Option FanaticOptions, stock, futures, and system trading, backtesting, money management, and much more!

ALGN Stock Study (8-7-23)

Posted by on October 19, 2023 at 06:29 | Last modified: August 7, 2023 15:43

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:

I am forecasting conservatively at 6.0% per year.

With regard to EPS growth:

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.

Categories: BetterInvesting® | Comments (0) | Permalink

EPAM Stock Study (8-2-23)

Posted by on October 17, 2023 at 07:13 | Last modified: August 2, 2023 14:54

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:

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

With regard to EPS growth:

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.

Categories: BetterInvesting® | Comments (0) | Permalink

NGVT Stock Study (8-21-23)

Posted by on October 14, 2023 at 07:06 | Last modified: August 21, 2023 14:54

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:

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

With regard to EPS growth:

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.

Categories: BetterInvesting® | Comments (0) | Permalink

FLT Stock Study (8-2-23)

Posted by on October 13, 2023 at 06:47 | Last modified: August 2, 2023 13:25

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:

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

With regard to EPS growth:

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.

Categories: BetterInvesting® | Comments (0) | Permalink

OZK Stock Study (8-1-23)

Posted by on October 11, 2023 at 06:47 | Last modified: July 31, 2023 20:26

I recently did a stock study on Bank OZK (OZK) with a closing price of $43.73.

Value Line writes:

     > Bank OZK (formerly Bank of the Ozarks) is a bank holding company.
     > The company owns an Arkansas state chartered subsidiary bank, Bank
     > of the Ozarks, that conducts operations through 240 offices. Bank
     > OZK provides a range of retail and commercial banking services.
     > Deposit services includes: checking, savings, money market, time
     > deposit, and individual retirement accounts. Loan services include:
     > various types of real estate, consumer, commercial, industrial and
     > agricultural loans, and various leasing services. The company also
     > provides mortgage lending; treasury management services for
     > businesses, individuals and non-profit and governmental entities
     > including: wholesale lock-box services; remote deposit capture
     > services; trust and wealth management services for businesses,
     > individuals and non-profit and governmental entities; real estate
     > appraisals; ATMs; telephone banking; online and mobile banking
     > services; debit cards, gift cards, and safe deposit boxes.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 17.7% and 13.3%, respectively. Lines are mostly up and parallel except for a sales dip in ’19 and EPS dips in ’18 and ’20. PTPM has been above peer and industry averages while going from 49.2% in ’13 to 57.8% in ’22 with a last-5-year mean of 55.6%.

Also over the past decade, ROE leads peer and industry averages going from 14.6% in ’13 to 12.7% in ’22 with a last-5-year mean of 10.8%. Debt-to-Capital is much less than peer and industry averages generally trending down from 35.6% in ’13 to 18.7% in ’22 with a last-5-year mean of 16.8%.

Return on Average Assets (ROAA) has a last-5-year mean of 1.82%. Aside from 1.15% in ’20 (COVID-19), the lowest ROAA in the last 10 years is 1.85% in ’19. That is impressive!

Value Line gives a B+ grade for Financial Strength.

With regard to sales growth:

I am forecasting toward the lower end of the range at 7.0% per year.

With regard to EPS growth:

My 5.0% forecast is below the long-term-estimate range (mean of three: 8.0%). I will use ’22 EPS of $4.54/share as the initial value rather than 2023 Q1 EPS of $4.93 (annualized).

My Forecast High P/E is 10.0. Over the past decade, high P/E has trended down from 24.1 in ’13 to 11.3 in ’22 with a last-5-year mean of 12.6. I am forecasting below the entire range and just above the last-5-year-mean average P/E of 9.7.

My Forecast Low P/E is 6.0. Over the past decade, low P/E has fallen from 13.5 in ’13 to 7.7 in ’22 with a last-5-year mean of 6.8. I am forecasting below the entire range.

My Low Stock Price Forecast (LSPF) of $27.20 is the default value based on $4.54/share. This is 37.8% less than the previous close and 11.4% less than the 52-week low.

Over the past decade, Payout Ratio ranges from 21.2% in ’17 to 47.7% (upside outlier) in ’20 with a last-5-year mean (excluding the outlier) of 26.5%. I am forecasting below the range at 21.0%.

These inputs land OZK in the HOLD zone with a U/D ratio of 0.9. Total Annualized Return (TAR) is 7.9%.

