors:<br /><ol><li>Gross profits to assets</li><li>Net profit margin</li><li>5 year average pretax return on assets</li><li>3 year average ROE</li><li>Net operating income margin</li><li>Free cash flow yield</li></ol><!-- x-tinymce/html --><br />Here are the results:<br /><br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>GP/A<br />Value & Rank</td><td>NPM<br />Value & Rank</td><td>5yr avg ROA<br /><span style="background-color: transparent;">Value & Rank</span></td><td>3yr avg ROE<br />Value & Rank</td><td>Net OIM<br />Value & Rank</td><td>FCF Yield<br />Value & Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>NPIFF</td><td>.08<br />6</td><td>.20<br />5</td><td>.02<br />5</td><td>.12<br />7</td><td>.44<br />7</td><td>-.09<br />3</td><td>33</td><td>6</td></tr><tr><td>TERP</td><td>.03<br />2</td><td>-.37<br />1</td><td>-.02<br />1</td><td>-.19<br />1</td><td>.04<br />2</td><td>-.18<br />2</td><td>9</td><td>1</td></tr><tr><td>NEP</td><td>.03<br />3</td><td>.35<br />7</td><td>.03<br />6</td><td>.04<br />5</td><td>.38<br />5</td><td>.01<br />5</td><td>31</td><td>5</td></tr><tr><td>ORA</td><td>.10<br />7</td><td>.25<br />6</td><td>.05<br />7</td><td>.12<br />6</td><td>.30<br />3</td><td>-.01<br />4</td><td>33</td><td>6</td></tr><tr><td>PEGI</td><td>.01<br />1</td><td>-.20<br />2</td><td>-.01<br />3</td><td>-.03<br />3</td><td>.02<br />1</td><td>.02<br />6</td><td>16</td><td>2</td></tr><tr><td>INGXF</td><td>.05<br />4</td><td>-.20<br />3</td><td>-.01<br />2</td><td>-.05<br />2</td><td>.44<br />6</td><td>-.24<br />1</td><td>18</td><td>3</td></tr><tr><td>AY</td><td>.06<br />5</td><td>-.10<br />4</td><td>0.00<br />4</td><td>-.02<br />4</td><td>.37<br />4</td><td>.16<br />7</td><td>28</td><td>4</td></tr></tbody></table><br /><!-- x-tinymce/html -->NIPFF and ORA are tied for the most profitable companies.<br /><br /><h3>Putting It All Together</h3><br />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.<br /><br />The utilities sector displays less price volatility than the overall market and is showing less negative price momentum.<br /><br />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.<br /><br />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.<br /><br />NPIFF is showing excellent growth results. It came in number one and I like it more than I like the next highest growth company (<a class="ticker-link" href="https://seekingalpha.com/symbol/NEP">NEP</a>) as it didn't grow consistently across all categories.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br /><h3>Final Notes</h3><br />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.Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-65277915612705361362019-01-09T09:12:00.001-05:002019-01-09T09:12:50.651-05:00Omnicell - No Stand-Out Features<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://3.bp.blogspot.com/-6oG7DwjxucQ/XDYAAjjaF_I/AAAAAAAAAzs/9T0g_uZ3meQ6uGJNcfK3-7TsIYf10rpOgCLcBGAs/s1600/1.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="" border="0" data-original-height="534" data-original-width="1600" height="106" src="https://3.bp.blogspot.com/-6oG7DwjxucQ/XDYAAjjaF_I/AAAAAAAAAzs/9T0g_uZ3meQ6uGJNcfK3-7TsIYf10rpOgCLcBGAs/s320/1.jpg" title="Analysis on Omnicell" width="320" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">No Compelling Hypothesis</td></tr></tbody></table><br />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).<br /><br />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. <br /><br />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. <br /><br />OMCL and its peer group will be analyzed on six factors:<br /><ul><li>Price momentum,</li><li>Quality,</li><li>Growth,</li><li>Income,</li><li>Value,</li><li>Profitability.</li></ul>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.<br /><br />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.<br /><h2>Overview:</h2>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.<br />Founded: 1992<br />Number of Employees: 2350<br />Headquarters: Mountain View US<br />CEO: Randall A. Lipps<br /><br /><h4>Peer Group:</h4><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price</td><td>Market Cap</td></tr><tr><td>HMS Holdings Corp.(HMSY:XNAS)</td><td>$28.23</td><td>2.3692B</td></tr><tr><td>National Research Corporation Class A (NRCIA:XNAS)</td><td>$38.67</td><td>957.55447M</td></tr><tr><td>Allscripts Healthcare Solutions, Inc.(MDRX:XNAS)</td><td>$9.46</td><td>1.6527B</td></tr><tr><td>Stericycle, Inc.(SRCL:XNAS)</td><td>$36.60</td><td>3.3160B</td></tr><tr><td>Syneos Health Inc, Class A (SYNH:XNAS)</td><td>$38.24</td><td>3.9473B</td></tr><tr><td>Healthcare Services Group, Inc.(HCSG:XNAS)</td><td>$39.46</td><td>2.9117B</td></tr><tr><td>CompuGroup Medical SE Unsponsored ADR(CMPUY:OOTC)</td><td>$29.40</td><td>1.4569B</td></tr><tr><td>Omnicell, Inc.(OMCL:XNAS)</td><td>$60.48</td><td>2.3959B</td></tr></tbody></table><h2> Market and Sector Price Momentum Analysis </h2>Let's start by getting a visual perspective on how the market and sector have been performing.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/632/2018-12-29-17-17-39.html?0.9381697748398894" width="700"></iframe><br />It's been quite a volatile year, coming off a couple years of pleasant growth. <br /><br />Let's look next at market and sector momentum.<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Longer Term -<br />% Price Change over Two Years</td><td>Medium Term -<br />12 Month Less 1 Month Price Change</td><td>Short Term -<br />Price Less 3 Month Moving Average</td></tr><tr><td>Market - S&P 500</td><td>11.03% (bullish)</td><td>3.2% (weakly bullish)</td><td>-11.07% (bearish)</td></tr><tr><td>Sector - S&P Health Care Select Sector</td><td>23.91% (strongly bullish)</td><td>14.69% (bullish)</td><td>-8.14% (bearish)</td></tr></tbody></table><br />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,<br /><h2>Price Momentum</h2>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:<br /><ol><li>Percentage price change over two years,</li><li>12 month less one month price change,</li><li>Price less 3 month moving average change.</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Long Term -<br />% Price Change over Two Years<br />/Rank</td><td>Medium Term -<br />12 Month Less 1 Month Price Change<br />/ Rank</td><td>Short Term -<br />Price Less 3 Month Moving Average<br />/ Rank</td><td>Sum</td><td>Final Rank</td></tr><tr><td>HMSY</td><td>55%/6</td><td>111%/8</td><td>-14%/3</td><td>17</td><td>6</td></tr><tr><td>NRCIA</td><td>104%/8</td><td>7%/5</td><td>1%/8</td><td>21</td><td>8</td></tr><tr><td>MDRX</td><td>-7%/3</td><td>-30%/1</td><td>-9%/5</td><td>9</td><td>2</td></tr><tr><td>SRCL</td><td>-52%/1</td><td>-29%/2</td><td>-18%/1</td><td>4</td><td>1</td></tr><tr><td>SYNH</td><td>-27%/2</td><td>19%/6</td><td>-17%/2</td><td>10</td><td>3</td></tr><tr><td>HCSG</td><td>1%/5</td><td>-10%/3</td><td>-8%/6</td><td>14</td><td>4</td></tr><tr><td>CMPUY</td><td>0%/4</td><td>0%/4</td><td>0%/7</td><td>15</td><td>5</td></tr><tr><td>OMCL</td><td>78%/7</td><td>59%/7</td><td>-12%/4</td><td>18</td><td>7</td></tr></tbody></table><br />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.<br /><h2>Quality</h2>There are five metrics for quality:<br /><ol><li> Earnings volatility (measured as the standard deviation of six years of earnings),</li><li> Gross margin (gross profit divided by sales),</li><li> Net margin (net profit divided by sales)</li><li> Total asset turnover (sales divided by total assets),</li><li> Financial leverage (debt as a percentage of total capital)</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>SD of Earnings<br />/ Rank</td><td>GM <br />/ Rank</td><td>NM <br />/ Rank</td><td>Asset Turnover <br />/ Rank</td><td>Financial<br />Leverage<br />/ Rank</td><td>Sum <br />/ Final<br />Rank</td></tr><tr><td>HMSY</td><td>14%/8</td><td>30%/3</td><td>8%/7</td><td>53%/4</td><td>28%/6</td><td>28/7</td></tr><tr><td>NRCIA</td><td>21%/7</td><td>54%/8</td><td>19%/8</td><td>92%/7</td><td>1%/8</td><td>38/8</td></tr><tr><td>MDRX</td><td>44%/3</td><td>41%/6</td><td>-9%/1</td><td>43%/2</td><td>50%/3</td><td>15/2</td></tr><tr><td>SRCL</td><td>116%/2</td><td>41%/5</td><td>1%/3</td><td>51%/3</td><td>49%/4</td><td>17/3</td></tr><tr><td>SYNH</td><td>131%/1</td><td>17%/2</td><td>-1%/2</td><td>37%/1</td><td>50%/2</td><td>8/1</td></tr><tr><td>HCSG</td><td>28%/4</td><td>14%/1</td><td>5%/5</td><td>273%/8</td><td>8%/7</td><td>25/5</td></tr><tr><td>CMPUY</td><td>21%/6</td><td>35%/4</td><td>5%/6</td><td>65%/5</td><td>61%/1</td><td>22/4</td></tr><tr><td>OMCL</td><td>27%/5</td><td>45%/7</td><td>3%/4</td><td>73%/6</td><td>29%/5</td><td>27/6</td></tr></tbody></table><br />NRCIA got the highest score for quality and OMCL came in third.