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ASML Stock Study (6-17-24)

Posted by on July 29, 2024 at 06:43 | Last modified: June 17, 2024 13:21

I recently did a stock study on ASML Holding N.V. ADR (ASML) with a closing price of $1027.90.

M* writes:

     > ASML is the leader in photolithography systems used in the
     > manufacturing of semiconductors. Photolithography is the
     > process in which a light source is used to expose circuit
     > patterns from a photo mask onto a semiconductor wafer.
     > The latest technological advances in this segment allow
     > chipmakers to continually increase the number of transistors
     > on the same area of silicon, with lithography historically
     > representing a high portion of the cost of making
     > cutting-edge chips. ASML outsources the manufacturing of
     > most of its parts, acting like an assembler. ASML’s main
     > clients are TSMC, Samsung, and Intel.

Over the last 10 years, this large-size company has grown sales and earnings at annualized rates of 17.8% and 23.8%, respectively. Lines are up, mostly straight, and parallel.

Over the past decade, PTPM leads peer and industry averages while increasing from 21.8% (’14) to 33.0% (’23) with a last-5-year mean of 30.3%. ROE lags behind peer and industry averages despite increasing from 17.5% (’14) to 63.9% (’23) with a last-5-year mean of 46.1%. Debt-to-Capital is lower than peer and industry averages despite increasing from 13.3% (’14) to 25.6% (’23) with a last-5-year mean of 26.9%.

Per M*, Quick Ratio is 0.76. Neither M* nor Value Line list Interest Coverage, but from 2023 Form 20-F I get 50.8 [“Total comprehensive income, net of taxes” 7755.7 (p.239) and 2023 interest expense of 152.7 (p.273)]. M* rates the company “Exemplary” for Capital Allocation and “Wide” for economic moat. Value Line gives a Financial Strength grade of A.

With regard to sales growth:

I am forecasting near the bottom of the range at 8.0% per year.

With regard to EPS growth:

My 14.0% per year forecast is below the range of five long-term estimates (mean 20.1%). Initial value is ’23 EPS of $21.54/share instead of 2024 Q1 EPS of $19.59 (annualized).

My Forecast High P/E is 30.0. Over the past decade, high P/E ranges from 29.6 in ’16 to 53.8 in ’22 with a last-5-year mean of 47.4 and a last-5-year-mean average P/E of 35.7. I am near the bottom of the range (only ’16 is less).

My Forecast Low P/E is 20.0. Over the past decade, low P/E ranges from 19.7 in ’17 to 28.9 in ’21 with a last-5-year mean of 24.0. I am forecasting near the bottom of the range (only ’17 is less).

My Low Stock Price Forecast (LSPF) is $718.00. Default based on initial value given above is unreasonably low at 58.1% less than the previous closing price. My (arbitrary) forecast is 30.1% less than the previous closing price but still 27.3% greater than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 21.3% in ’15 to 51.1% in ’19 with a last-5-year mean of 35.9%. I am forecasting below the range at 21.0%.

These inputs land ASML in the HOLD zone with a U/D ratio of 0.7. Total Annualized Return (TAR) is 4.6%.

PAR (using Forecast Average—not High—P/E) of 1.0% is less than I seek for a large-size company. If a healthy MOS anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 119 studies done in the past 90 days (my study and 49 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 13.7%, 15.7%, 43.2, 24.0, and 34.9%, respectively. I am lower across the board. Value Line projects a future average annual P/E of 40.0 that is greater than MS (33.6) and mine (25.0).

MS high / low EPS are $42.17 / $19.59 versus my $41.48 / $21.54 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $45.00 is greater than both.

MS LSPF of $495.00 implies a Forecast Low P/E of 25.3 versus the above-stated 24.0. MS LSPF is 5.3% greater than the default $19.59/share * 24.0 = $470.16, which results in more aggressive zoning. MS LSPF is 31.1% less than mine, however.

TAR (over 15.0% preferred) is much less than MS 13.8%. Despite a higher LSPF, MOS is robust in the current study.

With regard to valuation, PEG is 2.2 and 3.3 per Zacks and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is very expensive at 1.5.

The stock is up ~34% over the past 12 months per Value Line and trading near its 52-week high. For my style of investing, that is too hot to handle.

U/D has ASML a BUY under $847/share while the BI TAR criterion will be satisfied ~$622 given a forecast high price of $1244.

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INMD Stock Study (6-14-24)

Posted by on July 26, 2024 at 07:14 | Last modified: June 14, 2024 13:14

I recently did a stock study on InMode Ltd. (INMD) with a closing price of $18.20. Previous studies are here and here.

M* writes:

     > InMode Ltd provides minimally and non-invasive surgical
     > aesthetic and medical treatment solutions in the United
     > States. Its products and solutions address three energy-
     > based treatment categories that include face & body
     > contouring, medical aesthetics, and women’s health. INMD
     > has developed products using its technology for plastic
     > surgery, dermatology, gynecology, and ophthalmology.

Since 2019 when public trading begins, this small-size company grows sales and EPS at annualized rates of 36.1% and 33.2%, respectively. Lines are mostly up, straight, and parallel except for an EPS dip in ’22.

Since ’19, PTPM leads peer and industry averages and increases from 39.7% to 44.2% (’23) with a last-5-year mean of 42.4%. ROE also leads peer and industry averages despite falling from 33.0% to 26.7% (’23) for a last-5-year mean of 32.3%. The company has no long-term debt thereby leaving Debt-to-Capital far below peer and industry averages with a minuscule last-5-year mean of 0.7%.

Quick Ratio is over 12. Value Line gives a B+ rating for Financial Strength.

With regard to sales growth:

I am forecasting below the range at 1.0% per year.

With regard to EPS growth:

Analyst estimates are extremely scarce. None of the “Big 3” (Value Line, M*, and CFRA) have an analyst assigned. All of the above reduces to a few short-term and one long-term estimate (2.8%).

I am forecasting conservatively with flat earnings growth based on 2022 EPS of $1.89. This is 4.0% annualized contraction from ’23 EPS of $2.30 to get a 5-year forecast of $1.88/share.