PAR (using Forecast Average—not High—P/E) is 3.8%, 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 TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 90 studies done in the past 90 days (my study and 17 other 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 7.0%, 7.1%, 14.8, 10.2, and 26.5%, respectively. I am equal on projected sales growth and lower on the others.

MS high / low EPS is $6.46 / $3.41 vs. my $5.79 / $4.54 (per share). My high EPS is lower due to a lower growth rate. I am perplexed by the $3.41. ’22 and ’21 annual EPS are both higher. I have to go back to Q3 2020 to find a lower quarterly [annualized] EPS number. I almost think this to be unreasonably low.

MS LSPF of $28.70 implies a Forecast Low P/E of 8.4 vs. the above-stated 10.2. MS LSPF is 17.5% less than the default $3.41/share * 10.2 = $34.78, which results in more conservative zoning. MS LSPF remains 5.5% greater than mine.

MOS backing the current study seems robust. My 7.9% is much lower than MS TAR of 20.9%.

I track a couple different valuation metrics. PEG is 1.7 based on my forward P/E (slightly overvalued) while Relative Value [(current P/E) / 5-year-mean average P/E] is slightly undervalued at 0.92 (M*).

I would look to re-evaluate OZK under $34/share.

Categories: BetterInvesting® | Comments (0) | Permalink

CHDN Stock Study (7-27-23)

Posted by on October 9, 2023 at 06:38 | Last modified: July 27, 2023 13:45

I recently did a stock study on Churchill Downs Inc. (CHDN) with a closing price of $131.58.

M* writes:

     > Churchill Downs Inc is a gaming entertainment, online wagering,
     > and racing company. It operates through three business segments:
     > Live and Historical Racing, TwinSpires, and Gaming. The Live and
     > Historical Racing segment includes live and historical pari-mutuel
     > racing. The TwinSpires segment includes the revenue and expenses
     > for online horse racing and the online and retail sports betting
     > and iGaming wagering business. The company generates more than
     > half of its revenue from the Gaming segment includes revenue from
     > casino properties and associated racetrack or jai alai facilities
     > which support the casino license as applicable.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 7.4% and 20.6%. Lines are mostly up, straight, and narrowing except for sales dips in ’17 and ’20 along with EPS declines in ’14, ’19, and ’20. PTPM leads peer and industry averages while trending up from 11.0% in ’13 to 33.6% in ’22 with a last-5-year mean of 18.8%.

Also over the past decade, ROE is slightly better than peer and industry averages while trending up from 7.6% in ’13 to 69.7% in ’22 with a last-5-year mean of 40.8%. Debt-to-Capital is lower than peer and industry averages despite increasing from 34.4% in ’13 to 89.3% in ’22 with a last-5-year mean of 79.4%.

Interest Coverage is 5.0 and Quick Ratio is 0.7. Value Line assigns a B++ rating for Financial Strength.

With regard to sales growth:

I am forecasting below the range at 14.0% per year.

With regard to EPS growth:

I am forecasting below the long-term-estimate range (mean of five: 17.9%) at 10.0% per year. I am using ’22 EPS of $5.71/share as the initial value rather than ’23 Q1 EPS of $7.20 (annualized).

My Forecast High P/E is 21.0. Over the past decade, high P/E ranges from 21.8 in ’22 to 41.3 in ’15 and ’21 (upside outlier of 644 in ’20 excluded). The last-5-year mean (excluding ’20) is 31.8 and the last-5-year-mean average P/E is 26.2. I am forecasting below the entire range.

My Forecast Low P/E is 15.0. Over the past decade, low P/E ranges from 15.1 in ’22 to 31.7 in ’14 (upside outlier of 160 in ’20 excluded) with a last-5-year mean of 20.5. I am projecting below the entire range.

My Low Stock Price Forecast (LSPF) of $85.70 is the default value based on $5.71/share initial value. This is 34.8% less than the previous close and 3.9% less than the 52-week low.

Over the past decade, Payoff Ratio ranges from 6.3% in ’22 to 38.0% in ’14 (excluding upside outlier of 189% in ’20) with a last-5-year mean of 46.9%. I am forecasting conservatively below the range at 6.0%.

These inputs land CHDN in the HOLD zone with a U/D ratio of 1.3. Total Annualized Return (TAR) is 8.3%.

