EXLS Stock Study (6-28-24)

I recently studied ExlService Holdings, Inc. (EXLS) with a closing price of $31.11.

M* writes:

     > ExlService Holdings Inc. is a business process management company
     > that provides digital operations and analytical services to clients
     > driving enterprise-scale business transformation initiatives that
     > leverage company’s deep expertise in analytics, AI, ML and cloud.
     > The company offers business process outsourcing and automation
     > services, and data-driven insights to customers across multiple
     > industries. The company operates through four segments based on
     > the products and services offered and markets served: Insurance,
     > Healthcare, Emerging, Analytics. The vast majority of the company’s
     > revenue is earned in the United States, and more than half of its
     > revenue comes from Analytics segment.

Over the last 10 years, this medium-size company has grown sales and EPS at annualized rates of 12.6% and 18.6%, respectively. Lines are mostly up, straight, and parallel except for a sales dip in ’20 and EPS dip in ’17.

Over the past decade, PTPM leads peer and industry averages while ranging from 6.8% in ’18 to 14.6% in ’23 with a last-5-year mean of 12.3%. ROE leads peer averages while lagging the industry despite increasing from 7.7% (’14) to 21.2% (’23) with a last-5-year mean of 16.0%. Debt-to-Capital is lower than peer and industry averages despite increasing from 10.9% (’14) to 23.4% (’23) with a last-5-year mean of 30.2%.

Per M*, Quick Ratio is 2.3 and Interest Coverage is 19.4. Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 10.9% and 11.3% for ’24 and ’25, respectively (based on 11 analysts).
• Zacks projects YOY 10.7% and 11.2% for ’24 and ’25, respectively (6 analysts).
• CFRA reports ACE of 10.9% YOY and 11.1% per year for ’24 and ’23-’25, respectively (11).
• M* offers a 2-year annualized ACE of 11.1%.

I am forecasting below the range at 9.0% per year.

With regard to EPS growth:

• MarketWatch projects 13.8% and 14.7% per year for ’23-’25 and ’23-’26, respectively (based on 11 analysts).
• Nasdaq.com projects 19.5% YOY and 16.9% per year for ’25 and ’24-’26, respectively (7/7/3 analysts for ’24/’25/’26).
• Seeking Alpha projects 4-year annualized growth of 14.2%.
• YF projects YOY 12.6% and 13.7% for ’24 and ’25, respectively (11), along with 5-year annualized growth of 14.8%.
• Zacks projects YOY 12.6% and 13.6% for ’24 and ’25, respectively (8), along with 5-year annualized growth of 14.7%.
• Value Line reports annualized ACE of 14.7% from ’23-’28 (5).
• CFRA reports ACE of 46.4% YOY and 21.9% per year for ’24 and ’23-’25, respectively (11).
• M* projects long-term annualized growth of 15.0%.

My 11.0% per year forecast is below the long-term-estimate range (mean of five: 14.7%). Initial value is ’23 EPS of $1.10/share rather than 2024 Q1 $1.08 (annualized).

My Forecast High P/E is 30.0. Over the past decade, high P/E ranges from 30.6 in ’16 to 45.6 in ’17 with a last-5-year mean of 38.3 and a last-5-year-mean average P/E of 30.5. I am forecasting below the range.

My Forecast Low P/E is 20.0. Over the past decade, low P/E ranges from 15.7 in ’20 to 31.8 in ’17 with a last-5-year mean of 22.7. I am near the bottom of the range [only ’20 and ’15 (18.4) are less].

My Low Stock Price Forecast (LSPF) of $22.00 is default based on initial value given above: 29.3% less than the previous close and 12.7% less than the 52-week low.

These inputs land EXLS in the HOLD zone with a U/D ratio of 2.7. Total Annualized Return (TAR) is 12.3%.

PAR (using Forecast Average—not High—P/E) of 8.3% 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 TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 266 studies done in the past 90 days (my study along with 51 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.9%, 12.7%, 32.0, and 22.4, respectively. I am lower across the board. Value Line projects a 2025 [versus 2028] average annual P/E of 19.9 that is less than MS (27.2) and myself (25.0).

MS high / low EPS are $1.98 / $1.08 versus my $1.85 / $1.10 (per share). My high EPS is less due to a lower growth rate. Value Line’s ACE high EPS of $2.18 exceeds both.