My Forecast High P/E is 21.0. Since 2019, high P/E falls from 36.7 to 21.0 (’23) for a last-5-year mean of 35.4 and a last-5-year-mean average P/E of 22.3. I am forecasting at the bottom of the range.

My Forecast Low P/E is 7.0. Since 2019, low P/E ranges from 7.4 in ’20 to 11.8 in ’21 for a last-5-year mean of 9.3. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $13.20 is default based on ’22 EPS. This is 27.5% less than the previous close and 21.0% less than the 52-week low.

These inputs land INMD in the BUY zone with a U/D ratio of 5.4. Total Annualized Return (TAR) is 19.9%.

PAR (using Forecast Average—not High—P/E) of 9.8% 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 169 studies (my study and 36 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 6.5%, 6.5%, 21.0, and 8.4. I am lower across the board. Value Line’s projected average annual P/E of 10.1 (albeit for ’25) is lower than MS (14.7) and lower than mine (14.0).

MS high / low EPS are $3.03 / $2.20 vs. my $1.88 / $1.88 (per share). My high EPS is less due to a negative growth rate and lower initial value. Value Line projects $1.90/share for high EPS (in ’25), which is about equal to mine (in ’28).

MS LSPF of $15.70 implies a Forecast Low P/E of 7.1: less than the above-stated 8.4. MS LSPF is 15.0% less than the default $2.20/share * 8.4 = $18.48, which results in more conservative zoning. MS LSPF is 18.9% greater than mine, however.

With regard to valuation, Relative Value [(current P/E) / 5-year-mean average P/E] per M* is fire-sale cheap at 0.39.

MOS in the current study is robust. TAR is much less than the MS TAR of 27.1%. I lowball my inputs relative to scant analyst coverage and I think it shows.

The stock is certainly a fallen angel down ~50% in the last year. Is it just out of favor due to war in Israel (Inmode HQ)?

I did find out about a class action lawsuit:

     > The filed complaint alleges that defendants made false
     > statements and/or concealed that: (i) InMode heavily
     > discounts almost every device it sells; (ii) demand for
     > InMode’s products was driven by InMode’s willingness to
     > discount its products; (iii) InMode violated U.S. Food
     > and Drug Administration (“FDA”) regulations by engaging
     > in off-label marketing and promoting products for
     > treatment of indications for which they lack FDA
     > approval; and (iv) InMode violated FDA regulations by
     > failing to timely report injuries caused by its devices.

One attorney site claims ~5% of S&P 500 companies are named as securities class action defendants each year (3.8% in ’22). It does happen and it’s not necessarily end of the road. As a prospective investor, maybe I want to steer clear until the case is dismissed or reaches settlement. Maybe I want to increase MOS in terms of purchase price. I have done the latter.

U/D has INMD a BUY under $21/share. The stock meets the BI TAR criterion under $22 with a forecast high price of $45.

Disclaimer: I own shares in this security.

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F Stock Study (6-13-24)

Posted by on July 25, 2024 at 07:00 | Last modified: June 13, 2024 15:52

I recently did a stock study on Ford Motor Co. (F) with a closing price of $12.08.

M* writes:

     > Ford Motor Co. manufactures automobiles under its Ford and Lincoln
     > brands. In March 2022, the company announced that it will run its
     > combustion engine business, Ford Blue, and its… [Battery Electric
     > Vehicle] business, Ford Model e, as separate businesses but still
     > all under Ford Motor. The company has nearly 13% market share in
     > the United States, about 11% share in the U.K., and under 2% share
     > in China including unconsolidated affiliates. Sales in the U.S.
     > made up about 66% of 2023 total company revenue. Ford has about
     > 177,000 employees… and is based in Dearborn, Michigan.

As the son of a lifelong Ford engineer, I’ve always kept one eye on the stock but never anticipated doing a deep dive. Dad recently asked what I thought about the stock. What better way to answer than to get fully informed by doing a First Cut?

Over the last 10 years, this mega-size ( > $50B annual revenue) company has grown sales 0.6% per year and seen EPS contract at a 34.7% annual rate.

Did you just hear a loud BOOM go off?

Lines are not discernably up, not straight, and not parallel. YOY Sales dip in ’19 and ’20. If it weren’t for EPS declines in ’16, ’18, ’19, ’20, and ’22, then earnings grow 5.6% per year. CFRA normalized earnings are a bit smoother with ’22 posting growth but Value Line, which excludes non-recurrent gains/losses, does show that YOY contraction in the same five years.

Despite failing visual inspection, I will continue with the study.

Over the last decade, PTPM trails peer and industry (curves overlap) averages while generally declining (despite a spike to 13.0% in ’21) from 3.0% (’14) to 2.3% (’23) with a last-5-year mean of 2.4%. ROE is about even with peer/industry (same curve) averages while generally declining (despite a spike to 50.1% in ’21) from 12.3% (’14) to 9.8% (’23) with a last-5-year mean of 10.3%. Debt-to-Capital is higher than the peer/industry average while generally falling from 82.8% (’14) to 77.9% (’23) with a last-5-year mean of 79.1%.

Quick Ratio is 0.95 and Interest Coverage is 3.6. M* rates the company “Standard” for Capital Allocation while Value Line gives a B+ rating for Financial Strength.

With regard to sales growth:

I am forecasting flat sales growth (middle of the range).

With regard to EPS growth:


My 1.0% annualized forecast is toward the bottom of the long-term-estimate range (mean of five: 6.3%). Initial value is ’23 EPS of $1.08/share rather than 2024 Q1 $0.97 (annualized).

Inconsistent earnings can drastically impact estimates. Moving the initial value from ’23 to ’24 cuts Value Line’s long-term growth rate in half and cuts the mean of five estimates to 4.7%. My forecast is somewhere in the middle with three estimates higher and two lower.

My Forecast High P/E is 10.8. Over the past decade, high P/E ranges from 4.8 in ’21 to 22.6 in ’14 (excluding ’19, ’20, and ’22) with a last-5-year mean of 9.6 and a last-5-year-mean average P/E of 7.5. I am forecasting at the 10-year median.

