RBA Stock Study (8-15-23)

I recently did a stock study on RB Global, Inc. (name changed but ticker remains RBA) with a closing price of $58.14. Previous studies are here and here.

M* writes:

     > RB Global Inc. operates the world’s largest marketplace for heavy
     > equipment. The company started as a live auctioneer of industrial
     > equipment, since then it has greatly expanded its operations to
     > include the sale of construction, agricultural, oilfield, and
     > transportation equipment. RB Global Inc. operates over 40 live
     > auction sites in more than 12 countries, along with online
     > marketplaces, including IronPlanet, Marketplace-E, and GovPlanet.
     > Its agricultural auctions are frequently much smaller venues and
     > can include liquidations of single farms. The company holds over
     > 300 auctions yearly and sells $6 billion worth of equipment.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 18.1% and 10.7%. Lines are generally up and parallel except for EPS declines in ’14, ’16, ’17, and ’21. PTPM remains above peer and industry averages, declining from 28.8% in ’13 to 12.7% in ’17 and rebounding to 23.4% in ’22 with a last-5-year mean of 16.5%.

Also over the past decade, ROE is solidly above peer and industry averages and stable (except for a spike to 25.6% in ’22) with a last-5-year mean of 18.0%. Debt-to-Capital is generally lower than the industry but higher than peer averages with a last-5-year mean of 47.5%.

Quick Ratio is 0.99 but Interest Coverage is only 2.9 [versus 8.4 in ’22—possibly due to Mar ’23 IAA acquisition that also causes a disconnect with many of the numbers below]. Value Line rates the company B++ for Financial Strength and M* gives a Standard rating for Capital Allocation: “the company’s low balance sheet risk is largely due to its manageable debt levels and access to credit lines.”

With regard to sales growth:

• CNN Business projects YOY 106% and 57.2% for ’23 and ’24, respectively (based on 7 analysts).
• YF projects YOY 109% and 16.5% for ’23 and ’24, respectively (7 analysts).
• Zacks projects YOY 106% and 19.6% for ’23 and ’24, respectively (4).
• Value Line projects 23.6% annualized growth from ’22-’27.
• CFRA gives ACE of 108% YOY and 56.3% per year for ’23 and ’22-’24, respectively (7).
• M* offers a 2-year ACE of 79.5% annualized growth.

As mentioned above, acquisition of U.S. auto retailer IAA Inc., which completed on March 20 (see https://www.reuters.com/markets/deals/ritchie-bros-completes-acquisition-iaa-2023-03-20/), explains the lofty growth rates. I am forecasting conservatively below the range at 10.0% per year.

With regard to EPS growth:

• CNN Business projects contraction of 1.2% YOY for ’23, 8.9% growth per year for ’22-’24 (based on 7 analysts), and 5-year annualized growth of 7.0%.
• MarketWatch projects growth of 7.4% YOY and 12.5% per year for ’23 and ’22-’24, respectively (10 analysts).
• Nasdaq.com projects 132% YOY growth for ’24 (2).
• Seeking Alpha projects 4-year annualized growth of 7.0%.
• YF projects YOY growth of 4.1% and 18.3% for ’23 and ’24 (6), along with 5-year annualized growth of 7.0%.
• Zacks projects YOY growth of 7.1% and 17.1% for ’23 and ’24 (5), along with 5-year annualized growth of 7.0%.
• Value Line projects 11.5% annualized growth from ’22-’27.
• CFRA projects 12.9% YOY contraction and 4.6% growth per year for ’23 and ’22-’24, respectively (6).

Unlike sales, no bump in estimated EPS for ’23-’24 is projected (except for Nasdaq.com, which is strange).

I have data duplication concerns because four of five long-term estimates are identical [to the hundredths place on the actual websites]. CNN Business and Seeking Alpha get data from FactSet and S&P Global, respectively. YF gets data from Refinitiv, and Zacks is its own entity. Given different sources, I would not expect duplication unless [some of] the same analysts are being used by multiple sources. Neither is this a case where the number of analysts is an extreme few: CNN Business, YF, and Zacks are citing 7, 6, and 5.

I am forecasting EPS growth below the long-term-estimate range (mean of five: 7.9%) at 6.0% per year. With ’22 EPS up over 100% YOY to $2.86/share and 2023 Q2 EPS at $0.92/share (annualized), I will lean toward the former but use Value Line’s $2.41 instead. This results in a 5-year forecast of 2.41/share * (1.06 ^ 5) = $3.22/share, which is effectively a 2.4% growth rate on M*’s $2.86/share.

My Forecast High P/E is 25.0. Over the past decade, high P/E has ranged from 24.3 in ’15 to 56.0 in ’21 with a last-5-year mean of 40.0. The last-5-year-mean average P/E is 32.1. I am forecasting near the bottom of the range (only ’15 is lower).

My Forecast Low P/E is 15.0. Over the past decade, low P/E has ranged from 16.8 in ’20 to 37.2 in ’21 with a last-5-year mean of 24.2. I am forecasting near the bottom of the range (only ’20 is lower).

My Low Stock Price Forecast (LSPF) of $41.00 is default based on $2.41/share initial value. This is 29.5% less than the previous closing price and 15.8% less than the 52-week low.

Over the past decade, Payout Ratio has ranged from 36.4% in ’22 to 98.6% in ’17 (possibly an upside outlier) with a last-5-year mean of 55.8%. I am forecasting just below the range at 36.0%.

These inputs land RBA in the HOLD zone with a U/D ratio of 1.3. Total Annualized Return (TAR) is 8.2%.

PAR (using Forecast Average—not High—P/E) is 4.8%, which is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 8.2% total annualized return (TAR) instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 15 studies (my study and 9 other 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 15.0%, 9.0%, 31.0, 22.4, and 55.8%. I am lower across the board. Value Line’s projected average annual P/E of 24.0 is lower than MS (26.7) and higher than mine (20.0).

MS high / low EPS are $3.65 / $0.98 vs. my $3.22 / $2.41 (per share). I think EPS numbers under $1.00/share are due to the acquisition and to be excluded, which would render that unreasonable to use.

The MS sample size is too small upon which to base valid comparisons, but I will continue for the sake of completeness.

MS LSPF of $41.60 implies a Forecast Low P/E of 42.4 vs. the above-stated 22.4. MS LSPF is 89.5% greater than the default $0.98/share * 22.4 = $21.95, which results in much more aggressive zoning [this clearly reflects a disconnect, which I say is the unreasonable $0.98/share]. MS LSPF remains 1.5% greater than mine.

My TAR (over 15.0% preferred) is much less than the 17.2% from MS. MOS in the current study seems to be robust.

I track a few different valuation metrics. PEG is 3.2 and over 10.0 per Zacks and my projected P/E, respectively: both extremely overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is overvalued at 1.97. Kim Butcher’s “quick and dirty DCF” prices the stock at 20.0 * [$5.25 – ($1.50 + $1.75)] = $40.00 thereby suggesting the stock to be overvalued by 45.0%. This is the first time I have seen unanimous agreement among the four different calculations.

While the BUY zone tops out at $50/share, I would seek a much lower cost basis to approach a 15.0% TAR. This is also to heed Value Line’s advice from a previous report: “the integration risks and added debt load associated with the acquisition mean more conservative investors will likely want to proceed cautiously.”