<br /><h2>Growth</h2>There are five metrics for the factor growth:<br /><ol><li>Total revenue change over 1 year</li><li>EBITDA change over 1 year</li><li>Free cash flow change over 1 year</li><li>Gross margin change over 1 year</li><li>Number of year over year growth in earnings.</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Revenue d <br />Over <span style="background-color: transparent;">1 Year </span><br /><span style="background-color: transparent;">/ Rank</span></td><td>EBITDA d<br />Over 1 Year<br />/ Rank</td><td>FCF d<br />Over 1 Year<br />/ Rank</td><td>GM d<br />Over 1 Year<br />/ Rank</td><td>Number of<br />Years Growth<br />/ Rank <br />(max score 6)</td><td>Sum<br />/ Final<br />Rank</td></tr><tr><td>HMSY</td><td>6%/3</td><td>-2%/3</td><td>-8%/4</td><td>-0%/6</td><td>4/7</td><td>23/5</td></tr><tr><td>NRCIA</td><td>7%/5</td><td>10%/6</td><td>3%/6 </td><td>-0%/7</td><td>*3/6</td><td>30/7</td></tr><tr><td>MDRX</td><td>17%/6</td><td>10%/7</td><td>-0%/5</td><td>-1%/5</td><td>2/5</td><td>28/6</td></tr><tr><td>SRCL</td><td>1%/1</td><td>-65%/1</td><td>-11%/3</td><td>-1%/4</td><td>3/6</td><td>15/3</td></tr><tr><td>SYNH</td><td>66%/8</td><td>46%/8</td><td>98%/8</td><td>-23%/1</td><td>*3/6</td><td>31/8</td></tr><tr><td>HCSG</td><td>19%/7</td><td>8%/5</td><td>-94%/1</td><td>-4%/2</td><td>5/8</td><td>23/5</td></tr><tr><td>CMPUY</td><td>7%/4</td><td>2%/4</td><td>56%/7</td><td>4%/8</td><td>4/7</td><td>30/7</td></tr><tr><td>OMCL</td><td>3%/2</td><td>-21%/2</td><td>-74%/2</td><td>-1%/3 </td><td>5/8</td><td>17/4</td></tr></tbody></table><br />OMCL got the second to worst score. SYNH got the best.<br /><h2>Income</h2>Most of these companies including OMCL don't offer dividends so we won't be looking at this factor.<br /><h2>Value</h2>We'll look at five value factors:<br /><ol><li>Enterprise value over EBITDA</li><li>Price to book</li><li>Price to earnings</li><li>Price to sales</li><li>Price to theoretical price (as calculated using the Ohlson Clean Surplus (OCS), for more information on the valuation tool, please review this <a href="https://seekingalpha.com/article/4085164-using-ohlson-clean-surplus-theory-valuation" target="_blank">article</a>).</li></ol>Here are the results:<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>EV/EBITDA<br />/ Rank</td><td>P/B<br />/ Rank</td><td>P/E<br />/ Rank</td><td>P/S<br />/ Rank</td><td>P/TP<br />/ Rank</td><td>Sum<br />/ Final<br />Rank</td></tr><tr><td>HMSY</td><td>15/8</td><td>.04/5</td><td>60/4</td><td>2.8/3</td><td>4/4</td><td>24/6</td></tr><tr><td>NRCIA</td><td>41/1</td><td>.3/1</td><td>73/3</td><td>14/1</td><td>8/2</td><td>8/2</td></tr><tr><td>MDRX</td><td>17/6</td><td>.02/6</td><td>na**/0</td><td>1.5/7</td><td>10/1</td><td>20/4</td></tr><tr><td>SRCL</td><td>35/3</td><td>.011/8</td><td>513/1</td><td>1.6/6</td><td>2/8</td><td>26/7</td></tr><tr><td>SYNH</td><td>16/7</td><td>.014/7</td><td>na**/0</td><td>1.2/8</td><td>3.1/6</td><td>28/8</td></tr><tr><td>HCSG</td><td>29/4</td><td>.07/2</td><td>33/6</td><td>2.1/5</td><td>3.3/5</td><td>22/5</td></tr><tr><td>CMPUY</td><td>27/5</td><td>.05/3</td><td>41/5</td><td>4.9/2</td><td>2.8/7</td><td>22/5</td></tr><tr><td>OMCL</td><td>36/2</td><td>.04/4</td><td>114/2</td><td>2.6/4</td><td>6/3</td><td>15/3</td></tr></tbody></table><br />OMCL is the second most expensive.<br /><h2>Profitability</h2>There are six profitability factors:<br /><ol><li>Gross profits to assets</li><li>Net profit margin</li><li>5 year average pretax return on assets</li><li>3 year average ROE</li><li>Net operating income margin</li><li>Free cash flow yield</li></ol> Here are the results:<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>GP/Assets<br />/ Rank</td><td>NPM<br />/ Rank</td><td>5 yr avg<br />Pretax ROA<br />/ Rank</td><td>3 yr avg<br />ROE<br />/ Rank</td><td>Net<br />OIM<br />/ Rank</td><td>FCF<br />Yield<br />/ Rank</td><td>Sum<br />/ Final<br />Rank</td></tr><tr><td>HMSY</td><td>16%/2</td><td>8%/7</td><td>5%/4</td><td>6%/4</td><td>10%/6</td><td>3%/4</td><td>27/5</td></tr><tr><td>NRCIA</td><td>50%/8</td><td>19%/8</td><td>24%/8</td><td>25%/8</td><td>29%/8</td><td>0%/2</td><td>42/8</td></tr><tr><td>MDRX</td><td>18%/3</td><td>-9%/1</td><td>-3%/1</td><td>-6%/1</td><td>2%/3</td><td>14%/8</td><td>17/1</td></tr><tr><td>SRCL</td><td>21%/4</td><td>1%/3</td><td>6%/5</td><td>5%/3</td><td>0%/1</td><td>11%/7</td><td>23/4</td></tr><tr><td>SYNH</td><td>6%/1</td><td>-5%/2</td><td>3%/2</td><td>24%/7</td><td>6%/4</td><td>5%/6</td><td>22/3</td></tr><tr><td>HCSG</td><td>38%7</td><td>5%/5</td><td>17%/7</td><td>23%/6</td><td>7%/5</td><td>-2%/1</td><td>31/6</td></tr><tr><td>CMPUY</td><td>23%/5</td><td>5%/6</td><td>7%/6</td><td>19%/5</td><td>14%/7</td><td>4%/5</td><td>34/7</td></tr><tr><td>OMCL</td><td>33%/6</td><td>3%/4</td><td>5%/3</td><td>4%/2</td><td>1%/2</td><td>0%/3</td><td>20/2</td></tr></tbody></table><br />OMCL is the second least profitable, NRCIA is the most profitable.<br /><h2>Summary</h2>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.<br /><br />Given these results, there is no investment hypothesis for OMCL at this time.<br /><h2>Disclaimer</h2>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.<br /><br /><h2>Analysis Notes</h2>* SYNH and NRCIA only had five years of EPS data.<br />**Negative number<br /><br /><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-85584945470923693362019-01-07T17:18:00.000-05:002019-01-07T17:18:20.492-05:00Demographics & InvestingPlease read our newest exclusive Seeking Alpha article:<br /><a href="https://seekingalpha.com/article/4231912-demographics-point-bear-market-next-five-years" target="_blank">"Demographics Point To A Bear Market for the Next Five Years".</a>Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-46298409725001202272018-11-29T06:13:00.000-05:002018-11-29T06:13:31.460-05:00A 5-Factor Analysis of Square<div class="separator" style="clear: both; text-align: center;"><a href="https://1.bp.blogspot.com/-YAuowA9Wrn0/W__GgvE6dsI/AAAAAAAAAzg/wNZEGuQs8c0kEP-BfM6CGKh-45PaYICaQCLcBGAs/s1600/logo.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="" border="0" data-original-height="195" data-original-width="195" src="https://1.bp.blogspot.com/-YAuowA9Wrn0/W__GgvE6dsI/AAAAAAAAAzg/wNZEGuQs8c0kEP-BfM6CGKh-45PaYICaQCLcBGAs/s1600/logo.png" title="factor-based analysis on square" /></a></div><h2><br /></h2><h2>Overview:</h2>Square, Inc. engages in the provision of credit card payment processing solutions. The firm offers additional point-of-sale services, financial services, and marketing services. The company was founded by Jack Dorsey and Jim McKelvey in February 2009 and is headquartered in San Francisco, CA.<br /><br />Number of Employees: 2,338<br />CEO: Jack Dorsey<br /><br /><h4>Peer Group:</h4><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price</td><td>Market Cap</td></tr><tr><td>CDW Corp.(CDW:XNAS)</td><td>$87.87</td><td>13.2596B</td></tr><tr><td>Cap Gemini SA(CAPMF:OOTC)</td><td>$116.37</td><td>19.5645B</td></tr><tr><td>Constellation Software Inc.(CNSWF:OOTC)</td><td>$689.40</td><td>14.6094B</td></tr><tr><td>Hexagon AB Unsponsored ADR Class B(HXGBY:OOTC)</td><td>$48.83</td><td>16.8305B</td></tr><tr><td>NTT DATA Corporation Unsponsored ADR(NTDTY:OOTC)</td><td>$10.99</td><td>15.4135B</td></tr><tr><td>Wipro Limited Sponsored ADR(WIT:XNYS)</td><td>$5.08</td><td>22.8726B</td></tr><tr><td>Workday, Inc. Class A(WDAY:XNYS)</td><td>$135.26</td><td>29.3514B</td></tr><tr><td>Vantiv, Inc. Class A(VNTV:XNYS) aka Worldpay (WP)</td><td>$79.49</td><td>23.9945B</td></tr><tr><td>ServiceNow, Inc.(NOW:XNYS)</td><td>$160.63</td><td>28.8018B</td></tr><tr><td>Shopify, Inc. Class A(SHOP:XNYS)</td><td>$134.81</td><td>14.4205B</td></tr><tr><td>Atlassian Corp. Plc Class A(TEAM:XNAS)</td><td>$73.20</td><td>17.2250B</td></tr><tr><td>Splunk Inc.(SPLK:XNAS)</td><td>$92.57</td><td>13.5718B</td></tr><tr><td>CGI Group Inc. Class A(GIB:XNYS)</td><td>$62.58</td><td>17.4416B</td></tr><tr><td>Square, Inc. Class A(SQ:XNYS)</td><td>$63.47</td><td>26.1733B</td></tr></tbody></table><h2>Analysis Methodology</h2>The goal of this analysis is to determine if there is a viable investment strategy in the stock Square.