MS LSPF of $23.80 implies a Forecast Low P/E of 22.0: less than the above-stated 22.4. MS LSPF is 1.6% less than the default $1.08/share * 22.4 = $24.19 resulting in [slightly] more conservative zoning. MS LSPF is 8.2% higher than mine, though.

With regard to valuation, PEG is 1.3 and 2.4 per Zacks and my projected P/E, respectively: the latter overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 0.94.

MOS is robust in the current study because my inputs are below MS and the respective analyst/historical ranges. As further evidence, MS TAR of 16.2% is higher than mine.

This seems like a very organized stock study with plentiful analyst estimates (even without long-term from Value Line), a relatively tight range of those estimates, a relatively high Earnings Predictability score (75 from Value Line), and a straightedge visual inspection except for ’17 EPS.

Per U/D, EXLS is a BUY under ~$30/share. The stock needs to approach $27.50 in order to meet the BI TAR criterion given a forecast high price ~$55.

PTLO Stock Study (6-27-24)

I recently studied Portillo’s Inc. (PTLO) with a closing price of $9.95.

M* writes:

     > Portillos Inc serves the Chicago street food industry through
     > high-energy and multichannel restaurants designed to ignite
     > the senses and create memorable dining experiences. It owns
     > and operates fast-casual restaurants in the United States,
     > along with two food production commissaries in Illinois.
     > Its menu includes hot dogs, beef and sausage sandwiches,
     > sandwiches and ribs, salads, burgers, chicken, Barnelli’s
     > pasta, sides and soup, and desserts and shakes.

In a nod to Manifest Investing, “Portillo’s is not a sponsor of this program but they probably should be.”

Since 2019, the small-size company has grown sales and EPS at annualized rates of 10.0% and 451%, respectively. It has been profitable since ’22 and lines are up, straight, and parallel since then. More data is needed to evaluate visual inspection and for that reason, any potential stock investment should be considered non-core with a smaller position size.

PTPM trails peer and industry averages while ranging from -3.2% in ’21 to 4.1% in ’23 with a last-5-year mean of 1.6%. ROE averages 0.3% over the last three years and appears to trail peer and industry averages. Debt-to-Capital is about equal to peers and less than the industry in falling from 100% (’19) to 63.1% (’23) with a last-5-year mean of 79.1%.

Current and Quick Ratio are 0.4 and 0.2, respectively, per M*. Interest Coverage is 2.3. While these numbers could stand improvement, Value Line gives a B+ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 8.1% and 11.8% for ’24 and ’25, respectively (based on 11 analysts).
• Zacks projects YOY 7.7% and 12.2% for ’24 and ’25, respectively (7 analysts).
• CFRA reports ACE of 8.1% YOY and 9.9% per year for ’24 and ’23-’25, respectively (11).
• M* offers a 2-year annualized ACE of 10.5%.

I am forecasting below the range at 7.0% per year.

With regard to EPS growth:

• MarketWatch projects 42.8% and 39.6% per year for ’23-’25 and ’23-’26, respectively (based on 11 analysts).
• Nasdaq.com projects 21.9% YOY and 28.7% per year for ’25 and ’24-’26, respectively [5/5/1 analyst(s) for ’24/’25/’26].
• Seeking Alpha projects 4-year annualized growth of 6.0%.
• YF projects YOY 12.5% and 19.4% for ’24 and ’25, respectively (8), along with 5-year annualized growth of 20.2%.
• Zacks projects YOY 13.5% contraction for ’24 and 21.9% growth for ’25 along with 5-year growth of 6.0%/year (7).
• Value Line reports annualized ACE of 19.3% from ’23-’28 (4).
• CFRA reports ACE of 15.6% YOY and 15.9% per year for ’24 and ’23-’25, respectively (7).

My 6.0% per year forecast is at the bottom of the long-term-estimate range (mean of four: 12.9%). Initial value is ’23 EPS of $0.32/share rather than 2024 Q1 $0.40 (annualized).

My Forecast High P/E is 35.0. High P/E is NMF, 162, and 76.3 for ’21, ’22, and ’23, respectively: not much to go on. The last-5-year-mean average P/E is 85.2. I am forecasting at the top of my comfort zone.

My Forecast Low P/E is 24.0. Low P/E is NMF, 59.3, and 43.4 for ’21, ’22, and ’23, respectively: also not much to go on. I am forecasting (arbitrarily) below the range.