ADUS Stock Study (8-28-23)

I recently did a stock study on Addus Homecare Corp. (ADUS) with a closing price of $89.37. The original study is here.

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 past 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 an EPS dip in ’15. PTPM leads peers but trails the industry while ranging from 4.0% in ’16 to 7.0% in ’21 with a last-5-year mean of 5.6%.

Also over the past decade, ROE leads peer and industry averages despite trending down from 9.8% to 7.5% with a last-5-year mean of 7.0%. Debt-to-Capital is much lower than peer and industry averages with a last-5-year mean of 21.1%.

Quick Ratio is 1.4 and Interest Coverage is 8.0 per M*. Value Line rates the company B+ for Financial Strength.

With regard to sales growth:

• CNN Business projects 5.2% YOY and 7.6% per year for ’23 and ’22-’24, respectively (based on 6 analysts).
• YF projects YOY 10.5% and 7.7% for ’23 and ’24, respectively (7 analysts).
• Zacks projects YOY 10.4% and 6.8% for ’23 and ’24, respectively (4).
• CFRA projects 10.6% YOY and 9.0% for ’23 and ’22-’24, respectively (7).
• M* offers a 2-year ACE of 9.5% per year.

I am forecasting toward the lower end of the range at 6.0% per year.

With regard to EPS growth:

• CNN Business projects 11.5% YOY and 10.9% per year for ’23 and ’22-’24, respectively (based on 6 analysts), along with 5-year annualized growth of 12.6%.
• MarketWatch projects 15.8% and 14.5% per year from ’22-’24 and ’22-’25, respectively (7 analysts).
• Nasdaq.com projects 11.0% YOY and 12.5% per year for ’24 and ’23-’25 [5, 5, and 1 analyst(s) for ’23, ’24, and ’25].
• Seeking Alpha projects 4-year annualized growth of 12.6%.
• YF projects YOY 14.5% and 10.8% for ’23 and ’24, respectively (7), along with 5-year annualized growth of 15.0%.
• Zacks projects YOY 12.9% and 9.7% for ’23 and ’24, respectively (6), along with 5-year annualized growth of 12.6%.
• Value Line offers a 2.5-year annualized ACE of 16.4% (4).
• CFRA projects YOY growth of 51.1% and 10.0% for ’23 and ’24, respectively (7).
• M* projects long-term annualized growth of 15.0% per year.

MarketWatch’s 2024 estimate is the same as the ’25 estimate from Nasdaq.com: $4.73/share. This is puzzling given an estimated EPS growth rate around 10%. This may be totally random as the latter estimate is just one analyst. It probably catches my eye because I’ve never noticed any relationship between MarketWatch and Nasdaq.com estimates (unlike CNN Business and MarketWatch, which are both supplied by FactSet).

I am forecasting below the long-term-estimate range (mean of five: 13.6%) at 11.0% per year. I am using ’22 EPS of $2.84/share as the initial value rather than ’23 Q2 EPS of $3.31 (annualized).

My Forecast High P/E is 34.0. Over the past decade, high P/E ranges from 27.3 in ’14 to 56.7 in ’20 with a last-5-year mean of 50.4. The last-5-year-mean average P/E is 37.9. I am forecasting below the latter and toward the bottom of the range [only ’14 and ’13 (32.1) are lower].

My Forecast Low P/E is 22.0. Over the past decade, low P/E trends up from 7.0 in ’13 to 24.1 in ’22 with a last-5-year mean (median) of 25.4 (22.4). I am forecasting below the latter.

My Low Stock Price Forecast (LSPF) of $62.50 is default based on $2.84/share EPS. This is 30.1% less than the previous close and 8.9% less than the 2022 low.

These inputs land ADUS in the HOLD zone with a U/D ratio of 2.7. Total Annualized Return (TAR) is 12.7%.

PAR (using Forecast Average—not High—P/E) is 8.4%, 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 219 studies (my study and 61 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 9.0%, 12.2%, 37.9, and 24.3. I am lower across the board. Value Line’s projected average annual P/E of 22.2 is less than MS (31.1) and mine (28.0). This comparison may be invalid with Value Line projecting to ’24/’25 rather than five years hence.

MS high / low EPS are $5.60 / $3.10 vs. my $4.79 / $2.84 (per share). My high EPS is lower due to a lower EPS growth rate.

MS LSPF of $70.00 implies a Forecast Low P/E of 22.6: less than the above-stated 24.3. MS LSPF is 7.1% less than the default $3.10/share * 24.3 = $75.33, which results in more conservative zoning. MS LSPF remains 12.0% greater than mine.

My TAR (over 15.0% preferred) is less than the 18.2% from MS.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG per Zacks and my projected P/E are 1.7 and 2.2, respectively: both slightly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.7.

ADUS is a BUY under $87. With a forecast high price of $162.70, my TAR criterion should be satisfied under $81/share.

CBRE Stock Study (8-14-23)

I recently did a stock study on CBRE Group, Inc. (CBRE) with a closing price of $84.53. Previous studies on this stock can be seen here, here, and here.

Value Line writes:

     > CBRE Group, Inc. is a worldwide commercial real estate
     > firm, offering services to occupiers, owners, lenders, and
     > investors in the office, retail, industrial, and multi-family
     > segments of the market. Provides facilities management,
     > leasing, property sales, mortgage origination, investment
     > management, and valuation services.

Over the past decade, this large-size company has grown sales and earnings at annualized rates of 17.8% and 18.0%, respectively. Lines are mostly up, straight, and parallel except for a sales dip in ’20 and EPS dips in both ’20 and ’22. PTPM leads peer and industry averages despite trending down from 7.1% in ’13 to 5.4% in ’22 with a last-5-year mean of 6.1%.

Also over the past decade, ROE leads peer and industry averages while ranging from 16.8% in ’22 to 22.9% in ’19 with a last-5-year mean of 21.1% (downside outlier of 11.4% in ’20 excluded). Debt-to-Capital is lower than peer and industry averages since ’19 with a last-5-year mean of 35.6%.

Value Line gives a Financial Strength rating of A along with Interest Coverage over 25.0. M* assigns a “Standard” rating for Capital Allocation and reports Quick Ratio of 1.03.

With regard to sales growth:

• CNN Business projects 2.3% YOY and 5.4% per year for ’23 and ’22-’24, respectively (based on 7 analysts).
• YF projects YOY 3.0% and 6.6% for ’23 and ’24, respectively (3 analysts).
• Zacks projects YOY growth of 3.3% and 8.5% for ’23 and ’24, respectively (3).
• Value Line projects 2.6% annualized growth from ’22-’27.
• CFRA projects 1.3% YOY and 4.2% for ’23 and ’22-’24, respectively.
• M* offers a 2-year ACE of 4.0% per year along with its own analyst estimate of 5.0% per year for the next 10 years.

I am forecasting below the range at 2.0% per year.