PAR (using Forecast Average—not High—P/E) of 5.0% 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 7 studies done in the past 90 days (five outliers including my own 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 13.1%, 2.1%, 31.6, 20.3, and 44.1%. My growth rates are higher while my other three inputs are lower. Value Line projects a future average annual P/E of 27.0, which is higher than MS (26.0) and much higher than me (18.0).

MS high / low EPS is $7.99 / $6.82 vs. my $9.20 / $5.71 (per share). My high EPS is higher due to a higher growth rate. My TAR is significantly lower than MS 15.3% [average], however.

MS LSPF of $106.00 implies a Forecast Low P/E of 15.5 vs. the above-stated 20.3. MS LSPF is 23.4% less than the default $6.82/share * 20.3 = $138.45, which results in more conservative zoning. MS LSPF remains 23.7% greater than mine.

Something isn’t right with the MS studies because the default MS LSPF is invalid (higher than previous close) on today’s date. These studies were all done in the past two weeks as the stock has fallen less than 3.0%. The LSPF cushion should be 15-20% (and sometimes much more). I would also take issue with multiple MS studies (done on 2 separate days) that have identical inputs including EPS growth of 2.1%: unreasonably low, in my opinion.

I deem MOS in the current study to be robust based on the long-term EPS estimates and Value Line’s future average P/E. I can’t take MS into account for this comparison because the sample size (four not including the duplicates) is too low.

Valuation metrics are mixed for the stock. PEG is 2.1 (Zacks) or 1.7 (using my projected P/E). While this implies overvalued, Relative Value [(current P/E) / 5-year-mean average P/E] at 0.70 (M*) disagrees. Kim Butcher’s “quick and dirty DCF” prices the stock at 20 * [$12.30 – ($0.75 + $2.45)] = $182.00 thereby suggesting the stock to be undervalued by 28.0%.

I would look to re-evaluate CHDN under $112/share.

Categories: BetterInvesting® | Comments (0) | Permalink

DAR Stock Study (8-17-23)

Posted by on October 6, 2023 at 07:00 | Last modified: August 17, 2023 11:44

I recently did a stock study on Darling Ingredients Inc. (DAR) with a closing price of $62.61.

M* writes:

     > Darling Ingredients Inc develops and manufactures sustainable ingredients
     > for customers in the pharmaceutical, food, pet food, fuel, and fertilizer
     > industries. It collects and transforms all aspects of animal by-product
     > streams into ingredients, including gelatin, fats, proteins, pet food
     > ingredients, fertilizers, and other specialty products. Also, the company
     > recovers and converts used cooking oil and bakery remnants into feed
     > and fuel ingredients. Darling has three primary business segments: feed
     > ingredients (the majority of revenue), food ingredients, and fuel
     > ingredients. It provides grease trap services for food businesses and sells
     > various equipment for collecting and delivering cooking oil. The company
     > derives the majority of its revenue from customers in North America.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 8.5% and 27.5%. Lines are generally up and parallel with YOY declines for sales in ’15, ’18, and ’19 along with ’14, ’18, and ’20 for EPS. PTPM trails peer and industry averages despite increasing from 9.5% in ’13 to 13.7% in ’22 with a last-5-year mean of 11.1%.

Also over the past decade, ROE trails peer and industry averages despite increasing from 12.9% in ’13 to 20.1% in ’22 with a last-5-year mean of 13.6%. Debt-to-Capital is lower than peer and industry averages while ranging from 30.5% in ’13 to 52.4% in ’14 with a last-5-year mean of 40.2%.

Quick Ratio is 0.9 and Interest Coverage is 5.5. Value Line rates the company B++ for Financial Strength.

With regard to sales growth:

I am forecasting near the bottom of the range at 5.0% per year.

With regard to EPS growth:

My 2.0% per year forecast is at the bottom of the long-term estimate range. I consider this quite conservative as the mean and median of four estimates are 16.6% and 10.6%, respectively. Of the extremes, I am more puzzled by YF than CNN Business although I scratch my head at both. A larger estimate range also encourages me to lean more conservative due to perceived uncertainty.

My initial value is ’22 EPS of $4.49/share rather than 2023 Q2 EPS of $4.82 (annualized).

My Forecast High P/E is 19.0. Over the past decade, high P/E trends down from 17.7 in ’13 to 12.4 in ’22 with a last-5-year mean of 13.9. My forecast is near the bottom of the range [only ’19 (15.2) is lower].