My Low Stock Price Forecast (LSPF) of $7.70 is default based on initial value given above. This is 22.6% less than the previous close and 19.8% less than the 52-week low.

These inputs land PTLO in the HOLD zone with a U/D ratio of 2.3. Total Annualized Return (TAR) is 8.6%.

PAR (using Forecast Average—not High—P/E) of 5.0% 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 only 5 studies done in the past 90 days (my study and 3 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 10.0%, 10.9%, 40.0, and 21.0, respectively. I am lower on all but the last (24.0). Value Line projects a 2025 average annual P/E of 24.3 that appears to be less than MS and mine (albeit 3 years apart).

MS high / low EPS are $0.67 / $0.40 versus my $0.43 / $0.32 (per share). My high EPS is less due to a lower growth rate and initial value. Value Line’s ACE high EPS of $0.87/share soars above both.

MS LSPF of $8.40 matches the default value. This is 9.1% higher than mine, which results in more aggressive zoning.

With regard to valuation, PEG is 5.2 and 3.8 per Zacks and my projected P/E, respectively: both extremely overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is low at 0.3 but not very meaningful due to brief data history.

I believe MOS to be robust in the current study primarily because my inputs are at or below respective analyst/historical ranges. MS TAR 21.0% is much higher than mine, but the tiny MS sample size limits meaningful comparison.

The common tendency of IPOs to lose money often puts a damper on early Quality rankings. As such, Portillo’s should be reserved for speculators who want to build a non-core (i.e. smaller) position.

Per U/D, PTLO is a BUY under $9.50/share. The stock needs to approach $7.50 in order to meet the BI TAR criterion given a forecast high price of $15.

NVDA Stock Study (6-26-24)

I recently studied NVIDIA Corp. (NVDA) with a closing price of $126.09. The stock was priced at $131.67 when I last studied it on 10/5/22: apparently little changed except for the 10:1 stock split that took place 16 days ago! What have I been missing?

M* writes:

     > Nvidia is a leading developer of graphics processing units.
     > Traditionally, GPUs were used to enhance the experience on
     > computing platforms, most notably in gaming applications on
     > PCs. GPU use cases have since emerged as important
     > semiconductors used in artificial intelligence. Nvidia not
     > only offers AI GPUs, but also a software platform, Cuda,
     > used for AI model development and training. Nvidia is also
     > expanding its data center networking solutions, helping to
     > tie GPUs together to handle complex workloads.

Over the last 10 years (FY ends Jan 31; references to year at BI and Value Line incremented to align), this mega-size ( > $50B annual revenue) company has grown sales and EPS at annualized rates of 30.0% and 40.8%, respectively. Lines are generally up, straight, and parallel with a sales dip in ’20 and EPS dips in ’20 and ’23. 10-year EPS R^2 of 0.83 triggers an audit review, but I think it passes visual inspection.

Over the last decade, PTPM is about even with peers and leading industry averages while ranging from 14.8% in ’16 to 55.5% in ’24 with a last-5-year mean of 32.3%. ROE ranges from 1.3% in ’16 to 8.8% in ’23 with a last-5-year mean of 4.0%. The latter was 23.7% on my first study; this data series may need stock-split adjustment. Debt-to-Capital is lower than peer and industry averages while ranging from 17.5% in ’19 to 35.2% in ’23 with a last-5-year mean of 27.1%.

Quick Ratio is 2.8 and Interest Coverage is 192. M* also rates Capital Allocation as “Exemplary” and assigns the company a “Wide” economic moat. Value Line grades A+ for Financial Strength.

With regard to sales growth:

• YF projects 97.8% and 33.4% for ’25 and ’26, respectively (based on 49 analysts).
• Zacks projects 92.8% and 27.1% for ’25 and ’26, respectively (10 analysts).
• Value Line projects 28.1% annualized growth from ’24-’29.
• CFRA projects 98.0% YOY and 56.1% per year for ’25 and ’24-’26, respectively.
• M* gives a 2-year ACE of 62.2% per year and projects 29.0% per year for the next decade in its analyst note.

I am forecasting below the range at 25.0% per year.