<br />The analysis will begin by evaluating the price momentum of the market and industry using long, medium and short term measures. We'll then follow with a peer-based analysis of Square using the following six factors:<br /><ul><li>Price Momentum</li><li>Quality</li><li>Growth</li><li>Income</li><li>Value</li><li>Profitability.</li></ul>Each factor uses several metrics each providing different insight. For example, the profitability factor looks at gross profit to assets, net profit margin, the 5 year average on the pretax return on assets, the 3 year average ROE, net operating income margin and the free cash flow yield. <br /><br />The company with the best metric value is given a score of 14 (as there are 14 companies in the group we are looking at), the second best a 13, and so on. The ranking process is repeated for each metric and then all of the scores for the particular factor are summed. The grand total is then re-ranked and the best company for the particular factor becomes apparent.<br /><br />INVRS lets you analyze a company in any way you wish. It's an extremely robust and flexible platform allowing you to easily accomplish two of the most difficult, yet profitable investment tasks: create investment models and perform peer based analysis.<br /><br /><b>Date</b>: This analysis was performed on Sunday, November 25, 2018 and uses the closing prices from the 23rd.<br /><h2>Market and Sector Price Momentum Analysis</h2>Let's start with an overview of the market and sector. Let's look at a year price graph and then review momentum.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/630/2018-11-26-06-27-12.html?0.550841269307095" width="700"></iframe><br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Longer Term -<br />% Price Change over Two Years</td><td>Medium Term -<br />12 Month Less 1 Month Price Change</td><td>Short Term -<br />Price Less 3 Month Moving Average</td></tr><tr><td>Market (S&P 500)</td><td>20 % - bullish</td><td>2% - weakly bullish</td><td>-7% - bearish</td></tr><tr><td>Sector (S&P Information Tech)</td><td>41% - bullish</td><td>10% - bullish</td><td>-13% - bearish</td></tr></tbody></table><br />Both the market and the sector are showing a similar pattern - positive price momentum in the long-term category, becoming weaker over the medium term and turning negative in the short term. This trend is not favourable to a long position in the near term and a short could be premature.<br /><h2>Price Momentum for SQ and the Group</h2><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Long Term -<br />% Price Change over Two Years<br />/Rank</td><td>Medium Term -<br />12 Month Less 1 Month Price Change<br />/ Rank</td><td>Short Term -<br />Price Less 3 Month Moving Average<br />/ Rank</td><td>Sum</td><td>Final Rank</td></tr><tr><td>SQ</td><td>340% / 14</td><td>87% /14</td><td>-20% /1</td><td>29</td><td>10</td></tr><tr><td>SHOP</td><td>224% /13</td><td>33% / 11</td><td>-7% / 8</td><td>32</td><td>13</td></tr><tr><td>TEAM</td><td>170% / 12</td><td>63% / 13</td><td>-9% / 6</td><td>31</td><td>12</td></tr><tr><td>NOW</td><td>93% / 11</td><td>47% / 12</td><td>-11% / 4</td><td>27</td><td>9</td></tr><tr><td>CDW</td><td>71% /10</td><td>29% / 9</td><td>2% / 14</td><td>33</td><td>14</td></tr><tr><td>SPLK</td><td>61% / 9</td><td>25% / 8</td><td>-11% / 5</td><td>22</td><td>7</td></tr><tr><td>WDAY</td><td>60% / 8</td><td>29% / 10</td><td>0% / 12</td><td>30</td><td>11</td></tr><tr><td>CAPMF</td><td>48% / 7</td><td>5% / 3</td><td>-3% / 9</td><td>19</td><td>5</td></tr><tr><td>CNSWF</td><td>48% / 6</td><td>18% / 6</td><td>-1% / 11</td><td>23</td><td>8</td></tr></tbody></table><table class="table table-bordered"><tbody><tr><td>HXGBY </td><td>44% / 5 </td><td>-2% / 2 </td><td>-7% / 7 </td><td>14 </td><td>3 </td></tr><tr><td>VNTV/WP</td><td>41% / 4</td><td>22% / 7</td><td>-15% / 3</td><td>14</td><td>4</td></tr><tr><td>GIB</td><td>32% / 3</td><td>17% / 5</td><td>0% / 13</td><td>21</td><td>6</td></tr><tr><td>WIT</td><td>-47% / 2</td><td>-4% / 1</td><td>-1% / 10</td><td>13</td><td>2</td></tr><tr><td>NTDTY</td><td>-57% / 1</td><td>9% / 4</td><td>-17% / 2</td><td>7</td><td>1</td></tr></tbody></table><br />From a purely ranking perspective, CDW has the best price momentum. SQ is fifth. However, we're seeing the same pattern we saw with the market and industry: long & medium term positive momentum turning negative in the short term. We're also seeing that the company with the greatest positive long & medium term momentum also has the greatest negative short term momentum, which happens to be SQ.<br /><h2>Quality </h2>We'll look at five metrics for the factor of quality:<br /><ol><li>Earning volatility (as measured by the standard deviation of six years of earnings)</li><li>Gross margin (gross profit divided by sales)</li><li>Net margin (net profit divided by sales)</li><li>Total asset turnover (sales divided by total assets)</li><li>Financial leverage (debt as a percentage of total capital)</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>SD of Earnings / Rank</td><td>Gross Margin / Rank</td><td>Net Margin / Rank</td><td>Sales/Assets / Rank</td><td>Financial Leverage / Rank</td><td>Sum</td><td>Final Rank</td></tr><tr><td>CDW</td><td>1.1 / 3</td><td>.2 / 2</td><td>0 / 8</td><td>2.2 / 14</td><td>.8 / 2</td><td>29</td><td>5</td></tr><tr><td>CAPMF</td><td>1.9 / 2</td><td>.3 / 4</td><td>.1 / 10</td><td>.7 / 9</td><td>.3 / 9</td><td>34</td><td>8</td></tr><tr><td>CNSWF</td><td>2.4 /1</td><td>.3 / 5</td><td>.1 / 11</td><td>1.1 / 13</td><td>.4 / 7</td><td>37</td><td>9</td></tr><tr><td>HXGBY</td><td>.8 / 7</td><td>.6 / 10</td><td>.2 / 14</td><td>.4 / 2</td><td>.3 / 8</td><td>41</td><td>11</td></tr><tr><td>NTDTY</td><td>.2 / 11</td><td>.2 / 3</td><td>0 / 7</td><td>.9 / 10</td><td>.4 / 6</td><td>37</td><td>9</td></tr><tr><td>WIT</td><td>.1 / 14</td><td>.3 / 6</td><td>.1 / 13</td><td>.7 / 8</td><td>.2 / 11</td><td>52</td><td>14</td></tr><tr><td>WDAY</td><td>.4 / 8</td><td>.7 / 11</td><td>-.1 / 2</td><td>.4 / 3</td><td>.5 / 4</td><td>28</td><td>4</td></tr><tr><td>VNTV/WP</td><td>.3 / 10</td><td>.4 / 8</td><td>0 / 9</td><td>.5 / 4</td><td>.9 / 1</td><td>32</td><td>7</td></tr></tbody></table><table class="table table-bordered"><tbody><tr><td>NOW </td><td>.8 / 6 </td><td>.7 / 12 </td><td>-.1 / 4 </td><td>.6 / 5 </td><td>.7 / 3 </td><td>30 </td><td>6 </td></tr><tr><td>SHOP</td><td>.2 / 13</td><td>.6 / 9</td><td>-.1 / 5</td><td>.6 / 6</td><td>0 / 13</td><td>46</td><td>13</td></tr><tr><td>TEAM</td><td>.2 / 12</td><td>.8 / 13</td><td>-.1 / 3</td><td>.4 / 1</td><td>.5 / 5</td><td>34</td><td>8</td></tr><tr><td>SPLK</td><td>.9 / 4</td><td>.8 / 14</td><td>-.2 / 1</td><td>.6 / 7</td><td>0 / 14</td><td>40</td><td>10</td></tr><tr><td>GIB</td><td>.8 / 5</td><td>.1 / 1</td><td>.1 / 12</td><td>1.0 / 11</td><td>.2 / 12</td><td>41</td><td>11</td></tr><tr><td>SQ</td><td>.4 / 9</td><td>.4 / 7</td><td>0 / 6</td><td>1.0 / 12</td><td>.3 / 10</td><td>44</td><td>12</td></tr></tbody></table><br />Note: there were a couple of tied values in this factor, which is why it ranges from 14 to 4.<br />The highest quality stock is WIT, SQ was the third highest.<br /><h2>Growth</h2>There are five metrics for the factor growth:<br /><ol><li>Total revenue change over 1 year</li><li>EBITDA change over 1 year</li><li>Free cash flow change over 1 year</li><li>Gross margin change over 1 year</li><li>Number of year over year growth in earnings.