My Forecast Low P/E is 11.0. Over the past decade, low P/E trends down from 17.7 in ’13 to 12.4 in ’22 with a last-5-year mean of 13.9. My forecast is near the bottom of the range [only ’20 (5.8) and ’19 (9.8) are lower].

My Low Stock Price Forecast (LSPF) of $49.40 is default based on $4.49/share initial value. This is 21.1% less than the previous closing price, 4.6% less than the 52-week low, and 11.3% less than the lowest price from 2020-1.

These inputs land DAR in the HOLD zone with a U/D ratio of 2.4. Total Annualized Return (TAR) is 8.5%.

PAR (using Forecast Average—not High—P/E) is 3.5%, 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 184 studies done in the past 90 days (my study and 42 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%, 9.2%, 19.4, and 12.2. I am lower across the board. Value Line’s future average annual P/E of 18.0 is higher than both MS (15.8) and mine (15.0).

MS high / low EPS are $7.15 / $4.50 vs. my $4.96 / $4.49 (per share). My high EPS is much lower due to the very conservative EPS growth rate discussed above.

MS LSPF of $50.00 implies a Forecast Low P/E of 11.1 vs. the above-stated 12.2. MS LSPF is 8.9% less than the default $4.50/share * 12.2 = $54.90, which results in more conservative zoning. MS LSPF remains 1.2% greater than mine.

My TAR (over 15.0% preferred) is much less than the 16.3% from MS.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG per my projected P/E (using that very conservative EPS growth rate) is 6.4: substantially overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is significantly undervalued at 0.54. Kim Butcher’s “quick and dirty DCF” prices the stock at 11.5 * [$10.50 – ($1.00 + $5.00)] = $51.75 thereby suggesting the stock to be overvalued by 21.0% [I’m a bit puzzled by the $5.00 ’26-’28 CapEx, which is twice as much as anything seen historically or projected through ’24].

Based on this analysis, DAR is a BUY under $60/share. For me, TAR would still not qualify. With a Forecast High Price of $94.20 [in five years], I should look to invest up to $94.20 / 2 = $47.10. If you believe DAR capable of realizing greater than a 2.0% EPS growth rate, then this threshold can be relaxed.

Categories: BetterInvesting® | Comments (0) | Permalink

DIS Stock Study (7-26-23)

Posted by on October 5, 2023 at 06:40 | Last modified: July 26, 2023 18:55

I recently did a stock study on The Walt Disney Co. (DIS) with a closing price of $85.63.

M* writes:

     > Walt Disney owns the rights to some of the most globally recognized
     > characters, from Mickey Mouse to Luke Skywalker. These characters
     > and others are featured in several Disney theme parks around the
     > world. Disney makes live-action and animated films under studios
     > such as Pixar, Marvel, and Lucasfilm and also operates media
     > networks including ESPN and several TV production studios. Disney
     > shifted into a more streaming-focused firm by acquiring the
     > remainder of Hulu and launching Disney+ and ESPN+. Across its
     > streaming platforms, Disney had over 235 million subscribers as of
     > September 2022, up sharply from under 64 million in December 2019.

Over the past decade, this mega-size ( > $50B annual revenue) company has grown sales 6.0% per year. EPS has grown 12.7% per year from ’13-’19 before falling off the COVID-19 cliff in ’20. A full recovery is still years away, and for this reason the company does not pass visual inspection.

Pressing on to entertain [pun intended] the possibility of a smaller, more speculative holding, PTPM trails peer and industry [declining] averages with a last-5-year mean of 10.5%. ROE also trails peers and the industry with a last-5-year mean of 8.4%. Debt-to-Capital is lower than peer and industry averages with a last-5-year mean of 36.1%.

Interest Coverage is 4.6 and Quick Ratio 0.83. M* rates the company “Exemplary” for Capital Allocation while Value Line awards an A rating for Financial Strength.

With regard to sales growth:

I am forecasting below both long-term estimates at 4.0% per year.

With regard to EPS growth:

Given the large long-term-estimate range (11.9% to 37.7%), my initial thought was to forecast below the range at 11.0%.

The Zacks long-term estimate of 11.8% seems a bit quirky, though. They project 36.5% YOY for ’24 leaving only 20.0% further growth to be spread over the following four years.

Excluding the extremes results in a 4-long-term-estimate mean of 21.1%. I am truncating to get my forecast. I will use ’22 EPS of $1.75/share as the initial value rather than ’23 Q2 EPS of $2.25 (annualized).