With regard to EPS growth:

• CNN Business reports ACE of a 17.0% YOY contraction and 0.2% growth per year for ’23 and ’22-’24, respectively (based on 7 analysts), along with 5-year annualized growth of 11.0%.
• MarketWatch projects annualized growth of 0.8% and 6.4% for ’22-’24 and ’22-’25, respectively (10 analysts).
• Nasdaq.com projects annualized growth of 22.9% and 20.8% for ’23-’25 and ’23-’26, respectively [4, 3, and 1 analyst(s) for ’23, ’25, and ’26].
• YF projects YOY 25.1% contraction and 25.1% growth for ’23 and ’24, respectively (6), along with 11.0% annualized growth for the next five years.
• Zacks projects YOY 21.8% contraction and 26.1% growth for ’23 and ’24, respectively (4).
• Value Line projects 2.7% annualized growth from ’22-’27.
• CFRA projects contraction of 23.1% YOY and 4.2% per year for ’23 and ’22-’24 along with 3-year CAGR of -4.0%.
• M* projects long-term growth of 9.3% per year.

I am forecasting near the bottom of the long-term-estimate range (mean of four: 8.5%). While this is conservative, I am using ’22 EPS of $4.29/share as the initial value rather than 2023 Q2 EPS of $2.64 (annualized).

My Forecast High P/E is 18.0. Over the past decade, high P/E ranges from 16.3 (’18/’19) to 30.5 in ’20 with a last-5-year mean of 21.8. The last-5-year-mean average P/E is 17.1. I am forecasting near the bottom of the range (only ’18/’19 are lower).

My Forecast Low P/E is 11.0. Over the past decade, low P/E ranges from 10.0 in ’19 to 21.0 in ’13 with a last-5-year mean of 12.3. I am forecasting near the bottom of the range [only ’19 and ’21 (10.9) are lower].

My Low Stock Price Forecast (LSPF) of $47.20 is default based on $4.29/share initial value. This is 44.2% less than the previous closing price and 28.8% less than the 52-week low.

These inputs land CBRE in the SELL zone with a U/D ratio of 0.1. Total Annualized Return (TAR) is 1.2%.

PAR (using Forecast Average—not High—P/E) is -3.1%, which is unacceptable. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 1.2% but even that is much lower than the current yield on T-bills.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 57 studies done in the past 90 days (my study along with 11 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 7.0%, 9.3%, 21.0, and 12.5. I am lower across the board. Value Line projects a future average annual P/E of 15.0, which is lower than MS (16.8) and just higher than mine (14.5).

MS high / low EPS are $5.92 / $2.93 vs. my $4.97 / $4.29 (per share). The former EPS range is lower than mine and I cannot argue that as unreasonable due to the recent depressed quarterly EPS reports.

MS LSPF of $42.80 implies a Forecast Low P/E of 14.6 vs. the above-stated 12.5. MS LSPF is 16.9% greater than the default $2.93/share * 12.5 = $36.63, which results in more aggressive zoning. MS LSPF is 9.3% less than mine, however.

My TAR (over 15.0% preferred) is much less than the 8.2% from MS.

Despite my higher EPS range, MOS backing the current study seems robust.

I track a few different valuation metrics. PEG is 10.4 per my projected P/E: severely overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is significantly overvalued at 1.87. Kim Butcher’s “quick and dirty DCF” prices the stock at 12.5 * [$8.8 – ($0.00 + $0.75)] = $100.63 thereby suggesting the stock to be undervalued by 16.0%

Based on this stock study, I would look to buy CBRE under $57/share. At this point, I should sell. Because ’23 weakness was projected and because Value Line and M* have positive things to say about the company’s competitive positioning going forward, I will be patient with my holding to see how the future turnaround takes shape.

GMED Stock Study (8-9-23)

I recently did a stock study on Globus Medical Inc. (GMED) with a closing price of $56.83.

M* writes:

     > Globus Medical Inc is a medical device company that develops
     > and provides healthcare products and solutions to hospitals,
     > physicians, and surgical centers. The firm’s products are
     > organized into two categories: musculoskeletal solutions, which
     > include medical devices and instruments used mostly for spinal
     > and orthopedic procedures, and enabling technologies, which
     > include advanced computer systems developed for enhancing
     > surgical capabilities. The vast majority of the company’s revenue
     > is generated from musculoskeletal solutions products, and more
     > than half of the revenue is earned in the United States.

Over the past decade, this medium-size company grows sales and earnings at annualized rates of 9.9% and 7.4%, respectively. Lines are mostly up, straight, and parallel except for EPS declines in ’16, ’19, and ’20. PTPM leads peer and industry averages until ’19 while ranging from 16.0% in ’20 to 31.7% in ’15 with a last-5-year mean of 21.9%.

Also over the past decade, ROE mostly leads peer and industry averages until ’18 despite falling from 15.2% in ’13 to 10.5% in ’22 with a last-5-year mean of 10.2%. The company has zero long-term debt and Debt-to-Capital remains at 0.0%.

Quick Ratio is an impressive 5.5 and Value Line rates the company B++ for Financial Strength.

With regard to sales growth:

• CNN Business projects 10.0% YOY and 9.5% per year for ’23 and ’22-’24, respectively (based on 11 analysts).
• YF projects YOY 10.0% and 8.7% for ’23 and ’24, respectively (14 analysts).
• Zacks projects YOY 10.3% and 8.3% for ’23 and ’24, respectively (6).
• Value Line projects 9.1% annualized growth from ’22-’27.
• CFRA projects 10.3% YOY and 9.5% per year for ’23 and ’22-’24, respectively.
• M* provides a 2-year ACE of 9.5%.

I am forecasting below the range at 8.0% per year.

With regard to EPS growth:

• CNN Business projects 12.6% YOY and 12.3% per year for ’23 and ’22-’24, respectively (based on 11 analysts), along with 5-year annualized growth of 12.0%.
• MarketWatch projects 13.2% and 12.4% per year for ’22-’24 and ’22-’25, respectively (15 analysts).
• Nasdaq.com projects 10.4% YOY and 22.4%/year for ’23-’25 and ’23-’26 [6, 5, and 1 analyst(s) for ’23, ’25, and ’26].
• Seeking Alpha projects 4-year annualized growth of 12.0%.
• YF projects YOY 12.1% and 12.6% for ’23 and ’24, respectively (14), along with 5-year annualized growth of 12.6%.
• Zacks projects YOY 12.1% and 11.7% for ’23 and ’24, respectively (8), along with 5-year annualized growth of 11.5%.
• Value Line projects annualized growth of 12.6% from ’22-’27.
• CFRA projects 12.1% YOY and 12.6% per year for ’23 and ’22-’24, respectively, along with a 3-year CAGR of 12.0%.
• M* projects long-term growth of 11.3% per year.

I am forecasting below the long-term estimate range [mean of six: 12.0%] at 10.0% per year. I will use ’22 EPS of $1.85/share as the initial value rather than 2023 Q2 EPS of $2.01 (annualized).

My Forecast High P/E is 26.0. Over the past decade, high P/E has ranged from 24.8 in ’15 to 66.0 in ’20 with a last-5-year mean of 49.2. The last-5-year-mean average P/E is 40.0. I am forecasting toward the lower end of the range [only ’15 and ’16 (25.6) are lower].

My Forecast Low P/E is 22.0. Over the past decade, low P/E has trended up from 14.5 in ’13 to 28.4 in ’22 with a last-5-year mean of 30.9. The last-10-year median is 23.7. I am forecasting at the lowest value since 2016.

My Low Stock Price Forecast (LSPF) of $40.70 is default based on $1.85/share initial value. This is 28.4% less than the previous closing price and 20.0% less than the 52-week low.