</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Total revenue <span style="background-color: transparent;">/ Rank</span></td><td>EBTIDA <span style="background-color: transparent;">/ Rank</span></td><td>FCF / Rank</td><td>GM / Rank</td><td># of Year of <br />Growth / Rank</td><td>Sum</td><td>Final Rank</td></tr><tr><td>CDW</td><td>9% / 5</td><td>29% / 8</td><td>29% / 9</td><td>-3% / 1</td><td>5 / 14</td><td>37</td><td>8</td></tr><tr><td>CAPMF</td><td>4% / 2</td><td>6% / 5</td><td>3% / 4</td><td>-1% / 5</td><td>3 / 9</td><td>25</td><td>4</td></tr><tr><td>CNSWF</td><td>17% / 7</td><td>25% / 7</td><td>13% / 6</td><td>1% / 7</td><td>5 / 14</td><td>41</td><td>9</td></tr><tr><td>HXGBY</td><td>12% / 6</td><td>12% / 6</td><td>21% / 7</td><td>3% / 10</td><td>4 / 13</td><td>42</td><td>10</td></tr><tr><td>NTDTY</td><td>19% / 8</td><td>5% / 4</td><td>-24% / 2</td><td>-2% / 3</td><td>2 / 6</td><td>23</td><td>3</td></tr><tr><td>WIT</td><td>3% / 1</td><td>-1% / 3</td><td>-12% / 3</td><td>1% / 8</td><td>3 / 11</td><td>26</td><td>5</td></tr><tr><td>WDAY</td><td>37% / 11</td><td>30% / 9</td><td>41% / 10</td><td>2% / 9</td><td>2 / 7</td><td>46</td><td>12</td></tr><tr><td>VNTV/WP</td><td>12% / 6</td><td>-4% / 2</td><td>22% / 8</td><td>-2% / 4</td><td>3 / 10</td><td>30</td><td>6</td></tr></tbody></table><table class="table table-bordered"><tbody><tr><td>NOW </td><td>39% / 12 </td><td>118% / 12 </td><td>806% / 13 </td><td>4% / 12 </td><td>1 / 4 </td><td>53 </td><td>13 </td></tr><tr><td>SHOP</td><td>73 % / 14</td><td>-11% / 1</td><td>-24% / 1</td><td>6% / 13</td><td>0 / 2</td><td>31</td><td>7</td></tr><tr><td>TEAM</td><td>41 % / 13</td><td>1,768% / 14</td><td>53% / 11</td><td>-3% / 2</td><td>1 / 3</td><td>43</td><td>11</td></tr><tr><td>SPLK</td><td>34% / 10</td><td>32% / 10</td><td>55% / 12</td><td>0% / 6</td><td>1 / 5</td><td>43</td><td>11</td></tr><tr><td>GIB</td><td>9% / 4</td><td>114% / 11</td><td>11% / 5</td><td>3% / 11</td><td>4 / 12</td><td>43</td><td>11</td></tr><tr><td>SQ</td><td>30% / 9</td><td>161% / 13</td><td>4,514% / 14</td><td>14% / 14</td><td>2 / 8</td><td>58</td><td>14</td></tr></tbody></table>*Dividing by a negative gives a nonsense result, however one can attempt to make sense of the number by making assumptions. In this case, our assumption is if the numerator is positive and the denominator is negative, we convert the denominator into a positive number. If both are negative, but the numerator is less than the denominator, we convert the quotient into a negative number<br />SQ has the highest growth rate.<br /><h2>Income</h2>Although some of these companies in this peer group offer a dividend, SQ does not, so we won't look at this factor.<br /><h2>Value</h2>We'll look at five value factors:<br /><ol><li>Enterprise value over EBITDA</li><li>Price to book</li><li>Price to earnings</li><li>Price to sales</li><li>Theoretical price (as calculated using the Ohlson Clean Surplus (OCS), for more information on the valuation tool, please review this <a href="https://seekingalpha.com/article/4085164-using-ohlson-clean-surplus-theory-valuation" target="_blank">article</a>) over current price.</li></ol>Here are the results:<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>EV/EBITDA / Rank</td><td>P/B / Rank</td><td>P/E / Rank</td><td>P/S / Rank</td><td>P/TP</td><td>Sum</td><td>Final Rank</td></tr><tr><td>CDW</td><td>13 / 9</td><td>14 / 8</td><td>27 /4</td><td>1 / 14</td><td>.6 / 14</td><td>49</td><td>11</td></tr><tr><td>CAPMF</td><td>11 / 10</td><td>12 / 10</td><td>21 / 6</td><td>1 / 12</td><td>1.4 / 10</td><td>48</td><td>10</td></tr><tr><td>CNSWF</td><td>18 / 5</td><td>24 / 4</td><td>66 / 2</td><td>5 / 7</td><td>2.8 / 8</td><td>26</td><td>8</td></tr><tr><td>HXGBY</td><td>17 / 6</td><td>3 / 12</td><td>23 / 5</td><td>5 / 8</td><td>.9 / 11</td><td>42</td><td>9</td></tr><tr><td>NTDTY</td><td>6 /11</td><td>2 / 14</td><td>29 / 3</td><td>1 / 13</td><td>1.4 / 9</td><td>50</td><td>12</td></tr><tr><td>WIT</td><td>14 / 7</td><td>3 / 13</td><td>19 / 8</td><td>3 / 10</td><td>.9 / 12</td><td>50</td><td>12</td></tr><tr><td>WDAY</td><td>*</td><td>18 / 6</td><td>*</td><td>12 / 3</td><td>40.8 / 3</td><td>12</td><td>2</td></tr><tr><td>VNTV/WP</td><td>21 / 4</td><td>24 / 3</td><td>99 / 1</td><td>3 / 9</td><td>3.6 / 7</td><td>24</td><td>7</td></tr><tr><td>NOW</td><td>1,742 / 1</td><td>48 / 1</td><td>*</td><td>12 / 4</td><td>164.1 /1</td><td>7</td><td>1</td></tr></tbody></table><table class="table table-bordered"><tbody><tr><td>SHOP </td><td>* </td><td>13 / 9 </td><td>* </td><td>14 / 2 </td><td>6.3 / 6 </td><td>17 </td><td>6 </td></tr><tr><td>TEAM</td><td>527 / 2</td><td>19 / 5</td><td>*</td><td>17 / 1</td><td>23.9 / 4</td><td>12</td><td>3</td></tr><tr><td>SPLK</td><td>*</td><td>16 / 7</td><td>*</td><td>10 / 5</td><td>108.8 / 2</td><td>14</td><td>4</td></tr><tr><td>GIB</td><td>13 / 8</td><td>3 / 11</td><td>20 / 7</td><td>2 / 11</td><td>.8 /13</td><td>50</td><td>12</td></tr><tr><td>SQ</td><td>252 / 3</td><td>32/ 2</td><td>*</td><td>6 / 6</td><td>14.3 / 5</td><td>16</td><td>5</td></tr></tbody></table><br />* negative denominator, nonsensical value.<br /><br />SQ is showing poor value, the fifth lowest score.<br /><h2>Profitability</h2>There are six profitability factors:<br /><ol><li>Gross profits to assets</li><li>Net profit margin</li><li>5 year average pretax return on assets</li><li>3 year average ROE</li><li>Net operating income margin</li><li>Free cash flow yield</li></ol> Here are the results:<br /><div><br /></div><table class="table table-bordered"><tbody><tr><td><br /></td><td>GP TO ASSETS / RANK</td><td>NET PROFIT MARGIN</td><td>5 YEAR AVG PRETAX<br />RETURN ON ASSETS</td><td>3 YEAR AVG<br />ROE</td><td>NET OPERATING<br />INCOME MARGIN</td><td>FREE CASH<br />FLOW YIELD</td><td>SUM</td><td>FINAL<br />RANK</td></tr><tr><td>CDW</td><td>.35 / 11</td><td>3% / 8</td><td>8% / 10</td><td>44% / 13</td><td>6% / 7</td><td>4% / 9</td><td>58</td><td>9</td></tr><tr><td>CAPMF</td><td>.19 / 2</td><td>6% / 10</td><td>6% / 9</td><td>14% / 9</td><td>11% / 9</td><td>5% / 11</td><td>50</td><td>6</td></tr><tr><td>CNSWF</td><td>.30 / 8</td><td> 9% / 11</td><td>12% / 13</td><td>51% / 14</td><td>18% / 13</td><td>3% / 7</td><td>66</td><td>12</td></tr><tr><td>HXGBF</td><td>.23 / 6</td><td>20% / 14</td><td>8% / 11</td><td>14% / 8 </td><td>22% / 14</td><td>4% / 8</td><td>61</td><td>11</td></tr><tr><td>NTDTY</td><td>.23 / 5</td><td>3% / 7</td><td>16% / 14</td><td>8% / 7</td><td>6% / 8</td><td>7% / 14</td><td>55</td><td>8</td></tr><tr><td>WIT</td><td>.21 / 4</td><td>15% / 13</td><td>4% / 7</td><td>17% / 12</td><td>15% / 12</td><td>4% / 10</td><td>58</td><td>9</td></tr><tr><td>WDAY</td><td>.31 / 9</td><td>-15% / 2</td><td>-9% / 5</td><td>-26% / 4</td><td>-14% / 2</td><td>1% / 3</td><td>25</td><td>1</td></tr><tr><td>VNTV</td><td>.21 / 3</td><td>5% / 9</td><td>6% / 8</td><td>16% / 10</td><td>13% / 10</td><td>5% / 12</td><td>52</td><td>7</td></tr><tr><td>NOW</td><td>.42 / 13</td><td>-8% / 4</td><td>-11% / 3</td><td>-62% / 2</td><td>-5% / 5</td><td>2% / 5</td><td>32</td><td>5</td></tr></tbody></table><table class="table table-bordered"><tbody><tr><td>SHOP </td><td>.34 / 10 </td><td>-6% / 5 </td><td>-10% / 4 </td><td>-9% / 5 </td><td>-7% / 3 </td><td>0% / 1 </td><td>28 </td><td>3 </td></tr><tr><td>TEAM</td><td>.27 / 7</td><td>-14% / 3</td><td>0% / 6</td><td>-6% / 6</td><td>-6% / 4</td><td>2% / 4</td><td>30</td><td>4</td></tr><tr><td>SPLK</td><td>.5 / 14</td><td>-20% / 1</td><td>-15% / 2</td><td>-36% / 3</td><td>-20% / 1</td><td>2% / 6</td><td>27</td><td>2</td></tr><tr><td>GIB</td><td>.13 / 1</td><td>10% / 12</td><td>12% / 12</td><td>17% / 11</td><td>13% / 11</td><td>6% / 13</td><td>60</td><td>10</td></tr><tr><td>SQ</td><td>.37 / 12</td><td>-3% / 6</td><td>-19% / 1</td><td>66% / 1</td><td>1% / 6</td><td>0% / 2</td><td>28</td><td>3</td></tr></tbody></table><div><br />SQ profitability showing is poor at 3.</div><div><br /></div><h2>Summary</h2><div><br /></div><div>SQ's standout characteristic is its growth rate. Out of a group of 14 peers, it achieved the highest combined score for growth as well as had the highest individual scores for free cash flow and gross margin. It was also strong in quality, with the third highest position. The bear story is that it's expensive and it doesn't have strong profitability. Furthermore the price momentum for the stock, sector and the market appears to be at an inflection point - possible changing from direction from upward to down.</div><div><br /></div><div>My opinion is there is a lot of risk with a position in the stock at this time. I would remain on the sidelines until a clearer story emerges.</div><div><br /></div><h2>Disclaimer</h2><div>Part of intelligent investing involves taking on risk levels appropriate to one's circumstances. We don't know what your's 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.<br /><br /></div>Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-79847554100362840742018-11-24T06:44:00.000-05:002018-11-24T06:44:36.487-05:00Alibaba - The Time Isn't Now<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://2.bp.blogspot.com/-OEJk7xb-qtM/W_k3mepn4lI/AAAAAAAAAzU/rPBJnAr2geIxtFW2a1CzrzZQSl7xPanewCLcBGAs/s1600/12Artboard.