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ADUS Stock Study (5-29-23)

Posted by on June 10, 2023 at 12:54 | Last modified: May 30, 2023 13:34

I recently did a stock study on Addus Homecare Corp. (ADUS) with a closing price of $88.81.

M* writes:

     > Addus HomeCare Corp is engaged in the provision of in-home personal
     > care services. It operates through the following segments: Personal
     > care segment, which is a key revenue driver, provides nonmedical
     > assistance with activities of daily living, primarily to persons who
     > are at risk of hospitalization or institutionalization, such as the
     > elderly, chronically ill and disabled. The Hospice segment provides
     > physical, emotional and spiritual care for people who are terminally
     > ill and their families. Its Home health segment provides services
     > that are primarily medical in nature to those individuals who may
     > require assistance during an illness or after surgery.

Over the last decade, this small-size company has grown sales and EPS at annualized rates of 15.9% and 13.8%, respectively. Lines are mostly up, straight, and parallel except for EPS dip in ’15. PTPM has been up and down—leading peers but trailing the industry—with a last-5-year average of 5.6%.

Over the last decade, ROE has led peer and industry averages despite trending down from 9.8% to 7.5% with a last-5-year average of 7.0%. Debt-to-Capital is much lower than peer and industry averages with a last-5-year average of 21.1%. Quick Ratio is 1.6 and Interest Coverage is 7.8 per M*. Value Line rates the company B+ for Financial Strength.

I forecast long-term sales growth of 6.0% based on the following:

I am forecasting conservatively.

I forecast long-term annualized EPS growth of 11.0% based on the following:

I am forecasting below the long-term-estimate range (mean of five: 13.9%). I am using ’22 EPS of $2.84/share as the initial value rather than Q1 ’23 EPS of $3.10 (annualized).

My Forecast High P/E is 36. Over the last 10 years, high P/E has ranged from 27.3 in ’14 to 56.7 in ’20 with a last-5-year average of 50.4. The last-5-year-average average P/E is 37.9. I am forecasting below that.

My Forecast Low P/E is 22. Over the last 10 years, low P/E has ranged from 7.0 in ’13 to 32.0 in ’19 with a last-5-year average of 25.4. I am forecasting just below the median (22.4).

My Low Stock Price Forecast (LSPF) is the default value of $62.50 (based on initial EPS of $2.84/share). This is 29.6% less than the previous close and 8.9% less than the ’22 low.

These inputs land ADUS in the BUY zone with an U/D ratio of 3.2. Total Annualized Return (TAR) is 14.2%.

PAR (using Forecast Average—not High—P/E) is 9.3%, which is less than I seek for a small-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 158 studies over the past 90 days (my study and 52 outliers excluded), averages for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 9.7%, 13.0%, 39.2, and 24.9, respectively. I am lower across the board.

MS high and low EPS are $5.40/share and $2.85/share in contrast to my $4.79 and $2.84. My high EPS is probably lower due to a lower growth rate.

MS LSPF of $70.70 is consistent with the $2.85 * 24.9 = $70.97 default value. It’s also 13.1% greater than mine, which along with my lower inputs lend support for a robust MOS behind the current study.

PEG ratio is another value check I am just starting to monitor. My forward PEG is 29 / 11 = 2.6. A generally-accepted upper limit is 1.0 – 1.5, but it’s also good to compare against the industry average [which I don’t have].

ADUS shares are a BUY under $89.

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ALGN Stock Study (5-11-23)

Posted by on June 9, 2023 at 06:53 | Last modified: May 11, 2023 15:02

I recently did a stock study on Align Technology Inc. (ALGN) with a closing price of $305.26.

CFRA writes:

     > Align Technology, Inc. (ALGN) is a global medical device company
     > engaged in the design, manufacture, and marketing of Invisalign
     > clear aligners and iTero intraoral scanners and services for
     > orthodontics, and restorative and aesthetic dentistry. ALGN
     > also provides exocad computer-aided design and computer-aided
     > manufacturing (“CAD/CAM”) software for dental laboratories and
     > dental practitioners. ALGN’s products are intended primarily
     > for the treatment of malocclusion or the misalignment of teeth.