These inputs land GMED in the HOLD zone with a U/D ratio of 1.2. Total Annualized Return (TAR) is 6.1%.

PAR (using Forecast Average—not High—P/E) is 4.2%, which is less than the current yield on T-bills. 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 33 studies done in the past 90 days (my study along with 7 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 8.8%, 10.4%, 33.6, and 24.0. I am lower across the board. Value Line’s future average annual P/E of 28.0 is lower than MS (28.8) and higher than mine (24.0).

MS high / low EPS are $3.12 / $1.68 vs. my $2.98 / $1.85 (per share). My EPS range is slightly higher despite a slightly lower EPS growth rate.

MS LSPF of $41.90 implies a Forecast Low P/E of 24.9 vs. the above-stated 24.0. MS LSPF is 3.9% greater than the default $1.68/share * 24.0 = $40.32, which results in [slightly] more aggressive zoning. MS LSPF remains 3.0% greater than mine.

My TAR (over 15.0% preferred) is much less than MS 13.7%.

MOS backing the current study seems robust, but due to the small MS sample size I consider it moderate.

I track a few different valuation metrics. PEG is 2.2 and 2.6 per Zacks and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.72. Kim Butcher’s “quick and dirty DCF” prices the stock at 20.0 * [$4.20 – ($0.00 + $0.85)] = $67.00 thereby suggesting the stock to be undervalued by 15.0%.

The stock is a BUY under $49/share, but I would look to acquire a bit lower. This is due to the moderate (not robust) MOS and a pending merger with NuVasive that seems to have Value Line and CFRA concerned. I will re-evaluate the stock under $47 to see if TAR qualifies.

Agilent Stock Study (8-8-23)

I recently did a stock study on Agilent Technologies Inc. with a closing price of $126.51. Previous studies are here and here.

M* writes:

     > Originally spun out of Hewlett-Packard in 1999, Agilent
     > has evolved into a leading life sciences and diagnostics
     > firm. Today, Agilent’s measurement technologies serve a
     > broad base of customers with its three operating segments:
     > life science and applied tools, cross lab (consisting of
     > consumables and services related to its life science and
     > applied tools), and diagnostics and genomics. Over half
     > of its sales are generated from the biopharmaceutical,
     > chemical, and advanced materials end markets, but it
     > also supports clinical lab, environmental, forensics,
     > food, academic, and government-related organizations.

Since 2015, this medium-size company has grown sales and earnings at annualized rates of 7.8% and 19.3%, respectively. Lines are mostly up and straight except for EPS declines in ’18 and ’20. PTPM leads peer and industry averages by trending higher from 11.9% in ’15 to 22.0% in ’22 with a last-5-year mean of 19.3%.

Also since 2015, ROE is even with peer and industry averages by trending higher from 10.6% in ’15 to 24.2% in ’22 with a last-five-year mean of 18.2%. Debt-to-Capital is been less than peer/industry averages with a last-5-year mean of 32.5%.

Interest Coverage is 19.0 and Quick Ratio is 1.5. Value Line rates the company A for Financial Strength and M* rates them “Exemplary” for Capital Allocation with a “Wide” Economic Moat.

With regard to sales growth:

• CNN Business projects 2.9% YOY and 4.3% per year for ’23 and ’22-’24, respectively (based on 16 analysts).
• YF projects YOY 1.8% and 5.7% for ’23 and ’24, respectively (17 analysts).
• Zacks projects YOY 2.1% and 5.9% for ’23 and ’24, respectively (6).
• Value Line projects 7.2% annualized growth from ’22-’27.
• CFRA projects 2.6% YOY and 5.0% per year for ’23 and ’22-’24, respectively.
• M* provides a 2-year ACE of 4.3% and projects 5.0% annualized growth from ’22-’26 in its analyst note.

My 5.0% per year forecast is at the bottom of the long-term range.

With regard to EPS growth:

• CNN Business projects 7.5% YOY and 8.1% per year for ’23 and ’22-’24, respectively (based on 16 analysts), along with 5-year annualized growth of 14.0%.
• MarketWatch projects 9.5% and 9.9% per year for ’22-’24 and ’22-’25, respectively (20 analysts).
• Nasdaq.com projects 7.5% YOY and 8.2% per year for ’24 and ’23-’25 (7, 7, and 4 analysts for ’23, ’24, and ’25).
• Seeking Alpha projects 4-year annualized growth of 11.0%.
• YF projects YOY 5.4% and 8.7% for ’23 and ’24, respectively (19), along with 5-year annualized growth of 11.0%.
• Zacks projects YOY 7.5% and 7.5% for ’23 and ’24, respectively (7), along with 5-year annualized growth of 11.0%.
• Value Line projects annualized growth of 11.9% from ’22-’27.
• CFRA projects 8.2% YOY and 9.8% per year for ’23 and ’22-’24, respectively, along with a 3-year CAGR of 15.0%.
• M* projects long-term growth of 8.4% per year.

I am forecasting below the long-term estimate range [mean of six: 11.2%] at 8.0% per year. I will use ’22 EPS of $4.18/share as the initial value rather than 2023 Q2 EPS of $4.54 (annualized).

My Forecast High P/E is 31.0. Since 2015, high P/E has ranged from 24.4 (’19) to 77.3 (upside outlier in ’18) with a last-5-year mean of 39.1 (outlier excluded). The last-5-year-mean average P/E is 31.8. I am forecasting less than all values except ’19.

My Forecast Low P/E is 23.0. Since 2015, low P/E has ranged from 18.4 (’19) to 62.3 (upside outlier in ’18) with a last-5-year mean of 24.5 (outlier excluded). I am forecasting less than all values except ’19 and ’17 (20.6).

My Low Stock Price Forecast (LSPF) of $96.10 is default based on $4.18/share initial value. This is 24.0% less than the previous closing price and 7.0% less than the ’21 low.

Since 2015, Payout Ratio has ranged from 19.5% (’19) to 61.4% (upside outlier in ’18) with a last-5-year mean of 22.6% (outlier excluded). I am forecasting to the low side at 19.0% even though Value Line says positive things about the company’s ability to raise the dividend.

These inputs land Agilent in the HOLD zone with a U/D ratio of 2.1. Total Annualized Return (TAR) is 9.1%.

PAR (using Forecast Average—not High—P/E) is 6.3%, 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 72 studies done in the past 90 days (my study along with 18 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 5.0%, 7.7%, 35.0, 24.5, and 27.9%. I am higher only on EPS growth rate. Value Line’s future average annual P/E of 25.0 is lower than both MS (29.8) and mine (27.0).

MS high / low EPS are $6.42 / $4.49 vs. my $6.14 / $4.18 (per share). My EPS range is slightly lower.

MS LSPF of $102.60 implies a Forecast Low P/E of 22.9 vs. the above-stated 24.5. MS LSPF is 6.7% less than the default $4.49/share * 24.5 = $110.00, which results in more conservative zoning. MS LSPF remains 6.8% greater than mine.

My TAR (over 15.0% preferred) is less than MS 13.7%.

MOS backing the current study seems moderate.

I track a few different valuation metrics. PEG per Zacks is 2.1 and 3.2 per my projected [forward] P/E: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.88. Kim Butcher’s “quick and dirty DCF” prices the stock at 20.0 * [$9.85 – ($1.40 + $1.55)] = $138.00 thereby suggesting the stock to be undervalued by 8.0%.