My Forecast Low P/E is 6.9. Over the past decade, low P/E ranges from 1.9 in ’21 to 16.6 in ’14 with a last-5-year mean of 5.4. I am forecasting at the 10-year median.

My Low Stock Price Forecast (LSPF) is $8.50/share. The default based on initial value given above seems unreasonably low at 44.5% less than the previous close. My forecast is 29.6% less than the previous close and 11.5% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 31.6% in ’17 to 54.2% in ’18 [excluding ’19, ’20, ’21 (2.2%) and ’22]. I am forecasting below the range at 31.0%. Although dividend is suspended from Mar ’20 through Dec ’21, I believe COVID-19 to be a Black Swan event.

These inputs land F in the Sell zone with a U/D ratio of 0.1. Total Annualized Return (TAR) is 3.3%.

PAR (using Forecast Average—not High—P/E) of 0.0% is unacceptable for any size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead but even that is less than the risk-free rate.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 38 studies done in the past 90 days (my study and 10 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 2.4%, 9.3%, 11.1, 5.4, and 1390%, respectively. I am lower except for the fourth (6.9). Value Line projects a future average annual P/E of 9.0 that is greater than MS (8.3) and greater than mine (8.9).

MS high / low EPS are $1.68 / $0.97 versus my $1.14 / $0.97 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $2.35 is much greater than both.

MS LSPF of $8.70 implies a Forecast Low P/E of 9.0 versus the above-stated 5.4. MS LSPF is 66.1% greater than the default $0.97/share * 5.4 = $5.24, which results in more aggressive zoning. MS LSPF is also 2.4% greater than mine.

27 of the 38 studies have PR 1537% or higher, which contributes to the 1390% mentioned above. This also results in MS TAR of 140%: quite unreasonable. I’m not sure what causes this, but if I have to exclude for fear of other inputs also being corrupt then only 11 studies remain. Those average (lower of mean/median) inputs are: 2.4%, 9.3% [these two same as above], 12.0, 6.4, and 21.9%. High/low EPS are $1.56 / $0.97 and LSPF is $7.70. TAR is still more than quadruple mine at 13.7%.

Compared to the full or filtered MS set, MOS seems robust despite targeting range midpoints as opposed to the conservative below-the-range approach I typically employ.

With regard to valuation, PEG is 0.79 and 11.2 per Zacks and my projected P/E: as widely discrepant as the respective EPS growth estimates. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely high at 1.67 but with a couple NMFs flanked by outlier high/low P/Es, that 5-year average is only calculated with one or two.

With regard to data stability, from ’19-’22 F posts two GAAP EPS losses, one penny, and a record-high result (by more than two-fold) at $4.45. I like normalized EPS to smooth but even that does not avoid inconsistent historical growth rates. Starting with 2014-23 and incrementing the starting year by one, the annualized EPS historical growth rate is: 6.3%, 0.5%, 1.9%, 2.0%, 9.1%, 14.0%, 70.0%, and 12.4%. It’s no wonder future long-term projections are also widespread (range 19.5%).

Such EPS inconsistency is what [makes for a much longer stock study and] troubles me about Ford Motor Company as a potential stock investment. One metric that best sums this up is probably R^2: 0.41 and 0.00 over 5 and 10 years, respectively. Value Line gives an Earnings Predictability score of 10.

U/D has F a Buy under $9.50/share while the BI TAR criterion will be satisfied ~$6.15 given a forecast high price of $12.30.

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AMWD Stock Study (6-12-24)

Posted by on July 23, 2024 at 06:31 | Last modified: June 12, 2024 11:05

I recently did a stock study on American Woodmark Corp. (AMWD) with a closing price of $81.38. The previous study is here.

Value Line writes:

     > American Woodmark Corporation manufactures and distributes kitchen
     > cabinets and vanities for the home construction and remodeling
     > markets. The company offers 550 cabinet lines in a wide variety of
     > designs, materials, and finishes, ranging from low to mid-tier
     > prices under the American Woodmark, Simply Woodmark, and other
     > brands. Acquired RSI Home Products, 12/17. Home Depot and Lowe’s
     > accounted for 43% of sales in fiscal 2022.

Over the last 10 years, this medium-size company has grown sales and earnings at annualized rates of 10.6% and 9.1%, respectively (FY ends Apr 30; references to year at BI and Value Line incremented to align).

Critical to the analysis is that the latter excludes -$1.79/share in 2022. The historical EPS growth rate is -15.9% with ’22 included. I would reject that based on visual inspection. A closer look at the 10-K reveals a major contributor to the down year is a $65.8M pension settlement:

     > Prior to April 30, 2020, the Company had two non-contributory
     > defined benefit pension plans covering many of the Company’s
     > employees hired prior to April 30, 2012. Effective April 30, 2012,
     > the Company froze all future benefit accruals under the Company’s
     > hourly and salaried defined benefit pension plans. Effective April
     > 30, 2020, these plans were merged into one plan. Effective December
     > 31, 2020 the Plan was terminated in a standard termination and
     > benefits were distributed on December 2, 2021.

“Cost of Sales and Distribution” is also higher in ’21:

     > The decrease in gross profit margin was primarily due to higher
     > material and logistics costs, and increases related to wage and
     > retention programs. This was partially offset by the increase in
     > sales creating leverage of our fixed expenses in our operating
     > platforms.

This $117M impact, for which management may be on the hook, is almost double that of the pension settlement.

I will continue the study with ’22 data excluded.

Even without ’22 EPS, visual inspection is not pristine. Sales are up and mostly straight with a dip in ’24. EPS are down in ’18, ’20, and ’21, which gives somewhat of a rocky appearance.

Over the past decade, PTPM is about even with the industry but lower than peer averages by ranging from 4.4% in ’21 to 10.6% in ’17 with a last-5-year mean of 6.2%. ROE lags industry and peer averages by falling from 15.7% (’15) to 12.6% (’24) with a last-5-year mean of 10.5%: Debt-to-Capital is lower than industry and peer averages by going from 9.1% in ’15 to 58.3% in ’18 then trending down to 35.8% in ’24 for a last-5-year mean of 42.7%.