This medium-size company has posted annualized growth of 23.8% and 25.0% for sales and EPS (excluding ’20, which is an upside outlier that boosts the latter growth rate to 30.3%), respectively, over the last 10 years. Lines are mostly up, straight, and parallel except for a spike in ’20 EPS and ’22 EPS, which drops off considerably. PTPM has mostly led the industry while falling behind peers in ’19 with a last-5-year average of 20.8%.

ROE leads peer and industry averages with a last-5-year average (excluding ’20) of 24.4%. The same holds for Debt-to-Capital with a last-5-year average of 2.7% (per Value Line, the company has no long-term debt). Value Line gives ALGN a Financial Strength rating of B++ and M* a Standard rating for Capital Allocation.

I forecast long-term annualized sales growth of 6% based on the following:

I am forecasting conservatively.

I forecast long-term annualized EPS growth of 10% based on the following:

As CFRA recuses itself from that longer-term estimate, I believe YF’s long-term estimate to also be NMF as an extreme outlier. I am forecasting conservatively below the long-term-estimate range (mean of five: 17.0%).

An initial value discussion awaits since EPS numbers are discrepant. The ’22 10-K shows a drop from $9.69/share in ’21 to $4.61/share in ’22 (d52.4%). Value Line, however, shows a drop from $9.79/share in ’21 to $7.22/share in ’22 (d26.3%) without footnoting any nonrecurring losses. CFRA shows a drop in normalized EPS from $11.22/share in ’21 to $7.76/share in ’22 (d30.8%) without giving any explanation as to what is being omitted.

And suddenly, YF’s 43.3% doesn’t look so outrageous if done from ’23 Q1 EPS ($4.05/share annualized) because $24.47 in ’27 is about even with the extrapolated trendline (with ’20 EPS of $22.41/share excluded).

For lack of any better idea and a need to maintain a minimum high EPS for a valid study, I am forecasting 10% EPS growth. As mentioned above, this is below the long-term-estimate range. I will project from the trendline, however, rather than the last quarterly or annual EPS. Furthermore, I will exclude ’21 EPS. This lowers the ’22 trendline from $8.69/share to $7.37/share.

My Forecast High P/E is 30. Over the last 10 years, high P/E ranges from 24.3 (’20) to 142 (upside outlier in ’22) with a last-5-year average of 60.5. Excluding ’20 as a downside outlier, the next-lowest value is 36.8 (’14). I am forecasting conservatively.

My Forecast Low P/E is 24. Over the last 10 years, low P/E ranges from 5.7 in ’20 to 51 in ’21. I would exclude both as outliers. The last-5-year average is then 35.5. The second-lowest P/E is 24.4 in ’14. I am forecasting just below the latter.

My Low Stock Price Forecast (LSPF) is $176.90. Zero growth is assumed beyond the $7.37/share derived above. This is 42.0% below the previous close and 2.8% above the 52-week low.

These inputs land ALGN in the HOLD zone with an U/D ratio of 0.9. Total Annualized Return (TAR) is 7.0%.

PAR (using Forecast Average—not High—P/E) is 3.1%, which is less than the current risk-free rate. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 7.0% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 132 studies done in the past 90 days (my study along with 29 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 13.3%, 15.0%, 47.9, and 28.7. Despite being lower on all inputs, my EPS override makes comparison difficult. Value Line projects a future average annual P/E of 26.5, which is much lower than MS (38.3) and lower than mine (30.0). The former is ~50% greater than Value Line, which makes me wonder if other studies were as confused about this company as I am.

With regard to other data, MS high and low EPS are $8.53/share and $4.55/share in contrast to my $11.87 and $7.37. MS LSPF of $141.90 implies a Forecast Low P/E of 31.2 (versus the above-stated 28.7), is 19.8% less than mine, and is 8.7% greater than the $4.55 * 28.7 = $130.59 default.

At first, this encounter with ALGN was much easier than my original 11/8/22 stock study because the negative analyst forecasts have now turned positive thereby facilitating the math. Ultimately though, this study proved to be every bit as much of a challenge due to confusion about what different sources are excluding and why.

The stock has rallied 77.4% from [what is currently] the 52-week low. I wouldn’t expect any stock that has rallied this much to be near the BUY zone, and this certainly is not. I would look to re-evaluate under $240/share.

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BKNG Stock Study (5-10-23)

Posted by on June 7, 2023 at 07:05 | Last modified: May 10, 2023 15:07

I recently did a stock study on Booking Holdings Inc. (BKNG) with a closing price of $2,634.91.