I would look to re-evaluate Agilent under $120/share.

BALL Stock Study (9-13-23)

I recently did a stock study on Ball Corp. with a previous closing price of $51.88/share.

Value Line writes:

     > Ball Corporation manufactures metal and plastic packaging (87%
     > of sales), primarily for the beverage and food industries for a
     > variety of end users around the world. It has 18 locations in the
     > United States and 51 facilities internationally. The company also
     > supplies government and commercial customers with aerospace and
     > other high-technology products (13%). Its largest product line
     > is aluminum beverage containers. Acquired Rexam, 6/16.

Over the past decade, this large-size company has grown sales and earnings at annualized rates of 7.2% and 8.2%, respectively. Lines are somewhat up, straight, and parallel except for sales declines in ’15 and ’19 and EPS declines in ’15, ’16, and ’22 [I don’t like to see five years pass before ’14 EPS is finally eclipsed; I should consult the 10-K about this]. PTPM lags peer and industry averages while trending slightly down from 6.9% in ’13 to 5.8% in ’22 with a last-5-year mean of 5.9%.

Also over the past decade, ROE lags peer and industry averages while trending down from 34.4% in ’13 to 20.3% in ’22 with a last-5-year mean of 18.2%. Debt-to-Capital is higher than peer averages and about even with the industry while ranging from 63.9% in ’17 to 80.4% in ’15 with a last-5-year mean of 70.6%.

Interest Coverage is 3.3 and Quick Ratio is 0.5. Value Line gives an B++ rating for Financial Strength. M* gives a “Standard” rating for Capital Allocation and writes:

     > Ball’s balance sheet is sound, in our view. We believe the firm’s
     > leverage is reasonable considering the overall stability of revenue
     > and earnings in this industry. Although debt has risen in recent
     > years, management has reiterated its commitment to maintain
     > reasonable leverage, and we expect the firm to pay down its debt
     > in the coming years.

With regard to sales growth:

• CNN Business projects 1.3% YOY contraction and 1.6% growth per year for ’23 and ’22-’24 (based on 13 analysts).
• YF projects YOY 4.8% contraction and 3.3% growth for ’23 and ’24, respectively (13 analysts).
• Zacks projects YOY 4.2% contraction and 4.0% growth for ’23 and ’24, respectively (4).
• Value Line projects 3.2% growth per year for ’22-’27.
• CFRA projects 3.4% YOY contraction and 2.0% growth per year for ’23 and ’22-’24, respectively.
• M* provides an annualized ACE of 2.1% contraction for the next 2 years.

I am forecasting toward the lower end of the range at 1.0% per year.

With regard to EPS growth:

• CNN Business projects 9.4% YOY and 12.2% per year for ’23 and ’22-’24, respectively (based on 13 analysts), along with 5-year annualized growth of 9.5%.
• MarketWatch projects 7.7% and 8.2% per year for ’22-’24 and ’22-’25, respectively (15 analysts).
• Nasdaq.com projects 11.9% YOY and 10.5% per year for ’24 and ’23-’25 (5, 5, and 3 analysts for ’23, ’24, and ’25).
• YF projects YOY 24.6% contraction and 10.8% growth for ’23 and ’24, respectively (12), along with 5-year annualized growth of 3.1%.
• Zacks projects YOY growth of 9.0% and 11.9% for ’23 and ’24 (5) along with 5-year annualized growth of 5.0%.
• Value Line projects 12.5% growth per year from ’22-’27.
• CFRA projects growth of 11.9% YOY and 12.5% per year for ’23 and ’22-’24 along with a 3-year CAGR of 15.0%.
• M* projects long-term growth of 8.9% per year.

I am forecasting toward the bottom of the long-term-estimate range (mean of five: 7.8%) at 4.0% per year. I will use ’22 EPS of $2.25/share as the initial value rather than 2023 Q2 EPS of $2.52 (annualized).

My Forecast High P/E is 36.0. Over the past decade, high P/E trends up from 19.0 in ’13 to 43.3 in ’22 with a last-5-year mean of 45.5. The last-5-year-mean average P/E is 36.0. I am using the historical average as my forecast high.

My Forecast Low P/E is 16.0. Over the past decade, low P/E ranges from 14.5 in ’14 to 38.2 in ’16 with a last-5-year mean of 26.5. The last-10-year median is 28.0. I am forecasting toward the bottom of the range [only ’14 and ’13 (15.2) are lower].

My Low Stock Price Forecast (LSPF) of $36.00 is default based on $2.25/share initial value. This is 30.6% less than the previous close and 21.7% less than the 52-week low.

Over the past decade, Payout Ratio has increased from 19.0% in ’13 to 35.6% in ’22 with a last-5-year mean is 32.0%. I am forecasting near the bottom of the range at 19.0% [only ’14 (15.8%) is lower].

These inputs land BALL on the precipice with a U/D ratio of 2.9. Total Annualized Return (TAR) is 14.2%.

PAR (using Forecast Average—not High—P/E) is 7.3%, which is less than I seek for a large-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the total annualized return (TAR) of 14.2% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 38 studies (my study and 14 other 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 5.8%, 9.6%, 37.2, 23.9, and 32.0%. I am lower across the board. Value Line’s projected average annual P/E of 25.0 is lower than MS (30.6) and mine (26.0).

MS high / low EPS are $3.42 / $2.13 vs. my $2.74 / $2.25 (per share). My high EPS is lower due to a lower growth rate. Value Line and M* project [high EPS of] $5.00 and $3.45, respectively: higher than MS and me.

MS LSPF of $45.80 implies a Forecast Low P/E of 21.5: greater than the above-stated 23.9. MS LSPF is 10.0% less than the default $2.13/share * 23.9 = $50.91, which results in more conservative zoning. MS LSPF remains 27.2% above mine.

My TAR (over 15.0% preferred) is less than the 19.7% from MS.

MOS backing the current study seems robust. Despite the limited MS sample size, comparisons with other analyst estimates are also favorable.

I track a few different valuation metrics. PEG is 3.4 and 4.9 per Zacks and my projected P/E, respectively: both significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is quite cheap at 0.6. Kim Butcher’s “quick and dirty DCF” prices the stock at 18.0 * [$7.85 – ($1.00 + $4.65)] = $39.60, which suggests the stock to be 23.7% overvalued.

BALL is a BUY under $51. With a forecast high price of $98.50, TAR should meet my personal criterion at or below $49/share.

ALGN Stock Study (8-7-23)

I recently did a stock study on Align Technology Inc. (ALGN) with a closing price of $361.44. The previous study is here.

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.

Over the past decade, 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. Lines are mostly up, straight, and parallel except for a spike in ’20 EPS and ’22 EPS, which drops off considerably. PTPM mostly leads the industry while falling behind peers in ’19 with a last-5-year mean of 20.8%.

Also over the past decade, ROE leads peer and industry averages with a last-5-year mean (excluding ’20) of 24.4%. The same holds for Debt-to-Capital with a last-5-year mean 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.