Per M*, Quick Ratio is 1.1 and Interest Coverage is 17.3. Value Line gives a Financial Strength rating of B+.

With regard to sales growth:

I am forecasting near the bottom of the range at 3.0% per year.

With regard to EPS growth:


With only two long-term estimates available (mean 22.0%), I am taking an arbitrary 25% haircut off the lower to arrive at my 9.0% per year forecast. Initial value is ’24 EPS of $7.15/share.

My Forecast High P/E is 14.0. Over the past decade, high P/E trends down from 25.5 (’15) to 14.6 (’24) with a last-5-year mean of 20.9 and a last-5-year-mean average P/E of 14.8. I am near the bottom of the range [only ’23 (10.8) is less].

My Forecast Low P/E is 8.0. Over the past decade, low P/E trends down from 11.4 (’15) to 6.8 (’24) with a last-5-year mean of 8.6. I am forecasting near the bottom of the range [only ’24 and ’23 (7.2) are less].

My Low Stock Price Forecast (LSPF) is the default value of $57.20 given initial value from above. This is 29.7% less than the previous closing price and 12.0% less than the 52-week low.

These inputs land AMWD in the HOLD zone with a U/D ratio of 3.0. Total Annualized Return (TAR) is 13.6%.

PAR (using Forecast Average—not High—P/E) of 8.3% is less than I seek for a medium-size company. If a healthy 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 17 studies done in the past 90 days (my study and 6 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 3.3%, 12.4%, 16.3, and 9.6, respectively. I am lower across the board. Value Line projects a future average annual P/E of 11.0 that is less than MS (13.0) and equal to mine.

MS high / low EPS are $12.83 / $6.76 versus my $11.00 / $7.15 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $14.85 soars above both.

MS LSPF of $65.20 implies a Forecast Low P/E of 9.6: a perfect match. MS LSPF is 14.0% greater than mine thereby representing more aggressive zoning.

TAR (over 15.0% preferred) is much less than MS 18.4%. Despite the small MS sample size, I believe MOS to be robust due to conservative input selection.

With regard to valuation, PEG is 1.2 per my projected P/E: fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is a bit cheap at 0.77.

The stock is up ~40% over the past 12 months per Value Line while remaining in the lower half of the YTD range. If I could just get one more long-term estimate to support solid future EPS growth…

U/D has AMWD a Buy under $81/share while the BI TAR criterion will be satisfied ~$77 given a forecast high price of $154.

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OC Stock Study (6-11-24)

Posted by on July 21, 2024 at 09:16 | Last modified: June 11, 2024 11:07

I recently did a stock study on Owens Corning Inc. (OC) with a previous closing price of $176.40/share.

M* writes:

     > Owens-Corning Inc is a manufacturer of glass fiber utilized in
     > composites and building materials. It has an integrated business
     > model with three reportable segments: Composites, Insulation, and
     > Roofing. It generates maximum revenue from the Roofing segment.
     > Its Roofing segment laminate and strip asphalt roofing shingles,
     > roofing components, synthetic packaging materials, and oxidized
     > asphalt. It meets the growing demand for longer-lasting,
     > aesthetically attractive laminate products with modest capital
     > investment. Geographically the company generates the majority
     > of its revenue from the United States.

Over the last 10 years, this medium-size company has grown sales and earnings at annualized rates of 7.5% and 24.2% (excluding -$3.53 EPS in COVID ’20), respectively. Lines are generally up and parallel with YOY sales declines in ’20 and ’23 along with YOY EPS declines in 17, ’19, and ’20.

Over the last decade, PTPM trails industry averages while leading peers by ranging from 4.4% (’14) to 16.4% (’23) with a last-5-year mean of 10.6%. ROE trails industry and peer averages despite increasing from 5.8% (’14) to 22.4% (’23) with a last-5-year mean of 13.9%. Debt-to-Capital is less than industry and peer averages despite increasing from 35.4% (’14) to 38.8% (’23) with a last-5-year mean of 41.7%.

Quick Ratio is 1.17 and Interest Coverage is 21.6. Value Line gives a B++ rating for Financial Strength.

With regard to sales growth:

I am forecasting in the middle of the range at 4.0% per year.

With regard to EPS growth:

My 3.0% forecast is near the bottom of the range of four long-term estimates (mean 5.6%). Initial value is 2024 Q1 EPS of $12.35/share (annualized) instead of ’23 EPS $13.14.

My Forecast High P/E is 15.0. Over the past decade, high P/E falls from 24.4 (’14) to 11.8 (’23) with a last-5-year mean of 12.5 (excluding NMF in ’20) and a last-5-year-mean average P/E of 10.2. I am near the bottom of the decade range [’21 (11.5), ’22 (8.0), and ’23 (11.8) are lower].

My Forecast Low P/E is 7.0. Over the past decade, low P/E falls from 14.9 (’14) to 6.5 (’23) with a last-5-year mean of 7.9 (excluding NMF in ’20). I am forecasting near the bottom of the decade range [’21 (7.6), ’22 (5.7), and ’23 (6.5) are lower].

My Low Stock Price Forecast (LSPF) is $123.00. Default, given the initial value from above, is unreasonably low at 58.0% less than the previous close. My forecast is 30.3% less than the previous close but 11.8% above the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 11.8% in ’21 to 33.5% in ’14 with a last-5-year mean of 16.3% (excluding NMF in ’20). I am forecasting below the range at 11.0%.

These inputs land OC in the HOLD zone with a U/D ratio of 0.4. Total Annualized Return (TAR) is 4.8%.

PAR (using Forecast Average—not High—P/E) of -1.2% is unacceptable for any size company. If a healthy MOS anchors this study, then I can proceed based on TAR but even that is less than the current yield on T-bills.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 8 studies done in the past 90 days (my study and 4 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 4.8%, 6.0%, 13.3, 7.9, and 16.3%, respectively. I am lower on all but the third. Value Line projects a future average annual P/E of 15.0 that is greater than MS (10.6) and greater than mine (11.0).