M* writes:

     > Booking is the world’s largest online travel agency by revenue,
     > offering booking and payment services for hotel and alternative
     > accommodation rooms, airline tickets, rental cars, restaurant
     > reservations, cruises, experiences, and other vacation packages.
     > The company operates a number of branded travel booking sites,
     > including Booking.com, Agoda, OpenTable, and Rentalcars.com,
     > and has expanded into travel media with the acquisitions of
     > Kayak and Momondo. Transaction fees for online bookings account
     > for the bulk of revenue and profits.

This large-size company has grown sales and EPS at annualized rates of 7.2% and 4.9%, respectively, over the last decade (’20 excluded due to COVID-19). Lines are mostly up, straight, and parallel with the exception of slight EPS softness in ’16-’17 (goodwill impairment charge with EPS subsequently catching back up to previous trendline in ’18) and ’21 (lower sales and EPS followed by healthy rebound in ’22). PTPM has been higher than peers and the industry with a last-5-year average of 23.5% (no exclusions). Also higher than peers and the industry is ROE with a last-5-year average of 43.8%.

For most of the last 10 years, Debt-to-Capital has been lower than industry averages while roughly equal to peers. The last-5-year average is 65.8%. Current and Quick Ratios are ~1.5 and Interest Coverage is 10.8 per M*. M* also rates Capital Allocation as Exemplary given that the $6.3B debt to mature within the next five years is much less than the projected $30B+ FCF over the same period. Value Line gives a B++ grade for Financial Strength.

I forecast long-term annualized sales growth of 5% based on the following:

I am forecasting just below Value Line’s long-term estimate (includes zero growth from ’24-’27, which seems good for a conservative projection but puzzling otherwise).

I forecast long-term annualized EPS growth of 15% based on the following:

I am forecasting below the long-term-estimate range (mean of six: 20.0%).

My Forecast High P/E is 20. Excluding upside outliers of 1547 in ’20 and 95.4 in ’21, over the last 10 years high P/E has ranged from 18.6 in ’19 to 44.1 in ’17 with a last-5-year average of 27.0. Only ’19 is lower than my [conservative] forecast.

My Forecast Low P/E is 15. Excluding upside outliers of 769 in ’20 and 66.1 in ’21, over the last 10 years low P/E has ranged from 14.6 in ’19 to 31.1 in ’17 with a last-5-year average of 18.4. Only ’19 is lower than my [conservative] forecast.

My Low Stock Price Forecast (LSPF) is the default value of $1,529.50. This is 42.0% less than the previous close and 5.4% less than the 52-week low.

These inputs land BKNG in the HOLD zone with an U/D ratio of 1.3. Total Annualized Return (TAR) is 9.3%.

PAR (using Forecast Average—not High—P/E) is 6.4%, which is less than I want to see. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 149 studies done in the past 90 days (my study along with 19 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 11.6%, 14.5%, 29.7, and 20.0. I am lower on all inputs but EPS growth (15.0%). Value Line projects a future average annual P/E of 20.0, which is lower than MS (24.9) and higher than mine (17.5).

With regard to other data, MS high and low EPS are $150.63/share and $66.18/share compared to my $205.10 and $101.97. ’22 EPS of $76.35 at least partially explains this as a much lower initial value for projection than the $101.97/share for Q1 ’23. MS LSPF of $1,395.40 implies a Forecast Low P/E of 21.1 (versus the above-stated 20.0), is 8.8% lower than mine, and is 5.4% higher [more aggressive] than the $66.18 * 20.0 = $1,323.60 default.

I don’t see much MOS behind this study and in retrospect, I would do two things differently. First, as recovery from COVID-19 is underway but not complete, analyst estimates may remain elevated (catch-up to trendline). [As noted above] Value Line long-term EPS estimate starting in ’23 compared to ’22 suggests an EPS growth rate of 12% rather than 15%. Second, Q1 ’23 EPS (annualized) is much greater than ’22. As a conservative measure when I see such leap, I could use the previous (lower) value. These modifications would boost MOS behind this study at the cost of leaving the stock even farther from the BUY zone. Either way, with BKNG up ~35% in the last six months it’s not one I should expect to be near the BUY zone anyway.