With regard to sales growth:

• CNN Business reports ACE of 8.1% YOY and 9.0% per year for ’23 and ’22-’24, respectively (based on 11 analysts).
• YF projects YOY 6.6% and 11.5% for ’23 and ’24, respectively (12 analysts).
• Zacks projects YOY 6.6% and 10.2% for ’23 and ’24, respectively (5).
• Value Line projects 9.0% annualized growth from ’22-’27.
• CFRA projects 6.6% YOY and 8.6% per year for ’23 and ’22-’24, respectively.
• M* offers a 2-year annualized ACE of 7.7% and 13.0% per year for the next five years in its analyst note.

I am forecasting conservatively at 6.0% per year.

With regard to EPS growth:

• CNN Business reports ACE of 7.1% YOY and 12.9% per year for ’23 and ’22-’24, respectively (based on 11 analysts), along with 5-year annualized growth of 17.5%.
• MarketWatch projects 21.5% and 19.9% per year from ’22-’24 and ’22-’25, respectively (14 analysts).
• Nasdaq.com projects 20.3% YOY and 18.3% per year for ’24 and ’23-’25 (6, 6, and 2 analysts for ’23, ’24, and ’25).
• Seeking Alpha projects 4-year annualized growth of 17.9%.
• YF projects YOY 13.0% and 18.4% for ’23 and ’24, respectively (11), along with 5-year annualized growth of 43.3%.
• Zacks projects YOY 12.2% and 18.0% for ’23 and ’24, respectively (7), along with 5-year annualized growth of 17.5%.
• Value Line projects 15.7% annualized growth from ’23-’27.
• CFRA projects 21.3% YOY and 19.0% per year for ’23 and ’22-’24, respectively.
• M* has long-term ACE at 15.8% annualized.

I am forecasting below the long-term-estimate range [mean of five excluding YF (possible NMF): 16.9%] at 12.0% per year.

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 (-52.4%). Value Line, however, shows a drop from $9.79/share in ’21 to $7.22/share in ’22 (-26.3%) without footnoting any nonrecurring losses. CFRA shows a drop in normalized EPS from $11.22/share in ’21 to $7.76/share in ’22 (-30.8%) without giving any explanation as to what is being omitted.

For lack of any better idea and a need to maintain a minimum high EPS for a valid study, I am forecasting lower EPS growth (8.0% per year) using the trendline as a higher initial value rather than the last quarterly or annual EPS. Furthermore, I will exclude ’20 and ’21 EPS to lower initial value from $12.08/share to $7.27/share.

My Forecast High P/E is 38.0. Over the past decade, high P/E ranges from 24.3 (in’20) to 142 (upside outlier in ’22) with a last-5-year mean of 60.5. Excluding ’20 as a downside outlier, the next-lowest value is 36.8 in ’14. The last-5-year-mean average P/E is 48.0. I am forecasting conservatively (only ’20 and ’14 are lower).

My Forecast Low P/E is 30.0. Over the past decade, low P/E ranges from 5.7 in ’20 to 51.0 in ’21. I would exclude both as outliers. The last-5-year average is then 35.5 and the last-10-year median is 31.0. I am forecasting just below the latter.

My Low Stock Price Forecast (LSPF) of $218.10 is default based on $7.37/share initial value. This is 39.7% less than the previous close and 26.7% greater than the 52-week low.

These inputs land ALGN in the HOLD zone with a U/D ratio of 0.3. Total Annualized Return (TAR) is 2.6%.

PAR (using Forecast Average–not High–P/E) is 0.4%, which is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 2.6% instead. Even this is much too low for me to consider investible, however.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 126 studies done in the past 90 days (my study along with 40 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 13.8%, 15.4%, 46.0, and 28.2. Despite being lower on three out of four 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 (37.1) and lower than mine (34.0).

MS high / low EPS are $9.27 / $4.07 vs. my $10.83 / $7.27 (per share). My numbers must be higher due to the initial value.

MS mean LSPF of $129.90 implies a Forecast Low P/E of 31.9 vs. the above-stated 28.2. MS LSPF is 13.2% greater than the default $4.07/share * 28.2 = $114.77, which results in slightly more aggressive zoning. MS LSPF is a whopping 40.4% less than mine, however. I do believe that to be unreasonably low (but of little consequence).

MS TAR of 5.0% is nearly double mine, which makes me think MOS in the current study is decent.

I track different valuation metrics. PEG is significantly overvalued at 2.4 per Zacks and 10.3 per my projected [forward] P/E. Relative Value [(current P/E) / 5-year-mean average P/E] is significantly overvalued at 1.83. Kim Butcher’s “quick and dirty DCF” prices the stock at 25.0 * [$16.95 – ($0.00 + $2.20)] = $368.75 thereby implying the stock to be 2.0% undervalued.

I would look to re-evaluate this stock under $266/share.

EPAM Stock Study (8-2-23)

I recently did a stock study on EPAM Systems Inc. (EPAM) with a closing price of $239.48.

M* writes:

     > EPAM Systems Inc provides software product development and digital
     > platform engineering services to clients located around the world.
     > The company services include Software Product Development, Custom
     > Application Development, Application Testing, Enterprise Application
     > Platforms, Application Maintenance, and Support and Infrastructure
     > Management. The company focuses on innovative and scalable software
     > solutions. The company uses industry standard and custom developed
     > technology, tools, and platforms to deliver results to handle
     > business challenges. The company primarily offers its solutions in
     > the following industries: financial services, travel and consumer,
     > software and hi-tech, life sciences and healthcare. The majority
     > of revenue is generated from North American clients.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 26.3% and 25.7%, respectively. Lines are mostly up, straight, and parallel except for EPS dips in ’17 and ’22. PTPM is above peer and industry averages despite trending down from 13.8% in ’13 to 10.5% in ’22 with a last-5-year mean of 13.1%.

Also over the past decade, ROE slightly leads peer averages while trailing the industry by falling from 17.0% in ’13 to 14.8% in ’22 with a last-5-year mean of 17.5%. Debt-to-Capital is well below peer/industry averages with a last-5-year mean of 8.5%.

EPAM has a Quick Ratio of 4.02, which is one of the highest I have ever seen. All debt is long-term with no interest due [leases perhaps?]. I’m surprised to see Value Line only give a B++ grade for Financial Strength.

With regard to sales growth:

• CNN Business projects 2.1% YOY contraction and 3.1% growth per year for ’23 and ’22-’24 (based on 14 analysts).
• YF projects YOY 2.6% contraction and 8.3% growth for ’23 and ’24, respectively (17 analysts).
• Zacks projects YOY 2.8% contraction and 6.3% growth for ’23 and ’24, respectively (9).
• Value Line projects 7.7% annualized growth from ’22-’27.
• CFRA projects 1.7% YOY contraction and 5.0% growth per year for ’23 and ’22-’24.

I am forecasting toward the lower end of the range at 2.0% per year.

With regard to EPS growth:

• CNN Business reports ACE of 9.1% YOY contraction and 0.5% growth per year for ’23 and ’22-’24, respectively (based on 14 analysts), along with 5-year annualized growth of 4.4%.
• MarketWatch projects annualized growth of 1.8% and 7.7% for ’22-’24 and ’22-’25, respectively (18 analysts).
• Nasdaq.com projects growth of 7.1% YOY and 15.3%/year for ’24 and ’23-’25 (10 analysts for ’23/’24 and 4 for ’25).
• Seeking Alpha projects 4-year annualized growth of 4.4%.
• YF projects YOY 9.0% contraction and 11.2% growth for ’23 and ’24, respectively (15), along with 5-year annualized growth of 6.3%.
• Zacks projects YOY 9.2% contraction and 8.5% growth for ’23 and ’24, respectively (11), along with 5-year annualized growth of 4.4%.
• Value Line projects 6.7% growth per year from ’22-’27.
• CFRA projects 8.4% YOY contraction and 3.2% growth per year for ’23 and ’22-’24 along with a 3-year CAGR of 10.0%.