My Forecast High P/E is 30.0. From ’13-’19, high P/E ranges from 14.1 (downside outlier in ’18) to 24.9 (’15). ’20 is NMF with negative earnings and for the last two years, high P/E is in triple digits. I expect this to normalize, which also suggests EPS should normalize [to be conservative, my forecast EPS growth over five years still ends up less than ’15 EPS]. My arbitrary forecast is near the top of my comfort zone.

My Forecast Low P/E is 15.0. From ’13-’19, low P/E ranges from 11.6 in ’18 to 16.0 (’15 and ’19). ’20 is NMF with negative earnings and for the last two years, low P/E has been ~106 and 51.6. Once again, I seem to have two distinct distributions from which to forecast. I am sticking with the former even though the latter will probably rule until EPS significantly rebounds toward pre-COVID levels. Only 13.8 in ’13, 14.8 in ’14, and 11.6 in ’18 are lower than my forecast.

I also need to determine what number to use as low EPS because [default] TTM seems unreasonably low. With the worst of COVID-19 seeming well behind us, zero-growth should not be based off a depressed value. Given my high EPS at $4.54/share, I will use $4.00 for low EPS, which represents zero-growth since 2014.

My Low Stock Price Forecast (LSPF) of $60.00 is the default value based on my Forecast Low P/E and low EPS. This is 29.9% less than the previous close and 28.7% less than the 52-week low.

These inputs land DIS in the HOLD zone with a U/D ratio of 2.0. Total Annualized Return (TAR) is 9.7%.

Dividend payout was suspended in ’21 (if not a bit earlier). While analysts expect it to be reinstated at some point, I am forecasting 0% Payout Ratio for now.

PAR (using Forecast Average—not High—P/E) is 3.6%, which is lower than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the 9.7% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 305 studies done in the past 90 days [121 outliers including my study 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 7.0%, 21.4%, 40.0, 20.0, and [interestingly] 24.1%. I am lower across the board. Value Line projects an average annual P/E of 19.0, which is less than both MS (30.0) and mine (22.5).

MS high / low EPS is $4.92 [median] / $2.20 vs. my $4.54 / $4.00 (per share). Mean MS high EPS is $6.08/share, which implies significant uncertainty. Looking back over my analysis, I empathize wholeheartedly.

MS LSPF of $71.80 implies a Forecast Low P/E of 32.6 vs. the above-stated 20.0. MS LSPF is 63.2% greater than the default value of $2.20/share * 20.0 = $44.00. I rarely see such an enormous discrepancy, which may be further evidence of confusion [i.e. MS low EPS needs to be greater].

I think MOS in the current study is at least moderate if not robust. Value Line and M* project high EPS of $8.65 and $4.61/share, respectively [based on this difference, one could even say the professionals seem confused]. Also, MS projects a mean total return of 19.2% compared to my 9.7%.

Valuation metrics are conflicted on the company. PEG ratio is 1.9 (Zacks) while Relative Value [(current P/E) / 5-year-mean average P/E] is 1.2 (M*). Both suggest the stock to be overvalued. According to Kim Butcher’s “quick and dirty DCF,” the stock should be priced at 15 * [$11.35 – ($0.00 + $2.50)] = $132.75 (i.e. stock undervalued by 35.0%).

I would look to re-evaluate DIS under $79/share.

There is certainly debate to be had over how to approach this analysis. Using ’22 or ’21 for low EPS essentially pushes the company back many years for what was clearly a COVID-driven decline. Suspending the dividend significantly impacts valuation as [Kim Butcher’s] Quick-and-Easy DCF decreases from $132.75 to $102.75/share when Value Line’s $2.00/share [projected future] dividend is included. Maybe a depressed low EPS is valid given the suspended dividend, but I still can’t reconcile pushing the company back more than a decade with a sub-$2.00/share EPS. Confusion rules the day, and nobody’s efforts—neither MS, professionals, nor myself—seem to be spared!

Categories: BetterInvesting® | Comments (0) | Permalink

YETI Stock Study (7-26-23)

Posted by on October 3, 2023 at 06:44 | Last modified: July 26, 2023 14:31

I recently did a stock study on YETI Holdings (YETI) with a closing price of $41.50.