I would look to re-evaluate the stock under $2,170/share.

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GOOG Stock Study (5-9-23)

Posted by on June 5, 2023 at 06:38 | Last modified: May 9, 2023 10:33

I recently did a stock study on Alphabet, Inc. (GOOG) with a closing price of $108.24. A previous study on this company can be seen here.

M* writes:

     > Alphabet is a holding company. Internet media giant
     > Google is a wholly owned subsidiary. Google generates
     > 99% of Alphabet revenue, of which more than 85% is
     > from online ads. Google’s other revenue is from sales
     > of apps and content on Google Play and YouTube, as
     > well as cloud service fees and other licensing
     > revenue. Sales of hardware such as Chromebooks, the
     > Pixel smartphone, and smart home products, which
     > include Nest and Google Home, also contribute to other
     > revenue. Alphabet’s moonshot investments are in its
     > other bets segment, where it bets on technology to
     > enhance health (Verily), faster internet access to homes
     > (Google Fiber), self-driving cars (Waymo), and more.

This mega-sized (revenue > $50B) company has grown sales and EPS at annualized rates of 19.2% and 13.2% per year, respectively, for the last decade. Revenue is up and straight while earnings from 2013 did not show growth until 2018 and beyond. Excluding ’21, which was an upside outlier, PTPM has averaged 25.2% for the last five years, is steady over the last 10, but has solidly trailed peer and industry averages.

Over the last five years, ROE averages 18.4% while trailing peer and industry averages. Debt-to-Capital, under 11% for the last decade, averages 6.6% for the last five years and is lower than peer and industry averages. Interest Coverage and Quick Ratio are 200 and 2.2 while M* and Value Line give Exemplary and A++ grades for Capital Allocation and Financial Strength.

I forecast long-term annualized sales growth of 8% based on the following:

I am projecting below the two long-term estimates.

I forecast long-term annualized EPS growth of 11% based on the following:

I am forecasting below the long-term-estimate range (mean of six: 15.3%).

My Forecast High P/E is 25. High P/E has ranged from 27.1 (’21) to 34.1 (’15) since 2014 with a 5-year average of 28.9. The trend has been down. I am forecasting below the range.

My Forecast Low P/E is 15. Low P/E has trended down from 24.0 in ’14 to 15.1 in ’21 with a last-5-year average (excluding the ’17 upside outlier of 42.9) of 18.8. I am forecasting below the entire range.

My Low Stock Price Forecast (LSPF) is $70.60, which is default given the most recent EPS (at $5.04/share, Q3 ’22 is the third straight quarter in decline). This is 34.8% less than the previous close and 15.4% less than the 52-week low.

These inputs land GOOG in the HOLD zone with an U/D ratio of 2.8. Total Annualized Return (TAR) is 14.4%.

PAR (using Forecast Average—not High—P/E) is 8.9%, which is less than I want to see. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 674 studies done in the past 90 days (my study along with 84 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 10.0%, 13.2%, 27.2, and 18.6. I am lower across the board. Value Line projects a future average annual P/E of 25.0, which is higher than MS (22.9) and much higher than mine (20.0). MOS backing the current study seems robust.

With regard to other data, MS high and low EPS are $8.53/share and $4.55/share compared to my $8.49 and $5.04. I am surprised the former is not even greater than mine given a 2.2% higher MS projected growth rate. I’m not exactly sure where the $4.55 comes from, either. By default, earlier studies should use a low EPS equal to or higher (Q2 ’22: $5.38/share) than mine. MS LSPF of $79.30 implies a Forecast Low P/E of 17.4 (versus the above-stated 18.6), is 12.3% higher than mine, and is 6.3% lower than the $4.55 * 18.6 = $84.63 default.

I would look to buy GOOG under $106/share.

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G Stock Study (5-24-23)

Posted by on June 2, 2023 at 07:00 | Last modified: May 25, 2023 10:38

I recently did a stock study on Genpact Ltd. (G) with a closing price of $38.13.

M* writes:

     > Genpact Ltd is a provider of business process management services.
     > Clients are industry verticals and operate in banking and
     > financial services, insurance, capital markets, consumer product
     > goods, life sciences, infrastructure, manufacturing and services,
     > healthcare, and high-tech. Genpact’s services include aftermarket,
     > procurement, risk and compliance, human resources, IT, industrial
     > direct solutions, collections, finance and accounting, and media
     > services. Genpact’s end market by revenue is India. The company
     > is a General Electric spin-off, which is still a large source of
     > revenue for Genpact.