Three long-term estimates of 4.4% makes me suspicious of data duplication: different sources using estimates from the same analyst(s). Knowing this might weaken my confidence and cause me to decrease my forecast even further. As it is, I am forecasting below the long-term-estimate range (mean of five: 5.2%) at 4.0% per year. I will use ’22 EPS of $7.09/share as the initial value rather than 2023 Q1 EPS of $7.29 (annualized).

My Forecast High P/E is 40.0. Over the past decade, high P/E has trended up from 31.1 in ’13 to 95.3 in ’22 with a last-5-year mean of 66.1. The last-5-year-mean average P/E is 47.1. I am below the latter [’13, ’18 (34.0) and ’14 (37.8) are lower].

My Forecast Low P/E is 25.0. Over the past decade, low P/E has ranged from 14.4 in ’13 to 48.0 in ’17 with a last-5-year mean of 28.0 (median 25.9). I am forecasting below the latter.

My Low Stock Price Forecast (LSPF) of $177.30 is default based on the initial value of $7.09/share. This is 26.0% less than the previous close and 10.5% less than the 52-week low.

These inputs land EPAM in the HOLD zone with a U/D ratio of 1.8. Total Annualized Return (TAR) is 7.8%.

PAR (using Forecast Average—not High—P/E) is 3.4%, which is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 7.8% total annualized return (TAR) instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 152 studies done in the past 90 days (my study and 38 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 16.6%, 15.2%, 41.0, and 26.1, respectively. I am lower across the board. Value Line projects a future average annual P/E of 40.0, which is higher than MS (33.6) and higher than me (32.5).

MS high / low EPS are $14.73 / $6.66 vs. my $8.63 / $7.09 (per share). I really do not understand why MS growth rates are so high unless analyst estimates have been recently slashed. As mentioned above, I see three at 4.4% with the highest at 6.7% (based on the statistical array, the 20.5% EPS growth shown in Value Line’s left-margin table no longer applies). MS averages 15.2%. I am tempted to argue the latter as unreasonably high.

MS LSPF of $177.80 implies a Forecast Low P/E of 26.7 vs. the above-stated 26.1. MS LSPF is 12.2% less than the default $6.66/share * 26.1 = $173.83, which results in slightly more aggressive zoning. MS LSPF is about equal to mine.

My TAR (over 15.0% preferred) is much less than MS 21.5%.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG is significantly overvalued at 5.5 per Zacks and 7.8 per my projected [forward] P/E. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.69. Kim Butcher’s “quick and dirty DCF” prices the stock at 33.0 * [$12.00 – ($0.00 + $2.05)] = $328.35 thereby implying the stock to be 27.0% undervalued.

I would look to re-evaluate EPAM under $219/share in hopes of qualifying TAR.

NGVT Stock Study (8-21-23)

I recently did a stock study on Ingevity Corp. (NGVT) with a closing price of $51.65. The original study is here.

Value Line writes:

     > Ingevity Corporation is a global manufacturer of specialty chemicals
     > and high-performance carbon materials. Performance Materials (33% of
     > ’22 sales) and Performance Chemicals (67%). Its products are used in
     > applications including auto parts that reduce gas emissions, asphalt
     > paving, oil exploration & production, agrochemicals, adhesives,
     > lubricants, publication inks, coatings, elastomers, and bioplastics.

This medium-size company has grown sales and EPS at annualized rates of 5.7% and 9.2% over the last 10 years. The stock starts trading publicly in 2016. Excluding ’13-’15, historical sales and EPS growth are 9.8% and 22.8%, respectively. Visual inspection is not the best. Lines are mostly up and parallel with sales declines in ’15, ’16, and ’20 along with EPS declines in ’15, ’16 (big), and ’21 (big). PTPM is above peer and industry averages since ’13 ranging from 9.6% in ’16 to 19.6% in ’18 with a last-5-year mean of 16.9%.

Since data history begins in ’16, ROE leads peer and industry averages ranging from 18.0% in ’21 to 56.3% in ’17 with a last-5-year mean of 34.3%. Debt-to-Capital is greater than peer and industry averages with a last-5-year mean of 68.6%.

Quick Ratio is 1.1 and Interest Coverage is 4.1. The latter is less than I like to see. Value Line rates the company B+ for Financial Strength.

With regard to sales growth:

• CNN Business projects 5.9% YOY and 5.7% per year for ’23 and ’22-’24, respectively (based on 7 analysts).
• YF projects YOY 1.1% and 5.7% for ’23 and ’24, respectively (7 analysts).
• Zacks projects YOY 0.2% and 4.5% for ’23 and ’24, respectively (4).
• Value Line projects 4.0% annualized growth from ’22-’27.
• CFRA projects 1.1% YOY and 3.4% per year for ’23 and ’22-’24, respectively (7).
• M* offers a 2-year ACE of 3.4%.

I am forecasting near the bottom of the range at 2.0% per year.

With regard to EPS growth:

• CNN Business projects 8.8% YOY contraction and 4.3% growth per year for ’23 and ’22-’24, respectively (based on 7 analysts), along with 5-year annualized contraction of 8.0%.
• MarketWatch projects annualized contraction of 9.8% and 3.1% for ’22-’24 and ’22-’25, respectively (7 analysts).
• Nasdaq.com projects growth of 32.8% YOY and 17.7% per year for ’24 and ’23-’25 (3/4/2 analysts for ’23/’24/’25).
• Seeking Alpha projects 4-year annualized growth of 1.0%.
• YF projects YOY 32.8% contraction and 27.0% growth for ’23 and ’24 (6) along with 5-year annualized growth of 6.2%.
• Zacks projects YOY 32.1% contraction and 32.8% growth for ’23 and ’24, respectively (3).
• Value Line projects 4.2% annualized growth from ’22-’27.
• CFRA projects contraction of 26.4% YOY and 4.5% per year for ’23 and ’22-’24, respectively (5).

My forecast of 0.0% is less than the 4-long-term-estimate mean of 0.9%. I think this is conservative because the -8.0% estimate strikes me as dubious (if excluded as an outlier, then arithmetic mean of the others is 3.8%). I will use ’22 EPS of $5.50/share as high EPS and ’21 EPS [arbitrary] of $2.95 as low EPS (with 0% growth rates for both).

My Forecast High P/E is 19.0. Since 2017 (excluding upside outlier of 66.8 in ’16), high P/E has ranged from 14.5 in ’22 to 30.4 in ’21 with a last-5-year mean of 23.9. The last-5-year-mean average P/E is 19.0. I am forecasting conservatively by using the latter (only ’22 is lower).

My Forecast Low P/E is 10.0. Since 2016, low P/E has ranged from 5.7 in ’20 to 21.5 in ’21 (excluding possible upside outlier of 27.7 in ’16) with a last-5-year mean of 14.2. I am forecasting toward the bottom of the range (only ’20 is lower).