M* writes:

     > YETI Holdings Inc is a designer, marketer, and distributor of premium
     > products for the outdoor and recreation market sold under the YETI
     > brand. The company offers products including coolers and equipment,
     > drinkware, and other accessories. Its trademark products include YETI,
     > Tundra, Hopper, YETI TANK, Rambler, Colster, Rambler Colster, Roadie,
     > and Wildly Stronger! Keep Ice Longer!, SideKick, FatWall, PermaFrost,
     > T-Rex, ColdLock, NeverFail, AnchorPoint, InterLock, BearFoot, Vortex,
     > DoubleHaul, LipGrip, Vortex, DryHide, ColdCell, HydroLock, Over-the-
     > Nose, and LOAD-AND-LOCK. The company distributes products through
     > wholesale channels and through direct-to-consumer, or DTC, channels.

This medium-size company has grown sales and earnings at annualized rates of 32.5% and 19.3% over the last 9 and 7 years, respectively [’13-’14 EPS excluded due to small fractional values that artificially inflate the growth rate]. The visual inspection is mediocre. Sales are up and straight except for spike in ’15 and decline in ’17. EPS are down in ’16, ’17, ’19, and ’22 [I am excluding the latter 57.1% YOY decline due to operational snafus including recall of defective items and inflation-induced demand destruction per Value Line]. PTPM has led peer and industry averages with a last-5-year mean of 12.3%.

ROE averages 47.6% over the last four years (too brief a history to compare peer and industry averages). Debt-to-Capital is declining since ’16 and falls below peer and industry averages in ’20 with a last-5-year mean of 50.9% [23.8% in ’22].

Value Line rates the company B+ for Financial Strength. Interest Coverage is 23.7 and Quick Ratio is 0.80.

With regard to sales growth:

I am forecasting conservatively toward the bottom of the range at 6.0% per year.

With regard to EPS growth:

I am forecasting below the long-term-estimate range (mean of five: 10.1%) at 8.0% per year. As the initial value, I will not use ’22 EPS of $1.03/share or Q1 ’23 EPS of $0.85/share (annualized) since those numbers are affected by product recall and production issues [strange that CFRA is the only data source projecting huge percentage increases relative to the depressed ’22 EPS]. Instead, I will use ’20 EPS of $1.77/share and extrapolate to $1.77/share * (1.08 ^ 5) = $2.60/share. I can almost ($2.56/share) get to this as a [website] workaround with a 20.0% growth rate and ’22 EPS.

My Forecast High P/E is 31.0. With the stock trading publicly since 2018, high P/E has increased since 31.1 in ’18 for a last-5-year mean of 53.0. The last-5-year-mean average P/E is 36.9. I am forecasting below the range.

My Forecast Low P/E is 16.0. Over the past five years, low P/E ranges from 8.6 (perhaps a downside outlier) in ’20 to 27.0 in ’22 with a last-5-year mean of 20.8. I am forecasting conservatively (18.0 in ’18 being the second-lowest value).

My Low Stock Price Forecast (LSPF) of $26.60 is the default value based on of $1.77/share. This is 35.9% less than the previous close and 4.7% less than the 52-week low.

These inputs land YETI in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 13.9%.

PAR (using Forecast Average—not High—P/E) of 7.3% is less than I prefer 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 58 studies done in the past 90 days (23 outliers and my study excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.3%, 13.0%, 31.1, and 17.4. I am lower across the board. Value Line projects a future average annual P/E of 20.0, which is lower than MS (24.3) and me (23.5).

MS high / low EPS is $1.82 / $0.85 vs. my $2.56 / $1.77 (per share). I think many studies are using ’22 for low EPS. Not only would I argue this to be unreasonable, it also obscures MOS.

MS LSPF of $17.70 implies a Forecast Low P/E of 20.8 vs. the above-stated 17.4. MS LSPF is 19.7% greater than the default value of $0.85/share * 17.4 = $14.79/share, which results in more aggressive zoning and suggests MS studies may not be comfortable with the $0.85. MS LSPF, which I believe to be unreasonably low, is 33.5% less than mine.

With regard to valuation metrics, PEG ratio is 2.0 per Zacks while Relative Value [(current P/E) / 5-year-mean average P/E] is 1.32 per M*. Both suggest the stock to be overvalued. According to Kim Butcher’s “quick and dirty DCF,” the stock should be priced at 17 * [$4.85 – ($0.00 + $0.70)] = $70.55 (i.e. stock undervalued by 41.0%).

I would look to re-evaluate PAR with the stock under $39/share.