MS high / low EPS are $17.06 / $12.35 versus my $14.32 / $12.35 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $20.00 soars above both.

MS LSPF of $102.50 implies a Forecast Low P/E of 8.3 versus the above-stated 7.9. MS LSPF is 5.1% greater than the default $12.35/share * 7.9 = $97.57, which results in more aggressive zoning. MS LSPF is 16.7% less than mine, however.

With regard to valuation, PEG is 5.3 and 4.6 per Zacks and my projected P/E, respectively: both substantially overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is about the highest I’ve seen at 1.40.

As rare as it is for me to say, I believe MOS to be weak in the current study. EPS growth rate is low and I use the lower, most-recent quarterly EPS as initial value. However, I override LSPF to go higher despite a low Forecast Low P/E. I also go higher on Forecast High P/E just to get forecast high price above current level.

I’m always going to be hard-pressed to invest in such a “high flyer.” My concessions are to maintain an appearance of validity to the current study, but fact is the stock is up ~70% in the past year and trading near 52-week highs.

U/D has OC a Buy under $118/share while the BI TAR criterion will be satisfied ~$107 given a forecast high price ~$214.

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GNRC Stock Study (6-10-24)

Posted by on July 20, 2024 at 06:27 | Last modified: June 10, 2024 16:09

I recently did a stock study on Generac Holdings Inc. (GNRC at $138.25/share). Previous studies are here, here, and here.

Value Line writes:

     > Generac Holdings Inc. designs and manufactures a wide range
     > of generators and other engine-powered products for the
     > residential, light commercial, industrial, and construction
     > markets. Its products are fueled by natural gas, liquid
     > propane, diesel, and Bi-Fuel. Acquired Ottomotores, 12/12;
     > Tower Light, 8/13; Country Home Prod., 8/15; and Pramac
     > Group, 3/16. Generac’s products are sold through indep.
     > dealers, retailers, wholesalers, and equipment rental cos.

Over the past 10 years, this medium-size company has grown sales and earnings at annualized rates of 15.5% and 16.0%, respectively. Lines are mostly up, straight, and parallel except for sales declines in ’15 and ’23 and EPS declines in ’15, ’22, and ’23. In my view, two straight years of EPS declines takes some luster off Quality.

Over the past decade, PTPM leads peer and industry averages despite going from 17.7% in ’14, down, up, and back down to 7.2% in ’23 with a last-5-year mean of 13.9%. ROE leads peer and industry averages despite trending down from 38.3% (’14) to 8.3% (’23) with a last-5-year mean of 21.5%. Debt-to-Capital is above peers and industry averages despite trending down from 69.0% in ’14 to 42.6% in ’23 with a last-5-year mean of 42.9%.

Interest Coverage is 4.1 and Quick Ratio is 0.86. M* rates the company “Standard” for Capital Allocation and describes its balance sheet as “sound.” Value Line gives a B++ rating for Financial Strength.

With regard to sales growth:

I am forecasting toward the lower end of the range at 5.0% per year.

With regard to EPS growth:

My 8.0% per year forecast is below the long-term estimate range (mean of five: 13.0%). Initial value is ’23 EPS of $3.27/share (down 39.7% YOY) rather than 2024 Q1 $3.63 (annualized).

My Forecast High P/E is 29.0. Over the past decade, high P/E increases from 25.1 (’14) to 47.9 (’23) with a last-5-year mean of 49.1 and a last-5-year-mean average P/E of 33.9. I am toward the lower end of the range [’14 and ’19 (25.5) are less].

My Forecast Low P/E is 15.0. Over the past decade, low P/E ranges from 12.0 in ’19 to 26.8 in ’21 with a last-5-year mean of 18.6. I am below the 10-year median of 15.7.

My Low Stock Price Forecast (LSPF) is $95.00. Default based on initial value is 64.6% less than the previous close: unreasonably low, in my opinion. My forecast is 31.3% less than the previous close and 18.9% greater than the 52-week low.

These inputs land GNRC in the HOLD zone with a U/D ratio of 0.0. Total Annualized Return (TAR) is 0.1%.

PAR (using Forecast Average—not High—P/E) is unacceptable for any size company at -5.2%. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead. Even that falls far short of the risk-free rate.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 96 studies (my study and 31 other 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 9.8%, 16.0%, 35.0, and 17.5. I am lower across the board. Value Line’s projected average annual P/E of 25.0 is lower than MS (26.3) and higher than mine (22.0).

MS high / low EPS are $8.92 / $3.50 vs. my $4.80 / $3.27 (per share). My high EPS is less due to a lower growth rate. Value Line projects $11.40/share for high EPS, which soars above everything else.

MS LSPF of $74.60 implies a Forecast Low P/E of 21.3: higher than the above-stated 17.5. MS LSPF is 21.8% greater than the default $3.62/share * 17.5 = $61.25, which results in more aggressive zoning. MS LSPF is 21.5% less than mine, however.

My TAR (over 15.0% preferred) is much less than the 16.6% from MS. MOS in this study is robust.

With regard to valuation, PEG is 1.9 and 4.4 per Zacks and my projected P/E, respectively: the latter significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is fair at 1.1.

Due to tarnished Quality described near the beginning, I think a larger MOS is warranted. I achieve that (and then some?) by using 2023 EPS (60.6% lower than ’21) as initial value. The current stock price is too high to overcome this.

U/D has GNRC a Buy under $106/share. The stock needs to approach $70 in order to meet the BI TAR criterion given a forecast high price ~$140.

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MED Stock Study (6-7-24)

Posted by on July 18, 2024 at 06:53 | Last modified: June 10, 2024 13:30

I recently did a stock study on Medifast, Inc. (MED) with a closing price of $21.85. Previous studies are here, here, and here.

M* writes:

     > Medifast Inc is a US-based company that produces, distributes
     > and sells products concerning weight loss, weight management,
     > and healthy living. The company generates its revenue from
     > point of sale transactions executed over an e-commerce platform
     > for weight loss, weight management, and other consumable
     > health and nutritional products.