My Low Stock Price Forecast (LSPF) of $29.50 is default based on $2.95/share low EPS. This is [ultra-conservative, being] 42.9% less than the previous closing price and 36.6% less than the 52-week low.

These inputs land NGVT in the HOLD zone with a U/D ratio of 2.4. Total Annualized Return (TAR) is 15.1%.

PAR (using Forecast Average—not High—P/E) of 9.1% 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 41 studies (my study and 13 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 6.0%, 8.3%, 19.7, and 11.2, respectively. I am lower across the board. Value Line’s projected average annual P/E of 20.0 is higher than MS (15.5) and mine (14.5).

MS high / low EPS are $7.64 / $5.18 vs. my $5.50 / $2.95 (per share). My high EPS is lower due to a lower EPS growth rate. Value Line projects a future [high] EPS of $7.40, which is close to MS and much higher than mine.

MS LSPF of $42.40 implies a Forecast Low P/E of 8.2 that is higher than the above-stated 11.2. MS LSPF is 26.9% less than the default $5.18/share * 11.2 = $58.02 [invalid on today’s date], which results in more conservative zoning. MS LSPF remains 43.7% greater than mine [ultra-conservative].

My TAR (over 15.0% preferred: “check!”) is less than the 22.4% from MS.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG is indeterminate based on my 0% EPS growth rate. Relative Value per M* [(current P/E) / 5-year-mean average P/E] is significantly undervalued at 0.6. Kim Butcher’s “quick and dirty DCF” prices the stock at 12.0 * [$7.40 – ($0.00 + $3.50)] = $46.80: overvalued by 10.4%.

I would look to BUY under $48/share.

FLT Stock Study (8-2-23)

I recently did a stock study on Fleetcor Technologies Inc. (FLT) with a closing price of $251.06. My previous study is here.

Value Line writes:

     > FLEETCOR Technologies, Inc. is a leading independent provider of fuel
     > cards, and payment products and services throughout North America,
     > Latin America, and Europe. Its corporate charge cards cater to
     > commercial fleets, major oil companies, petroleum marketers, and
     > government entities. The company owns and operates proprietary
     > closed-loop networks electronically connected to merchants, through
     > which it captures and reports customized information.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 13.6% and 15.5%, respectively. Lines are mostly up, straight, and parallel except for a sales decline in ’20 and EPS declines in ’15 and ’20. PTPM leads peer and industry averages while ranging from 31.5% in ’15 to 45.1% in ’13 with a last-5-year mean of 39.8%.

Also over the past decade, ROE has tracked evenly with the industry and ahead of peer averages while ranging from 12.0% in ’15 to 41.1% (possible upside outlier) in ’22 with a last-5-year mean of 26.4%. Debt-to-Capital is higher than peer and industry averages while trending [uncomfortably] higher from 54.4% to 73.5% with a last-5-year mean of 62.8%.

Interest Coverage is 6.7 or 13.8 according to M* or Value Line, respectively. M* reports Quick Ratio as 0.59. Value Line gives a B++ grade for Financial Strength. CFRA writes: “balance sheet is in a good place at 2.7x net debt-to-EBITDA with healthy liquidity of ~$2.1B.”

With regard to sales growth:

• CNN Business projects 11.8% YOY and 11.1% per year for ’23 and ’22-’24, respectively (based on 16 analysts).
• YF projects YOY 11.1% and 10.3% for ’23 and ’24, respectively (18 analysts).
• Zacks projects YOY 11.7% and 9.3% for ’23 and ’24, respectively (8).
• Value Line projects 9.5% per year from ’22-’27.
• CFRA projects 11.9% YOY and 10.3% per year for ’23 and ’22-’24, respectively.
• M* provides a 2-year ACE of 10.9%.

I am forecasting conservatively below the range at 8.0% per year.

With regard to EPS growth:

• CNN Business projects 6.3% YOY and 11.0% per year for ’23 and ’22-’24, respectively (based on 16 analysts), along with 5-year annualized growth of 12.5%.
• MarketWatch projects 11.4% and 12.7% per year for ’22-’24 and ’22-’25, respectively (19 analysts).
• Nasdaq.com projects 15.6% YOY and 17.0% per year for ’24 and ’23-’25 (7, 7, and 2 analysts for ’23, ’24, and ’25).
• Seeking Alpha projects 4-year annualized growth of 12.5%.
• YF projects YOY 6.1% and 15.6% for ’23 and ’24, respectively (17), along with 5-year annualized growth of 12.5%.
• Zacks projects YOY 6.1% and 15.8% for ’23 and ’24, respectively (8), along with 5-year annualized growth of 12.5%.
• Value Line projects 10.4% per year from ’22-’27.
• CFRA projects 7.0% YOY and 10.6% per year for ’23 and ’22-’24, respectively, along with a 3-year CAGR of 16.0%.

Multiple long-term estimates of 12.5% make me suspicious of data duplication. Three of the four (Zacks excluded) are actually presented as 12.45% (I usually round to one decimal place when blogging). In case multiple sources are indeed reporting numbers from the same analyst(s), I would be less certain about that number and forecast more conservatively.

I am forecasting below the long-term-estimate range (mean of five: 12.1%) at 9.0% per year. I will use ’22 EPS of $12.42/share as the initial value rather than 2023 Q1 $12.55 (annualized).

My Forecast High P/E is 21.0. Over the past decade, high P/E has ranged from 21.4 (’22) to 43.0 (’15) with a last-5-year mean of 29.9. The last-5-year-mean average P/E is 24.1. I am forecasting below the entire range.

My Forecast Low P/E is 13.0. Over the past decade, low P/E has ranged from 13.0 (’22) to 34.9 (’15) with a last-5-year mean of 18.3. I am forecasting at the bottom of the range.

My Low Stock Price Forecast (LSPF) of $161.50 is default based on initial value of $12.42/share. This is 35.7% below the last closing price and 20 cents less than 2022 and 52-week lows.

These inputs land FLT in the HOLD zone with a U/D ratio of 1.7. Total Annualized Return (TAR) is 9.8%.

PAR (using Forecast Average—not High—P/E) is 5.3%, 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 310 studies done in the past 90 days (my study and 90 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%, 11.9%, 25.0, and 16.9, respectively. I am lower across the board. Value Line projects a future average annual P/E of 14.5, which is lower than MS (21.0) and mine (17.0).

MS high / low EPS are $21.89 / $11.66 vs. my $19.11 / $12.42 (per share). My high EPS is lower due to a lower growth rate [and much less than Value Line’s projected $26.35/share to offset its lower projected average annual P/E].

MS LSPF of $164.70 implies a Forecast Low P/E of 14.1 vs. the above-stated 16.9. MS LSPF is 16.4% less than the default $11.66/share * 16.9 = $197.05, which results in more conservative zoning. MS LSPF remains 2.0% greater than mine.

My TAR (over 15.0% preferred) is much less than MS 17.1%.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG per Zacks is 1.2 (fairly valued) and 2.0 (slightly overvalued) per my projected [forward] P/E. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.83. Kim Butcher’s “quick and dirty DCF” prices the stock at 16.0 * [$30.50 – ($0.00 + $2.25)] = $452.00 thereby suggesting the stock to be undervalued by 44.0%.

I would look to re-evaluate FLT under $222/share.