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="" border="0" data-original-height="418" data-original-width="419" height="398" src="https://2.bp.blogspot.com/-OEJk7xb-qtM/W_k3mepn4lI/AAAAAAAAAzU/rPBJnAr2geIxtFW2a1CzrzZQSl7xPanewCLcBGAs/s400/12Artboard.png" title="Alibaba factor-based analysis" width="400" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">The Magic is Real...except for price momentum.</td></tr></tbody></table><h3><br /></h3><h3>Overview:</h3>Alibaba Group Holding Ltd. provides online and mobile marketplaces in retail and wholesale trade. It operates through the following segments: Core Commerce; Cloud Computing; Digital Media and Entertainment; and Innovation Initiatives and Others. The Core Commerce segment comprises of platforms operating in retail and wholesale. The Cloud Computing segment consists of Alibaba Cloud, which offers elastic computing, database, storage and content delivery network, large scale computing, security, management and application, big data analytics, a machine learning platform, and other services provide for enterprises of different sizes across various industries. The Digital Media and Entertainment segment relates to the Youko Tudou and UC Browser business. The Innovation Initiatives and Others segment includes businesses such as AutoNavi, DingTalk, Tmall Genie, and others. The company was founded by Chung Tsai and Yun Ma on June 28, 1999 and is headquartered in Hangzhou, China.<br /><br />Number of Employees: 66,421<br />CEO: Yong Zhang<br /><br /><h4>Peer Group:</h4><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price</td><td>Market Cap</td></tr><tr><td>eBay Inc(EBAY:XNAS)</td><td>$28.44</td><td>27.3877B</td></tr><tr><td>Amazon.com, Inc.(AMZN:XNAS)</td><td>$1502.06</td><td>734.5073B</td></tr><tr><td>JD.com, Inc. Sponsored ADR Class A(JD:XNAS)</td><td>$19.27</td><td>23.2008B</td></tr><tr><td>Alibaba Group Holding Ltd. Sponsored ADR(BABA:XNYS)</td><td>$150.33</td><td>386.6382B</td></tr></tbody></table><h3>Analysis Methodology</h3>This is a peer-based analysis that will examine six factors in order to determine the merits of an investment in BABA:<br /><ul><li>Price Momentum</li><li>Quality</li><li>Growth</li><li>Income</li><li>Value</li><li>Profitability.</li></ul>Each factor uses several metrics each providing different insight. For example, the profitability factor looks at gross profit to assets, net profit margin, the 5 year average on the pretax return on assets, the 3 year average ROE, net operating income margin and the free cash flow yield. <br /><br />The company with the best metric value is given a score of 4 (as there are four companies in the group we are looking at), the second best a 3, the second worst a 2 and the worst a 1. The ranking process is repeated for each metric and then all of the scores for the particular factor are summed. The grand total is then re-ranked and the best company for the particular factor becomes apparent.<br />INVRS allows the user to analyze a company in any way they wish. The analysis could be on any factor. The metrics can be any metric. Or you can create your own models that fall out of the factor-based purview.<br /><h3>Price Momentum</h3>This factor has short to medium term utility. The concept is that stocks will tend to trade in the momentum established, until the don't. Some investors with a longer term horizon might not be interested in this, but we will run it regardless. We'll use a negative scale to indicate companies with negative price momentum.<br /><br />The metrics we're looking at are:<br /><ul><li>The percentage price change over two years,</li><li>The M-12 less M-1 percentage price change (or in other words, the price change over the past 12 months excluding the most recent month),</li><li>Price change relative to the 10 week moving average.</li></ul>The results:<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>% change over<br />2 years</td><td>Rank</td><td>12 months less 1<br />month price change</td><td>Rank</td><td>Price change relative to the<br />10 week moving average</td><td>Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>EBAY</td><td>1%</td><td>2</td><td>-16%</td><td>3</td><td>-10%</td><td>2</td><td>7</td><td>-1</td></tr><tr><td>AMZN</td><td>112%</td><td>4</td><td>36%</td><td>4</td><td>-12%</td><td>1</td><td>9</td><td>1</td></tr><tr><td>JD</td><td>-14%</td><td>1</td><td>-37%</td><td>1</td><td>-5%</td><td>3</td><td>5</td><td>-2</td></tr><tr><td>BABA</td><td>64%</td><td>3</td><td>-20%</td><td>2</td><td>1%</td><td>4</td><td>9</td><td>1</td></tr></tbody></table><br />AMZN & BABA are the only two showing some positive price momentum, but both have two negative components.<br /><br />EBAY and JD are showing negative price momentum, in my opinion JD more so.<br /><h3>Quality</h3>We'll look at six metrics for the factor of quality:<br /><ol><li>Earning volatility (as measured by the standard deviation of six years of earnings)</li><li>Gross margin (gross profit divided by sales)</li><li>Net margin (net profit divided by sales)</li><li>Total asset turnover (sales divided by total assets)</li><li>Financial leverage (debt as a percentage of total capital)</li><li>Operating leverage (fixed assets as a percentage of total assets).</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Metric 1/Rank</td><td>Metric 2/Rank</td><td>Metric 3/Rank</td><td>Metric 4/Rank</td><td>Metric 5/Rank</td><td>Metric 6/Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>EBAY</td><td>2.14/2</td><td>76%/4</td><td>-11%/1</td><td>.37/2</td><td>55%/2</td><td>320%/2</td><td>13</td><td>2</td></tr><tr><td>AMZN</td><td>2.37/1</td><td>37%/2</td><td>2%/3</td><td>1.35/3</td><td>61%/1</td><td>11%/3</td><td>13</td><td>2</td></tr><tr><td>JD</td><td>.51/4</td><td>14%/1</td><td>0%/2</td><td>1.90/4</td><td>31%/3</td><td>0%/4</td><td>18</td><td>4</td></tr><tr><td>BABA</td><td>1.42/3</td><td>57%/3</td><td>25%/4</td><td>.33/1</td><td>22%/4</td><td>1094%/1</td><td>16</td><td>3</td></tr></tbody></table><br />JD came out with the highest quality score, followed by BABA.*<br /><h3>Growth</h3>We'll look at five metrics for growth:<br /><ol><li>Total revenue change over 1 year</li><li>EBITDA change over 1 year</li><li>Free cash flow change over 1 year</li><li>Gross margin change over 1 year</li><li>Number of year over year growth in earnings.</li></ol><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Metric 1/Rank</td><td>Metric 2/Rank</td><td>Metric 3/Rank</td><td>Metric 4/Rank</td><td>Metric 5/Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>EBAY</td><td>7%/1</td><td>-2%/1</td><td>13%/2</td><td>-1%/2</td><td>3/1</td><td>8</td><td>2</td></tr><tr><td>AMZN</td><td>31%/2</td><td>22%/2</td><td>-33%/1</td><td>6%/4</td><td>4/3</td><td>12</td><td>3</td></tr><tr><td>JD</td><td>37%/3</td><td>52%/3</td><td>179%/4</td><td>4%/3</td><td>4/2</td><td>15</td><td>4</td></tr><tr><td>BABA</td><td>61%/4</td><td>77%/4</td><td>55%/3</td><td>-8%/1</td><td>4/3</td><td>15</td><td>4</td></tr></tbody></table><br />BABA and JD tied for this metric for the best growth stocks.**<br /><h3>Income</h3>None of the companies under consideration offer a dividend.<br /><h3>Value</h3>We'll look at five value factors:<br /><ol><li>Enterprise value over EBITDA</li><li>Price to book</li><li>Price to earnings</li><li>Price to sales</li><li>Theoretical price (as calculated using the Ohlson Clean Surplus (OCS), for more information on the valuation tool, please review this <a href="https://seekingalpha.com/article/4085164-using-ohlson-clean-surplus-theory-valuation" target="_blank">article</a>) over current price.***</li></ol>Here are the results:<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Metric 1/Rank <br />(avg 51.26)</td><td>Metric 2/Rank<br />(avg 10.09)</td><td>Metric 3/Rank<br />(avg 142)</td><td>Metric 4/Rank<br />(avg 5.3)</td><td>Metric 5/Rank<br />(avg 3.5)</td><td>Sum</td><td>Final Rank</td></tr><tr><td>EBAY</td><td>15.07/4</td><td>3.57/4</td><td>Negative</td><td>4.19/2</td><td>5.6/1</td><td>11</td><td>2</td></tr><tr><td>AMZN</td><td>38.57/2</td><td>26.42/1</td><td>245.9/1</td><td>3.24/3</td><td>5.5/2</td><td>9</td><td>1</td></tr><tr><td>JD</td><td>117.19/1</td><td>3.77/3</td><td>Negative</td><td>1.1/4</td><td>1.8/3</td><td>11</td><td>2</td></tr><tr><td>BABA</td><td>34.20/3</td><td>6.61/2</td><td>39.54/2</td><td>12.69/1</td><td>1/4</td><td>12</td><td>3</td></tr></tbody></table><br />BABA came in with the highest score for value, but be aware that we are dealing with some pretty high valuations, specifically a PE ratio of 40. However according to the OCS, BABA is currently fairly valued, something I haven't seen in a while with tech stocks.