The stock is a fallen angel. It fails visual inspection as a complete trainwreck. At the time of my study eight months ago, the stock was at $73.87 and landed in the BUY zone using my growth estimate of -6% (yes, negative) for both sales and earnings. That investment obviously would not have fared well.

I am doing this First Cut to see what the view looks like from the other side (once a winner has turned into a loser).

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 24.8% and 31.6%, respectively. Lines are mostly up, straight, and parallel through ’21 except for sales in ’15 and EPS in ’15 and ’16. Sales reverse lower in ’23 and YOY EPS has been negative for the last two.

Over the past decade, PTPM trails peer averages and the industry [slightly] while ranging from 9.9% in ’16 to 14.4% in ’20 with a last-5-year mean of 13.0%. ROE leads peer and industry averages by increasing from 24.1% (’14) to an eye-popping 92.0% (’22) before dipping to 51.4% in ’23 for a last-5-year mean of 73.3%. The company has zero long-term debt. That means Debt-to-Capital [as uncapitalized leases] is far below peer and industry averages with a last-5-year mean of 11.2%.

Quick Ratio is 2.0 and Value Line gives a Financial Strength rating of B+.

With regard to sales growth:

I am forecasting below the long-term estimate at 3.0% contraction per year.

With regard to EPS growth:

Coming up with a long-term forecast is difficult due to scant analyst coverage. The YF 20.0% estimate is unchanged—and therefore suspect, in my mind—from 9 months ago. Interestingly, Value Line’s negative growth estimate accompanies prediction of 60-140% stock appreciation over the next five years with the stock at $37.51 on 4/12/24.

I am taking the lower long-term estimate as my forecast. Initial value is ’23 EPS of $9.10/share (down 28.5% YOY).

My Forecast High P/E is 14.0. Over the past decade, high P/E ranges from 14.4 in ’23 to 56.5 in ’18 with a last-5-year mean of 21.0 and a last-5-year-mean average P/E of 14.9. I am below the range.

My Forecast Low P/E is 4.0. Over the past decade, low P/E ranges from 5.6 in ’20 to 18.2 in ’16 with a last-5-year mean of 8.7. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $14.00 is 35.9% less than the previous close and 29.6% less than the 52-week low. I can’t calculate this by initial value given a negative EPS growth rate. I therefore select [arbitrarily] something less than high EPS. $3.50/share is the lowest value since 2017 ($2.29).

After dividend inception in ’15, the company announced in December (’23) that it would be eliminated. I am forecasting a Payout Ratio (PR) of 0%, accordingly.

These inputs land MED in the BUY zone with a U/D ratio of 4.0. Total Annualized Return (TAR) is 19.5%.

PAR (using Forecast Average—not High—P/E) of 9.4% 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 11 studies (my study and 2 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 PR are 8.8%, 5.0%, 14.8, 6.0, and 47.6%, respectively. I am lower across the board. Value Line’s projected average P/E of 20.0 is higher than MS (10.4) and higher than mine (9.0).

MS high / low EPS are $9.90 / $7.70 versus my $3.81 / $3.50: not even close. Value Line predicts a high EPS of $3.80.

MS LSPF of $29.00 is currently invalid. No blame there with the stock down 14.1% (71.3%) over the past (three) month(s).

MS TAR of 41.0% is more than double that of mine.

I think MS is unreasonably optimistic. Little disruption is evident in MS high/low EPS. MS Forecast Low P/E reflects some trouble, but getting multiplied by a relatively normal EPS offsets the impact. The biggest red flag for me is PR. Suspension of the dividend is old news and an internet search for “when will Medifast resume dividend” turns up nothing. Setting PR greater than zero seems like unbridled optimism or ignorance that the dividend has already been terminated.

MS small sample size aside, I believe MOS is robust. All my inputs are at or below their respective [historical] ranges.

Relative Value [(current P/E) / 5-year-mean average P/E] per M* is ridiculously low at 0.24. This number may be a bit exaggerated because a negative EPS growth rate P/E will increase over time with all else being equal.

U/D has MED a Buy under $23/share while the BI TAR criterion is satisfied today given a forecast high price over $53.

I think two thoughts from my last stock report are worth repeating.

First, the multi-level-marketing (MLM) business model gives me pause. Some refer to MLMs as “pyramid schemes” because many have been fraudulent in the past. This is not always the case. Examples of long-standing MLM companies include Amway, Herbalife, Tupperware, Avon, and Mary Kay.

Second, I am concerned about the Medifast diet itself. Based on one article, I’m not sure the weight loss is sustainable because the food intake is so low.

As Silly_Butterfly3917 writes on Reddit: “And on the other hand, you have medifast, which is a pyramid scheme that promotes dangerous diets…”

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HELE Stock Study (6-6-24)

Posted by on July 17, 2024 at 07:19 | Last modified: June 6, 2024 15:02

I recently did a stock study on Helen Of Troy Ltd. (HELE) with a closing price of $104.69.

M* writes:

     > Helen Of Troy Ltd is a consumer products company offering creative
     > products and solutions for its customers through a diversified
     > portfolio of brands. It has two operating segments: Home & Outdoor
     > segment provides a broad range of consumer products for home
     > activities such as food preparation, cooking, cleaning, and
     > organization; as well as products for outdoor and on-the-go
     > activities such as hydration, food storage, backpacks, and travel
     > gear, and The Beauty & Wellness segment provides beauty and
     > wellness products including mass and prestige market beauty
     > appliances, prestige market liquid-based hair and personal care
     > products, and wellness devices including thermometers, water and
     > air filtration systems, humidifiers, and fans.

Over the last 10 years, this large-size company has grown sales and earnings at annualized rates of 4.9% and 8.1%, respectively. Lines are generally up and parallel but not so straight with YOY sales declines in ’17, ’18, ’23, and ’24 along with YOY EPS declines in ’16, ’18, ’20, ’22, and ’23 (FY ends Feb 29; references to year at BI and Value Line incremented to align).