Categories: BetterInvesting® | Comments (0) | Permalink

FWRD Stock Study (8-16-23)

Posted by on September 30, 2023 at 07:10 | Last modified: August 16, 2023 10:53

I recently did a stock study on Forward Air Corp. (FWRD) with a closing price of $67.44. Previous studies are here and here.

M* writes:

     > Forward Air Corp is an asset-light freight and logistics company. The
     > company’s operating segment includes Expedited Freight and Intermodal.
     > It generates maximum revenue from the Expedited Freight segment.
     > Expedited Freight segment operates a comprehensive national network
     > to provide expedited regional, inter-regional and national LTL
     > (less-than-truckload) services. It also offers customers local
     > pick-up and delivery and other services including final mile,
     > truckload, shipment consolidation and deconsolidation, warehousing,
     > customs brokerage, and other handling.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 11.5% and 14.9%, respectively. This excludes sharp EPS dips in ’16 and ’20. Lines are mostly up and parallel except for a sales decline in ’20 and, in addition to the dips just mentioned, EPS dips in ’15 and ’19. PTPM mostly leads peer and industry averages while ranging from 5.5% in ’20 to 13.2% in ’22 with a last-5-year mean of 9.1%.

Also over the past decade, ROE trails peer and industry averages despite trending higher from 12.9% in ’13 to 27.7% in ’22 with a last-5-year mean of 17.8%. Debt-to-Capital is lower than peer and industry averages despite trending higher from 0% in ’13 to 28.2% in ’22 with a last-5-year mean of 26.0%.

Quick Ratio is 1.15, and Interest Coverage is 26.4. Value Line rates the company B++ for Financial Strength.

With regard to sales growth:

My forecast is consistent with the long-term estimate at zero growth per year.

With regard to EPS growth:

I am forecasting conservatively toward the bottom of the long-term-estimate range (mean of four: 9.8%) at 2.0% per year. I will use 2023 Q2 EPS of $5.66/share (annualized) as the initial value rather than ’22 EPS of $7.14.

My Forecast High P/E is 19.0. Over the past decade, high P/E has gone from 25.2 in ’13 up to 56.4 in ’17 then down to 17.6 in ’22 with a last-5-year mean of 27.1. The last-5-year-mean average P/E is 21.9. I am forecasting near the bottom of the range (only ’22 is lower).

My Forecast Low P/E is 9.0. Over the past decade, low P/E has generally trended lower (excluding upside outlier of 40.0 in ’16) from 19.9 in ’13 to 11.8 in ’22 with a last-5-year mean of 16.7. I am forecasting below the entire range.

My Low Stock Price Forecast (LSPF) of $50.90 is default based on $5.66/share initial value. This is 24.5% less than the previous close (and 52-week low).

Over the past decade, the lowest Payout Ratio is 13.4% in ’22 and the last-5-year mean is 23.4%. I am conservatively forecasting at 13.0%.

These inputs land FWRD in the BUY zone with a U/D ratio of 3.1. Total Annualized Return (TAR) is 12.7%.

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 67 studies done in the past 90 days (my study and 14 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 8.6%, 8.9%, 21.9, 15.1, and 23.9%. I am lower across the board. Value Line’s future average annual P/E of 23.0 is higher than both MS (18.5) and mine (14.0).

MS high / low EPS are $10.12 / $5.26 vs. my $6.25 / $5.66 (per share). My high EPS is lower due to a lower growth rate.

MS LSPF of $71.30 is currently invalid due to the recent decline in stock price. My LSPF is 28.6% less.

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

MOS backing the current study seems robust. My forecast P/E range is [much] lower than Value Line and MS and my forecast growth rates are bottom of the barrel.

I track a few different valuation metrics. PEG is 5.8 per my projected P/E (with the low 2.0% growth rate): significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is significantly undervalued at 0.54. Kim Butcher’s “quick and dirty DCF” prices the stock at 15.5 * [$8.90 – ($1.20 + $1.75)] = $92.23 thereby suggesting the stock to be undervalued by 27.0%

The stock is at the edge of the BUY zone right now. A price under $59/share would likely qualify TAR.

How do I figure?

My inputs forecast a high stock price of $118.70/share. Dividing by the proposed purchase price of $59/share equals 2.01, which amounts to a 5-year annualized return of [ (2.01 ^ (1/5) – 1) * 100] = 15.0%.

Categories: BetterInvesting® | Comments (0) | Permalink
Older Entries Newer Entries