<br /><h3>Profitability</h3>We'll look at six profitability factors:<br /><ol><li>Gross profits to assets</li><li>Net profit margin</li><li>5 year average pretax return on assets</li><li>3 year average ROE</li><li>Net operating income margin</li><li>Free cash flow yield</li></ol> Here are the results:<br /><br /><table class="table table-bordered"><tbody><tr><td><br /></td><td>Metric 1/Rank</td><td>Metric 2/Rank</td><td>Metric 3/Rank</td><td>Metric 4/Rank</td><td>Metric 5/Rank</td><td>Metric 6/Rank</td><td>Sum</td><td>Final<br />Rank</td></tr><tr><td>EBAY</td><td>.28/3</td><td>-11%/1</td><td>10%/3</td><td>30%/4</td><td>24%/3</td><td>8%/3</td><td>17</td><td>3</td></tr><tr><td>AMZN</td><td>.50/4</td><td>2%/3</td><td>2%/2</td><td>11%/2</td><td>2%/2</td><td>1%/1</td><td>14</td><td>2</td></tr><tr><td>JD</td><td>.27/2</td><td>0%/2</td><td>-3%/1</td><td>-12%/1</td><td>0%/1</td><td>10%/4</td><td>11</td><td>1</td></tr><tr><td>BABA</td><td>.19/1</td><td>25%/4</td><td>17%/4</td><td>25%/3</td><td>28%/4</td><td>4%/2</td><td>18</td><td>4</td></tr></tbody></table><br />BABA comes out number one in terms of profitability.<br /><h3>Summary of Results</h3>From a quality perspective, BABA is a close second after JD. It's tied for growth for the top position with JD and it holds the top position for value and profitability. It therefore could be a candidate for a long position. However, it appears that we are at an inflection point with respect to price momentum. If it was me considering a long position, I would wait until a new price trend established itself - going long when it became clearly positive.<br /><br />Sign up for a free trial with INVRS and keep an eye on the price momentum.<br /><h3>Analysis Notes</h3>*In EBAY's calculation for operational leverage I had to use one previous year value as the current year wasn't available.<br />**I gave JD a lower rank than BABA for the fifth metric, even though they had the same number of year over year instances of growth. This was a judgement call on my part to reflect the fact that JD's earnings have been negative every single year, whereas BABA's have been positive every year.<br />***Assumptions used: The near term market return will be -7%, ROE and the dividend payout ratio will remain unchanged, no growth factor included.<br /><h3>Disclaimer</h3>Part of intelligent investing involves taking on risk levels appropriate to one's circumstances. We don't know what your's 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.<br /><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-37733268747864961562018-10-29T06:17:00.000-04:002018-10-29T06:17:15.328-04:00Google Inc. - Risk is High<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://1.bp.blogspot.com/-joeSDg5rNDY/W9YS7gU7ZBI/AAAAAAAAAzI/UfJ05nzGEScmGSY3nyEtNtLFupZyDe53QCLcBGAs/s1600/12Artboard%2B110.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="" border="0" data-original-height="576" data-original-width="1025" height="358" src="https://1.bp.blogspot.com/-joeSDg5rNDY/W9YS7gU7ZBI/AAAAAAAAAzI/UfJ05nzGEScmGSY3nyEtNtLFupZyDe53QCLcBGAs/s640/12Artboard%2B110.png" title="GOOG is a risky proposition currently" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">Would you go out in this?</td></tr></tbody></table><h2></h2><h2>Overview:</h2>Alphabet, Inc. is a holding company, which engages in the business of acquisition and operation of different companies. It operates through the Google and Other Bets segments. The Google segment includes its main Internet products such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube. The Other B)ets segment includes businesses such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, and X. The company was founded by Lawrence E. Page and Sergey Mikhaylovich Brin on October 2, 2015 and is headquartered in Mountain View, CA.<br /><br />Founded: 2015<br />Number of Employees: 80110<br />Headquarters: Mountain View US<br />CEO: Lawrence E. Page<br /><h2></h2><h2>Analysis Methodology:</h2>This will be a general analysis reviewing the following areas: earnings quality, growth, value and dividends. We'll also look at R&D investment as an indicator of potential competitive advantage, sales per employee as an indicator of efficiency and relative earnings growth compared to price growth.<br /><br />It will be a peer based analysis as it's a good way to give the results context and an opportunity to uncover other opportunities.<br /><br />We'll use as a peer group the group of stocks popularly known as FAANG, but we'll substitute in MSFT instead of NFLX. These are the biggest companies in North America, if size was the only qualifying factor, we'd also include Berkshire Hathaway. We're going to exclude it as this group is technologically focused.<br /><h3>Peer Group:</h3><table class="table table-bordered"><tbody><tr><td>Stock Name (Symbol)</td><td>Last Price (Oct 28, 2018)</td><td>Market Cap</td></tr><tr><td>Microsoft Corporation(MSFT:XNAS)</td><td>$106.96</td><td>821.4528B</td></tr><tr><td>Facebook Inc(FB:XNAS)</td><td>$145.37</td><td>420.2647B</td></tr><tr><td>Amazon.com, Inc.(AMZN:XNAS)</td><td>$1642.81</td><td>800.0485B</td></tr><tr><td>Apple Inc.(AAPL:XNAS)</td><td>$216.30</td><td>1.0475T</td></tr><tr><td>Google Inc.(GOOG:XNAS)</td><td>$1071.47</td><td>745.6853B</td></tr></tbody></table><h2></h2><h2>Quality of Earnings</h2>It's a fact that earnings can be manipulated and changed by accounting-driven decisions. We want earnings that are persistent, can be expected to repeat and aren't the result of one-off events or management tinkering. I use an nine part quality of earnings framework based off the work of two academics, Lev & Thiagarajan. You can read their original paper <a href="https://pdfs.semanticscholar.org/34dd/405c82c404f6e128199f293fc9d95ca06767.pdf" style="background-color: whitesmoke;" target="_blank">here</a>. You can read my adaptation <a href="https://seekingalpha.com/article/4145580-gaining-advantage-using-quality-earnings." style="background-color: whitesmoke;" target="_blank">here</a>.<br /><br />The framework looks at nine areas in the financial statements: inventories, receivables, capital expenditures, research & development, gross income, selling-general-administrative expenses, sales per employees, tax rate and audit opinion. The first two, the fourth, fifth and six are compared to sales levels, capex and/or r&d are compared to industry averages (I use a peer group average as a proxy), the tax rate measures seeks to remove the effect of an earnings bump from a reduction in the tax rate and the a last one looks for a clean audit opinion. When any of these measures give a favourable signal, it gets a score of one. All the scores are summed to get a total out of nine, the higher the better.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/613/2018-10-18-11-54-02.html?0.9828140432591697" width="700"></iframe><br />GOOG at 4/9 isn't good. We have to be skeptical of their earnings results now. FB is great, It's actually perfect - 8/8 as they don't carry inventories (everyone else does). I almost never see perfect scores.<br /><h2></h2><h2>Growth</h2><h3>Year over Year Growth in Earnings</h3>This metric calculates the number of times the company is able to grow its earnings compared to the previous year. Each time the company increases its earnings relative to the previous year it earns a score of one. We'll use seven years of data so the maximum score is six. Here are the results in tabular form:<br /><br /><table class="table table-bordered"><tbody><tr><td>GOOG</td><td>5/6</td></tr><tr><td>FB</td><td>5/6 </td></tr><tr><td>AMZN</td><td>4/6</td></tr><tr><td>MSFT</td><td>4/6</td></tr><tr><td>AAPL</td><td>3/5 - missing year seven data</td></tr></tbody></table><br />These are all decent results, especially of course GOOG and FB. As a point of interest, GOOG missed increasing earnings between the most recent year Y and the year previous Y-1 and FB missed between year six and seven.