I feel iffy as to whether this passes visual inspection. 10-year R^2 is 0.78 for sales and 0.53 for EPS. I have seen the stock on Value Line’s Timely list enough over the years to find it of personal interest. If only for that reason, I will proceed with the analysis while being additionally careful to boost margin of safety (MOS) wherever possible.

Over the last decade, PTPM trails industry averages while leading peers by ranging from 7.8% in ’16 to 12.8% in ’21 with a last-5-year average of 10.6%. ROE is comparable to industry and peer averages while ranging from 9.8% in ’23 to 20.3% in ’21 with a last-5-year mean of 14.0%. Debt-to-Capital is less than industry and peer averages while ranging from 22.2% in ’18 to 40.1% in ’16 with a last-5-year mean of 31.4%.

Quick Ratio per Value Line is (843.9 – 396) / 450.8 = 0.99 and Interest Coverage is 24.6. Value Line gives a B++ rating for Financial Strength.

With regard to sales growth:

I am forecasting much closer to the short-term projections at 2.0% per year.

With regard to EPS growth:

Four long-term estimates are exactly 8.0% thereby raising my suspicion of data duplication (same analysts). I will apply a 25% haircut to that to get my 6.0% annualized forecast. Initial value is ’24 EPS of $7.03/share.

My Forecast High P/E is 18.0. Over the past decade, high P/E gradually increases from 17.7 (’15) to 20.4 (’24) with a last-5-year mean of 29.0 and a last-5-year-mean average P/E of 22.0. I am near the bottom of the range (only ’15 is lower).

My Forecast Low P/E is 11.4. Over the past decade, low P/E ranges from 10.3 in ’21 to 21.3 in ’16 with a last-5-year mean of 15.0. I am forecasting near the bottom of the range (only ’21 is lower).

My Low Stock Price Forecast (LSPF) of $80.10 is default given the initial value from above. This is 23.5% less than the previous close and 8.5% less than the 52-week low.

These inputs land HELE in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 10.1%.

PAR (using Forecast Average—not High—P/E) is less than I like to see for a medium-size company at 5.7%. If a healthy 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 11 studies done in the past 90 days (my study and 4 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 8.2%, 8.0%, 21.0, and 13.4, respectively. I am lower across the board. Value Line projects a future average annual P/E of 15.0 that is less than MS (17.2) and greater than mine (14.7).

MS high / low EPS are $10.33 / $7.05 versus my $9.41 / $7.03 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $15.00 is much greater than both.

MS LSPF of $72.00 implies a Forecast Low P/E of 11.5 versus the above-stated 13.4. MS LSPF is 14.2% less than the default $7.05/share * 13.4 = $94.47, which results in more conservative zoning. MS LSPF is 1.3% greater than mine, however.

TAR (over 15.0% preferred) is less than MS 17.1%. Despite the tiny MS sample size, I believe MOS to be robust due to consistent efforts to undercut the range with my inputs.

Turning to valuation, PEG is 1.5 and 2.3 per Zacks and my projected P/E, respectively: both somewhat overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.67.

U/D has HELE a Buy under $102/share while the BI TAR criterion will be satisfied ~$85 given a forecast high price over $169. Position size may be lower should you categorize as a speculative (non-core) investment.

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XPEL Stock Study (6-6-24)

Posted by on July 15, 2024 at 10:53 | Last modified: June 6, 2024 11:33

I recently did a stock study on XPEL Inc. (XPEL) with a closing price of $39.56.

M* writes:

     > XPEL, Inc. sells, distributes, and installs after-market automotive
     > products. The company offers automotive surface and paint
     > protection, headlight protection, and automotive and architectural
     > window films, as well as proprietary software. It also provides
     > merchandise and apparel; ceramic coatings; and tools and
     > accessories, which include squeegees and microfiber towels,
     > application fluids, plotter cutters, knives, and other products.
     > In addition, the company offers paint protection kits, car wash
     > products, after-care products, and installation tools through its
     > website. The company sells and distributes its products through
     > independent installers and new car dealerships, third-party
     > distributors, automobile original equipment manufacturers, and
     > company-owned installation centers, as well as through franchisees
     > and online channels… XPEL is headquartered in San Antonio, TX.

Over the past six years since public trading began, this small-size company has grown sales and earnings at annualized rates of 31.7% and 43.8%, respectively. Lines are up, mostly straight, and parallel.

Since 2018, PTPM leads peer and industry averages while trending higher from 10.4% (’18) to 16.7% (’23) with a last-5-year mean of 15.0%. ROE also leads peer and industry averages despite falling from 42.5% (’18) to 31.7% (’23) with a last-5-year mean of 38.7%. Debt-to-Capital is lower than peer and industry averages despite increasing from 8.1% (’18) to 16.7% (’23) with a last-5-year mean of 21.2%.

Quick Ratio is 1.2 and Interest Coverage is 51.2. Value Line gives a B+ rating for Financial Strength.

With regard to sales growth:

With only one long-term projection, I am applying a 50% haircut for my conservative forecast of 5.0% per year.

With regard to EPS growth:

Analyst estimates are scant—both in number of sources and analysts per source. I therefore want a solid margin of safety (MOS). As one of two long-term projections, Seeking Alpha not only seems very high but is also unchanged from nine months ago making me question its legitimacy. I am forecasting less than both projections (mean: 19.9%) at 9.0% per year. I will use 2024 Q1 EPS of $1.73/share (annualized) as the initial value rather than ’23 EPS of $1.91.

My Forecast High P/E is 28.0. Since 2018, high P/E ranges from 22.5 in ’18 to 91.1 in ’21 with a last-5-year mean of 62.0 and a last-5-year-mean average P/E of 41.6. I am near the bottom of the range (only ’18 is lower).

My Forecast Low P/E is 15.0. Since 2018, low P/E ranges from 8.2 in ’19 to 38.7 in ’21 with a last-5-year mean of 21.2 and a last-6-year median of 17.8. I am forecasting toward the lower end of the range [only ’19 and ’20 (11.4) are less].