This medium-size company has grown sales and EPS at annualized rates of 8.5% and 8.9% over the last decade. Lines are mostly up, straight, and parallel except for EPS dips in ’14 and ’22. PTPM has remained above peer and industry averages, declining from 14.4% in ’13 to 10.6% in ’22 with a last-5-year average of 11.4%.

Over the last 10 years, ROE slightly trails the industry while beating peer averages with a last-5-year mean of 18.9%. Debt-to-Capital is lower than industry averages and about even with peers despite climbing from 33.4% in ’13 to 48.2% in ’22 with a last-5-year mean of 50.3%. Quick Ratio is 1.7 and Interest Coverage is 9.2. Value Line rates the company B++ for Financial Strength and CFRA describes the balance sheet as “clean, with a low net debt-to-EBITDA ratio of 1.4x on a TTM basis.”

I forecast long-term sales growth of 7.0% based on the following:

I am forecasting just below the long-term estimate.

I forecast long-term annualized EPS growth of 8.0% based on the following:

I am forecasting below the long-term-estimate range (mean of five: 9.6%). My initial value is the ’22 EPS of $1.88/share rather than Q1 ’23 EPS of $1.94 (annualized).

My Forecast High P/E is 22. Over the last 10 years, high P/E has trended up from 22.0 in ’13 to 28.7 in ’22 with a last-5-year average of 27.7. I am forecasting conservatively at the bottom of the range. The last-5-year-average average P/E is 22.5.

My Forecast Low P/E is 15. Aside from ’20 (downside outlier at 12.4), low P/E over the last 10 years has trended up from 15.8 in ’13 to 20.0 in ’22 with a last-5-year average of 18.6 (outlier excluded). I am forecasting conservatively below the range.

My Low Stock Price Forecast (LSPF) is the default [using $1.88/share] value of $28.20. This is 26.0% less than the previous closing price and 21.2% less than the 52-week low.

Since dividend payment was instituted, Payout Ratio has increased from 17.9% in ’17 to 26.6% in ’22 with a last-5-year average of 23.3%. I am forecasting near the bottom of the range at 18.0%.

These inputs land G in the HOLD zone with an U/D ratio of 2.3. Total Annualized Return (TAR) is 10.6%.

PAR (using Forecast Average—not High—P/E) is 7.0%, which is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 27 studies (my study and 12 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 8.0%, 10.0%, 25.3, 16.6, and 21.3%. I am lower across the board. Value Line’s projected average annual P/E of 17.0 is lower than MS (21.0) and mine (18.5).

With regard to EPS, MS high and low are $3.04/share and $1.83/share in contrast to my $2.76 and $1.88. My high EPS is lower due to forecast EPS growth rate.

MS Low Stock Price Forecast of $30.20 is 7.1% greater than mine and in-line with the $1.83 * 16.6 = $30.38 default value.

MOS in this study seems consistent. Come to think of it, everything about this study has been “consistent.” Maybe that’s something to expect for a company with an Earnings Predictability rating (Value Line) of 100.

G is a BUY under $36/share.

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GPN Stock Study (5-8-23)

Posted by on June 1, 2023 at 07:19 | Last modified: May 8, 2023 14:40

I recently did a stock study on Global Payments Inc. (GPN) with a closing price of $104.78. A previous study on this company was done here.

CFRA writes:

     > Global Payments (GPN) provides payment processing and software
     > solutions globally through a variety of distribution channels,
     > which enable customers to accept card, electronic, check, and
     > digital-based payments. Specific offerings include
     > authorization, settlement, funding, customer support,
     > chargeback, security, and billing services.

This medium-size company has grown sales and earnings at annualized rates of 16.2% and 8.6% over the last nine and eight years, respectively. The latter excludes ’22 whose EPS was materially impacted by a goodwill impairment. Per the 2022 10-K:

     > A sustained decline in our share price and increases in discount
     > rates, primarily resulting from increased economic uncertainty,
     > indicated a potential decline in fair value and triggered a
     > requirement to evaluate our Issuer Solutions and our former
     > Business and Consumer Solutions reporting units for potential
     > impairment as of June 30, 2022… Based on the quantitative
     > assessment of our former Business and Consumer Solutions
     > reporting unit, including consideration of the consumer business
     > disposal group and the remaining assets of the reporting unit,
     > we recognized a goodwill impairment charge of $833.1 million
     > in our consolidated statement of income during the three
     > months ended June 30, 2022.