<br /><br />Remember the quality of earnings, GOOG's aren't as trustworthy as FB's.<br /><h3>Earnings Growth Relative to Price Growth </h3>This measure is known as the earnings yield and it's the reciprocal of the PE ratio, however I tweak it so that rather than a static number, earning divided by price, I take the change in earnings over a period of time divided by the change in price over a period of time. I'm looking to see if earnings growth has outpaced the growth in price of vice versa. If the number is greater than one, I consider that a good sign, if it's between 1 and 0 I consider it less promising. The period of time used to measure the change is three years.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/614/2018-10-19-05-36-47.html?0.31274713034783796" width="700"></iframe><br />The change in earnings and the change in price for GOOG is almost equivalent. On the other two extremes, FB has seen more earnings increase than price and AMZN has seen more price increase than earnings change.<br /><h2></h2><h2>Value</h2>We'll work with four value metrics - P/E ratio, EV/EBITDA, Ohlson Clean Surplus (OCS) and Discounted Cash Flow (DCF). We're looking for consistency in the value story.<br /><h3>PE Ratio</h3>I debated using this one because it's so similar to earnings yield we already used. I decided to because it's so ubiquitous and its handy to know what a dollar of earnings cost.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/615/2018-10-19-05-46-42.html?0.3018422886729004" width="700"></iframe><br />GOOG trades at 47x earnings. How do you feel about that?<br /><h3>EV/EBITDA</h3>Similar to a PE ratio, this valuation model looks at what one dollar of earnings costs the investor, but using enterprise value and EBITDA instead of price and earnings strips out the effects of different capital structures and lease versus purchase decisions. Since we've already got a PE ratio, I thought that looking at this metric over time would give us more information. This metric is the current EV/EBITDA divided by the EV/EBITDA from three years ago. A value greater than one means the stock has become relatively more expensive. Between 0 and 1 and the stock has become less.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/624/2018-10-20-05-42-20.html?0.4919405205756813" width="700"></iframe><br />Except for FB, they've all become more expensive and GOOG has increased its dearness the most.<br /><h3>OCS</h3>The OCS is an interesting valuation model that calculates a theoretical stock value. While I don't hold it out to be an exact value, it can give a decent ball park or at least an indication whether the stock is over, under or fairly valued. For a detailed explanation of the model, please review this <a href="https://seekingalpha.com/article/4085164-using-ohlson-clean-surplus-theory-valuation" style="background-color: whitesmoke;" target="_blank">article</a>. Academic testing demonstrates that the model has predictive results two to three years out.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/617/2018-10-19-07-35-23.html?0.24535280585448715" width="700"></iframe><br />All of these companies look over-priced. There are tweaks that can be made to the model, but even with adjustments GOOG is still trading at a premium. <br />The graph below shows by how much the stock is trading over its theoretical price.<br /><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/619/2018-10-19-07-56-15.html?0.1779716608334927" width="700"></iframe><br />Google is trading at 5x its theoretical price.<br /><h3>DCF</h3>This model can get elaborate with individual rates for each future year. I'm going to keep it simple. I'm using the most current free cash flow per share figure, the firm's rate calculated for the OCS (which isn't a WAAC, it's just the risk free rate + the company's beta x the market premium using 7% as the expected rate of return for the market) and I'll do a range of terminal growth rates 0%, 1%, 2% and 3%.<br /><br /><table class="table table-bordered"><tbody><tr><td>Security</td><td>FCF/Share</td><td>Firm's rate</td><td>0%</td><td>1%</td><td>2%</td><td>3%</td></tr><tr><td>FB</td><td>5.9144</td><td>0.083027</td><td>71.23</td><td>80.99</td><td>93.84</td><td>111.54</td></tr><tr><td>AAPL</td><td>7.3077</td><td>0.75216</td><td>97.16</td><td>112.05</td><td>132.35</td><td>161.62</td></tr><tr><td>AMZN</td><td>13.14</td><td>.084888</td><td>154.82</td><td>175.49</td><td>202.53</td><td>239.43</td></tr><tr><td>MSFT</td><td>2.51</td><td>.091559</td><td>27.40</td><td>30.76</td><td>35.06</td><td>40.75</td></tr><tr><td>GOOG</td><td>33.98</td><td>.091472</td><td>371.47</td><td>417.06</td><td>475.42</td><td>552.76</td></tr></tbody></table>Again, on the surface, these stocks all appear over-valued, however we're used to seeing these companies command a large premium.<br /><h2></h2><h2>Income</h2>GOOG doesn't offer a dividend so this analysis won't delve into income. Just as information, AAPL and MSFT have dividend yields of 1.56% and 1.7% respectively.<br /><h2></h2><h2>Other Factors</h2>We'll look at a couple of other factors in this analysis: R&D spend as a percentage of sales and sales per employee. The former can inform us how "relevant" they may be in the future and the later gives us an idea how efficient the company is.<br /><h3>R&D as a Percentage of Sales</h3><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/621/2018-10-19-08-39-43.html?0.3356775530854825" width="700"></iframe><br />GOOG's is the second highest spend of the group and it's spend has been increasing moderately over time, both factors are appealing.<br /><h3>Sales per Employee</h3><iframe frameborder="0" height="500" src="https://graphs.invrs.com/4A01BE599580FCFFEA70EC7FCF81CACD/622/2018-10-19-08-43-26.html?0.42641969206281494" width="700"></iframe><br />GOOG looks good according to this metric. Although it's middle of the road compared to its peers, it's been trending up over time.<br /><h2></h2><h2>Conclusion</h2><br />The GOOG's potential investment story is growth, not income, not value. Growth can be measured in different ways but I think the most pragmatic and important measure is earnings. Earnings are what turns companies in their stock market firmament. The question then becomes a) how good are those earnings and b) how expensive is that growth? Let's start with the first question.<br /><br />GOOG doesn't have the quality of earnings and it's earnings growth has been good, but I'm bothered by the fact that the one year it didn't grow was its most recent year. If I'm making an investment decision based on earnings, I want to feel good about them. I don't. Not as good as I'd like if I was going to pay 47x earnings.<br /><br />Which brings us to the second factor. A aura has developed around these big tech players and it seems that the usual valuation laws don't apply to them. I will concede that their cultures encourage innovation. I will concede that they are very well managed. And I will concede that they've changed the world at least once and may do so again. Those three factors may allow for some valuation rules to be more flexibly applied. What one is willing to pay for growth is a bit of a personal question.<br /><br />Based on the information in this analysis, relative to its peers, GOOG is middle of the road on OCS, Price to Theoretical Price and DCF. But relative to three years ago, it's become 38% more expensive using the EV/EBITDA measure. That's the biggest jump of the group.<br /><br />This is a difficult conclusion to make so I'm only going to speak of what I would do. I don't like the cost of those earnings when I question how good they are. I wouldn't buy. I would also take profits if I was long. <br /><br />This analysis indicates that FB might be a good candidate - it's got the high quality earnings and the stock is less expensive relative to the group. I do want to point out that AAPL and MSFT may have merit that wasn't fully explored in this analysis because they both have an income component.<br /><h2 style="color: rgb(0 , 0 , 0); font-family: "lato" , "helvetica neue" , "helvetica" , "arial" , sans-serif;"></h2><h2 style="color: rgb(0 , 0 , 0); font-family: "lato" , "helvetica neue" , "helvetica" , "arial" , sans-serif;">Disclaimer</h2>Part of intelligent investing involves taking on risk levels appropriate to one's circumstances. We don't know what your's 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.