My Low Stock Price Forecast (LSPF) of $29.40 is default given initial value from above. This is 25.7% less than the previous close and 4.5% less than the 52-week low.

These inputs land XPEL in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 13.5%.

PAR (using Forecast Average—not High—P/E) is less than I seek for a small-size company at 7.6%. If a healthy 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 141 studies done in the past 90 days (my study and 27 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 13.0%, 13.0%, 31.0, and 19.6, respectively. I am lower across the board. Value Line projects a future average annual P/E of 21.0 that is less than MS (25.3) and less than mine (21.5).

MS high / low EPS are $3.47 / $1.84 versus my $2.66 / $1.73 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $3.05 is in the middle.

MS LSPF of $33.40 implies a Forecast Low P/E of 18.2 versus the above-stated 19.6. MS LSPF is 7.4% less than the default $1.84/share * 19.6 = $36.06, which results in more conservative zoning. MS LSPF is 13.6% greater than mine, however.

TAR (over 15.0% preferred) is less than MS 20.1%. I believe MOS to be robust in the current study.

With regard to valuation, PEG is 2.3 per my projected P/E: slightly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.53.

Value Line projects 65% stock appreciation over the next 18 months while its analyst writes, “shares… are ranked to underperform the broader market averages in the year ahead.” Something seems off unless they are projecting a sharp stock rally in months 13-18, but even their Timeliness rank does not aim for that level of precision.

U/D has XPEL a BUY under $38/share while the BI TAR criterion will be satisfied ~$37 given a forecast high price over $74.

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DORM Stock Study (6-5-24)

Posted by on July 13, 2024 at 08:17 | Last modified: June 5, 2024 11:01

I recently did a stock study on Dorman Products Inc. (DORM) with a closing price of $90.15. The previous study is here.

M* writes:

     > Dorman Products Inc is a supplier of original equipment parts
     > for automobiles. The company produces automotive and heavy-
     > duty replacement parts, automotive hardware, brake parts, and
     > fasteners for the automotive and heavy-duty aftermarket. The
     > products are sold under the Dorman brand and its sub-brands
     > OE Solutions, Help!, Conduct-Tite, and HD Solutions through
     > aftermarket retailers, regional and local warehouse
     > distributors, specialty markets, and salvage yards. It
     > operates as a single reportable operating segment, namely,
     > the sale of replacement and upgrades parts in the motor
     > vehicle aftermarket industry, serving passenger cars, light-,
     > medium-,and heavy-duty trucks as well as specialty vehicles.
     > The company operates primarily in the United States.

Over the last 10 years, this medium-size company has grown sales and EPS at annualized rates of 10.7% and 5.2%, respectively. Lines are up, somewhat straight, and [I stretch to say] parallel. Admittedly, visual inspection is mediocre due to EPS declines in ’19 (big) and ’22 making growth appear inconsistent.

Over the past decade, management metrics are trending the wrong way. PTPM leads peer and industry averages despite falling from 19.2% (’13) to 9.0% (’22) with a last-5-year mean of 12.5%. ROE is roughly even with the industry and leading peer averages despite falling from 19.9% (’14) to 11.4% (’23) with a last-5-year mean of 12.3%. Debt-to-Capital is less than peer and industry averages despite increasing from 0% (through ’18) to 36.3% (’23) with a last-5-year mean of 22.5%.

Interest Coverage is 5.4 and Quick Ratio is 1.1. Value Line gives a B++ rating for Financial Strength.

With regard to sales growth:

I am forecasting toward the low end of the range at 4.0% per year.

With regard to EPS growth:

My 10.0% forecast is well below either long-term projection (mean 14.4%). I just don’t have a lot to go on with 2-3 estimates behind each number (Zacks and YF even seem to duplicate each other on YOY EPS). I think greater uncertainty warrants a more conservative forecast.

Initial value is ’23 EPS of $4.10 rather than 2024 Q1 $4.97/share (annualized).

My Forecast High P/E is 22.0. Over the past decade, high P/E ranges from 20.7 in ’15 to 38.0 in ’19 with a last-5-year mean of 30.8 and a last-5-year-mean average P/E of 24.9. I am near the bottom of the range (only ’15 is lower).

My Forecast Low P/E is 14.0. Over the past decade, low P/E ranges from 13.1 in ’16 to 26.3 in ’19 with a last-5-year mean of 18.9. I am forecasting toward the bottom of the range [only ’16 and ’20 (13.5) are lower].

My Low Stock Price Forecast (LSPF) of $57.40 is default based on initial value from above. This is 36.3% less than the previous close and 4.3% less than the 52-week low.

These inputs land DORM in the HOLD zone with a U/D ratio of 1.6. Total Annualized Return (TAR) is 9.6%.

PAR (using Forecast Average—not High—P/E) is less than I like to see for a medium-size company at 5.3%. 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 29 studies done in the past 90 days (my study and 6 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 6.4%, 9.9%, 27.0, and 16.6, respectively. I am lower on all but EPS growth (10.0%). Value Line projects a future average annual P/E of 20.0 that is less than MS (21.8) and greater than mine (18.0).

MS high / low EPS are $7.26 / $4.35 versus my $6.60 / $4.10 (per share). My high EPS is less due to low EPS. Value Line’s high EPS of $9.30 is much greater than both.

MS LSPF of $66.30 implies a Forecast Low P/E of 15.2 versus the above-stated 16.6. MS LSPF is 8.2% less than the default $4.35/share * 16.6 = $72.21, which results in more conservative zoning. MS LSPF is 15.5% greater than mine, however.

TAR (over 15.0% preferred) is much less than MS 16.2%. Despite the small MS sample size, I believe MOS to be robust.

With regard to valuation, PEG is 1.7 per my projected P/E: roughly fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.74.

Declining estimates over the past nine months combined with stock price near the YTD high make for a tough investment proposition right now. In case my LSPF is unreasonable, I would feel comfortable raising to the 52-week low thereby adding two points to the next number you read.

DORM is a BUY under $79/share. All else remaining equal, the BI TAR criterion will be satisfied ~$73 given a forecast high price ~$145.

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