This company probably does not clear the barbed wire fence (visual inspection), which may explain why so few studies have been done. Revenue data is [missing for ’16 and] down in ’18 while EPS is [missing for ’16 and] down in ’15, ’18, ’19, and ’20. [Stock] Price bars in ’17 and ’23 overlap, which represents several years without significant appreciation.

Pressing on regardless, PTPM has been higher than peers and the industry by averaging 10.0% over the last five years (including 2.5% for ’22).

ROE has averaged 4.0% over the last five years. Since ’13, ROE has been mostly higher than peer and industry averages. Debt-to-Capital has fallen from 64.8% in ’13 to 39.0% in ’22 with a last-5-year average of 36.5%. This is lower than peer and industry averages since ’19. Quick Ratio and Interest Coverage are a concerning 0.50 and 0.76, respectively.

Whether or not it should, the fact that so many analysts are covering this company gives me some reassurance about liquidity. Aside from all the analysts included in consensus estimates shown below, M* says the balance sheet is sound and gives a Standard rating for Capital Allocation. Value Line gives a B++ rating for Financial Strength and says GPN “should continue to meet its various obligations with minimal difficulty.”

I forecast long-term annualized sales growth of 7% based on the following:

I am forecasting below the long-term estimates.

I forecast long-term annualized EPS growth of 12% based on the following:

I am forecasting below the long-term-estimate range (mean of six: 14.7%).

Because ’22 GAAP EPS of $0.40 is NMF as an initial value, I will project from the ’22 trendline at $2.93/share. This is more conservative (lower) than ’21 EPS of $3.29/share.

My Forecast High P/E is 30. Over the last 10 years, high P/E has trended up from 21.9 in ’13 to 67.1 in ’21 with what I suspect are surrounding NMF (i.e. 85.8, 111, and 384 in ’19, ’20, and ’22). I am forecasting at the upper end of my comfort zone, which is the lowest high P/E since ’14 (25.7).

My Forecast Low P/E is 25. Over the last 10 years, low P/E has trended up from 13.3 in ’13 to 54.1 in ’20 with what I suspect are surrounding NMF (i.e. 45.6, 54.1, and 231 in ’19, ’20, and ’22). My forecast is the lowest low P/E since ’17 (22.9).

My Low Stock Price Forecast (LSPF) is $73.30, which is default given the low EPS value mentioned above of $2.93/share. This is 30.0% less than the previous close and 20.6% less than the 52-week low.

Payout Ratio was below 3.0% through ’18 before averaging 25.8% from ’19-’21 (’22 is NMF). I am forecasting low at 10.0%.

These inputs land GPN in the HOLD zone with an U/D ratio of 1.6. Total Annualized Return (TAR) is 8.5%.

PAR (using Forecast Average—not High—P/E) is 6.7%, which is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 46 studies done in the past 90 days (my study along with 24 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 9.0%, 13.0%, 40.2, 28.2, and 12.7%. I am lower across the board. Value Line projects a future average annual P/E of 26.5, which is lower than MS (34.2) and just lower than mine (27.5). MOS backing the current study seems moderate.

With regard to other data, MS high and low EPS are $2.02/share (median $0.90) and $1.74/share compared to my $5.17 and $2.93. MS standard deviation is quite large at $1.92 and $1.39, respectively. Along with the small sample size and discrepant mean/median high EPS, this may reflect confusion about how to handle the GAAP EPS. Furthermore, 20 out of 46 studies have low EPS $0.39 or less, which I would argue to be unreasonable. The MS LSPF of $68.90 implies a Forecast Low P/E of 39.6 (versus the above-stated 28.2) and is 28.8% higher than the $1.74 * 28.2 = $49.07 default. Despite being 6.0% lower than mine, this is rather aggressive forecast with regard to valuation.

I would look to re-evaluate GPN under $93/share as a speculative (smaller) holding due mainly to poor visual inspection and questionable liquidity ratios (also a sign that this analyst may not fully understand the business).

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