<br /><br /><h2 style="color: rgb(0 , 0 , 0); font-family: "lato" , "helvetica neue" , "helvetica" , "arial" , sans-serif;">Sales Pitch</h2>You can do amazing things with INVRS - build investment models, do peer based analysis and create investment reports. Wouldn't you like to see for yourself? Sign up for a free two-week trial and put the effort into learning the software using our myriad of learning tools. If you're a numbers geek with a curious and creative mind, we're your ticket to unique investment insight.<br /><br /><div><br /></div><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0tag:blogger.com,1999:blog-9142792868828064769.post-2147943370117406032018-10-26T05:23:00.000-04:002018-10-26T05:23:04.093-04:00Power Up Your Investment Analysis Using Probability<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody><tr><td style="text-align: center;"><a href="https://4.bp.blogspot.com/-LpOBZn1rTFs/W9IgaINK7mI/AAAAAAAAAy8/Skyr33ZWXdoO1pbrCKRF8-w9GjsxvOeUgCLcBGAs/s1600/12Artboard%2B110.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Investing & Probability" border="0" data-original-height="313" data-original-width="483" height="412" src="https://4.bp.blogspot.com/-LpOBZn1rTFs/W9IgaINK7mI/AAAAAAAAAy8/Skyr33ZWXdoO1pbrCKRF8-w9GjsxvOeUgCLcBGAs/s640/12Artboard%2B110.png" title="Probability Matrix for Investing" width="640" /></a></td></tr><tr><td class="tr-caption" style="text-align: center;">It's a numbers game, maybe like Bingo.</td></tr></tbody></table><br />Nobody knows the future, but developing our skills in probability analysis will make us better at preparing for it.<br /><br />We can use probability at any level - global, country, market, industry, company. We can use it for an event, for example the probability of the price of gold increasing or the trend of interest rates.<br /><br />For this example, we'll use probability at the U.S. market level.<br /><br />The question we'll attempt to answer using probability is "does the bull market have more to run, or are we at the top?"<br /><br /><h3>Step 1 - Identify the key factors</h3><br />We'll begin by listing the factors that influence, not just any bull market, but this one. Remember, the factors I choose and the probabilities I assign are my decisions. You may come up with different factors and different probabilities.<br /><br />In my opinion, this bull market was created in the aftermath of the global financial crisis. It was built on earnings, incredibly loose monetary policy and a new tool called quantitative easing. As those factors change the nature of the market will change.<br /><br />In considering what I think are the key factors of this market, I'll look at other factors coming into play: fiscal stimulus, tariffs, a movement toward less globalization/more isolation and less friendly immigration policies.<br /><br />Finally there is always a wild card, a <a href="https://en.wikipedia.org/wiki/Black_swan_theory" target="_blank">black swan event</a> - a surprise event that packs a wallop but seems obvious in hindsight.<br /><br />Having selected the factors we want to use, we build an equation:<br /><br />Market change = <i>a</i>(earnings) + <i>b</i>(monetary policy) + <i>f</i>(black swan)<br /><br />Where <i>a, b, c, </i>are the probabilities associated with the factor they are attached to.<br /><br /><h3>Step 2 - Assign Relative Weights</h3><br />The next step is to relatively weight each factor. For me, I think that monetary policy has been twice as important than earnings earnings and a black swan event could be twice as important as monetary policy. I therefore give weights of 1, 2, and 4 for earnings, monetary policy and black swan respectively.<br /><br /><h3>Step 3 - Evaluate and Assign Probabilities</h3><br />The next step is to look at what could impact the factors. Once the factors are evaluated, we must decide on a probability between -1 and 1. A positive probability indicates that I believe the outlook for the factor is favorable to a continued bull run (in this example). A negative probability indicates that the outlook is not favorable.<br /><br /><h4>Earnings</h4><br />Tax cuts may increase earnings. Companies may be able to keep more of what they earn and their sales might increase if people have more disposable income. Earnings might decrease because of rising inputs from tariffs and wages. Out of country sales may drop in retaliation for tariffs and antagonistic international policies. Population growth will slow if immigration becomes more difficult which indicates less demand for goods and services.<br /><br />In my opinion, the earnings effect has run it's course. There are more factors now to weigh on earnings than to support them. The sign is therefore negative and I also feel the probability is relatively high. Let's say -70%.<br /><br /><h4>Monetary Policy</h4><br />This past 10-year long cycle has been unique with it's use of quantitative easing. The policy poured an enormous amount of liquidity into the market and kept interest rates very low. It's in in the process of unwinding now; the bonds that were purchased during QE are maturing and not being replaced. This reduction in bond demand is pushing up yields. The federal reserve has also been raising it's benchmark rate and has signaled that further hikes are in the cards.<br /><br />If stock market started to drop, could the Fed change course and re-instate QE? Yes they could (not that they <i>would</i>) if inflation isn't a factor. If it is, they will have to make that their priority, in my opinion.<br /><br />Currently it looks like the Fed is doing a good job of normalizing monetary policy. They've gotten rates up and inflation is under-control. However, it would be imprudent to ignore the inflationary factors currently in play: tax cuts, tariffs, full-employment. If inflation starts to kick in and I believe it will, they'll have to tighten things up.<br /><br />I feel the probability of the monetary policy becoming more restrictive to be high and the effect to be negative. I'll estimate -80%<br /><br /><h4>Black Swan</h4><br />A black swan event is by definition difficult to predict. It could be anything, but is should have some relevance in what's going on now. Here's some ideas: the collapse of sovereign monetary systems and the development of an international, gold backed cyber-currency. Trade war that heats up to hot war. Trump's unconventional and unprecedented policies work out in a spectacular fashion.<br /><br />You could give probabilities to all the black swans you identify or you can just work with the one you think is most important or likely.<br /><br />I'll work with all three for this example.<br /><br />Let's say they all warrant a relative "4" for strength of impact. What counts next is the probabilities. The first example, I'm going to give a probability of .5%. The second 15%, the third 7%. The signs are negative, negative, positive. Because they all have the same weighting I can just sum the probabilities of the individual black swan events to get a black swan probability. The probability of a black swan event in this example is -.5%-15%+7%=-8.5%.<br /><br />Note, use a weighted average if you decided the strength of impact numbers should be different. For example if you think the numbers are 3, 4 and 5, the formula would be -.5*(3/12) - 15*(4/12) + 7*(5/12).<br /><br /><h3>Step 4 - Put It All Together</h3><br />We then plug the numbers into the equation we already created:<br /><br />Market Change = -.7 x 1 -.8 x 2 -.085 x 4 = -.7-1.6-.34 = -2.64<br /><br />The model indicates that the bull market will change into a bear market. It doesn't say "when" however, but the magnitude of the number is relevant. This equation could range in theory from a value of -7 to +7, but you'll never have a probability of 100% on any of the factors so in reality the range is less than that, maybe -6.3 to 6.3<br /><br />As you work with probability and get better at it, the final number's magnitude will begin to communicate something to you about the timing.<br /><br />Thanks for reading.<br /><br /><br />Jenhttp://www.blogger.com/profile/11730208896544988544noreply@blogger.com0