With regard to EPS growth:

• MarketWatch projects 55.3% and 48.6% per year for ’24-’26 and ’24-’27, respectively (based on 61 analysts).
• Nasdaq.com projects 19.7% and 29.3% per year for ’25-’27 and ’25-’28 [14/4/1 analyst(s) for ’25/’27/’28].
• Seeking Alpha projects 4-year annualized growth of 32.7%.
• YF projects YOY 109% and 34.4% for ’25 and ’26, respectively (41), along with 5-year annualized growth of 43.3%.
• Zacks projects YOY 106% and 25.3% for ’25 and ’26, respectively (13), along with 5-year annualized growth of 37.6%.
• Value Line projects 30.9% annualized growth from ’24-’29.
• CFRA projects 108% YOY and 63.4% per year for ’25 and ’24-’26, respectively, and a 3-year CAGR of 37.0%.
• M* projects long-term annualized growth of 33.6%.

My 28.0% per year forecast is below the long-term-estimate range (mean of five: 35.6%). Initial value is ’24 EPS of $1.19/share rather than 2025 Q1 EPS of $1.71 (annualized).

My Forecast High P/E is 40.0. Excluding 166 in ’23, high P/E has increased over the past decade from 19.0 (’15) to 53.2 (’24) with a last-5-year mean of 71.4 and a last-5-year-mean average P/E of 48.5. I am forecasting above my comfort zone [only ’15 and ’16 (31.4) are less].

My Forecast Low P/E is 17.0. Excluding 62.1 in ’23, low P/E over the past decade ranges from 9.7 in ’17 to 30.0 in ’22 with a last-5-year mean of 25.7. I am forecasting in the lower portion of the range [only ’17 and ’15 (13.7) are less].

My Low Stock Price Forecast (LSPF) is $86.00. Default based on initial value from above ($20.20) seems unreasonably low at 84.0% less than the previous close and 48.5% less than the 52-week low [the real question is how to forecast a stock that has gone parabolic?]. My LSPF is [arbitrarily] 31.8% less than the previous close and 94.1% higher than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 1.3% in ’24 to 37.0% in ’16. Being insignificant anyway, I am discounting the dividend to 0%.

These inputs land NVDA in the HOLD zone with a U/D ratio of 0.9. Total Annualized Return (TAR) is 5.4%.

PAR (using Forecast Average—not High—P/E) is unacceptable for any size company at -1.5%. 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 676 studies (my study and 198 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 30.0%, 27.9%, 61.7, 31.2, and 7.6%, respectively. I am lower on every input except the second (28.0%). Value Line’s projected average annual P/E of 32.5 is less than MS (46.5) and greater than mine (28.5).

MS high / low EPS are $19.12 / $4.00 versus my $4.10 / $1.19 (per share). These cannot really be compared because MS data are not all stock-split adjusted. Value Line’s high EPS of $5.00/share is greater than mine.

Also because MS data are not completely stock-split adjusted, LSPF cannot be compared.

Zoning and MS TAR [much greater than mine at 22.0% but also stock-split sensitive] aside, MOS in this study is robust. I cannot consider my LSPF conservative because even at > 30.0% below the previous close, overriding default always adds risk. Nevertheless, my EPS growth rate is below the range, my forecast P/E range is low, and my high EPS is low.

With regard to valuation, PEG is 1.3 and 2.0 per Zacks and my projected P/E, respectively: the latter a tad high. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is very expensive at 1.5 (2023 P/E excluded as discussed above).

NVDA has [projected] growth like no company I have studied before. I don’t just want growth, though. I want GARP: growth at a reasonable price.

U/D has NVDA a BUY under $105/share. The stock needs to approach $82 in order to meet the BI TAR criterion given a forecast high price of $164.

AMPH Stock Study (6-25-24)

I recently studied Amphastar Pharmaceuticals Inc. (AMPH) with a closing price of $40.84.

M* writes:

     > Amphastar Pharmaceuticals Inc is a biopharmaceutical company
     > that focuses on developing, manufacturing, marketing, and selling
     > technically challenging generic and proprietary injectable,
     > inhalation, and intranasal products. Additionally, the company
     > sells insulin API products. The company’s finished products are
     > used in hospital or urgent care clinical settings and are
     > contracted and distributed through group purchasing organizations
     > and drug wholesalers. The company has two reportable segments
     > finished pharmaceutical products and API products. Geographically
     > the business presence of the firm is seen in the United States,
     > China and France of which the U.S. accounts for the majority of
     > the revenue from Canada, Mexico, Chile, and the United States.

Over the past decade, this small-size company has grown sales and EPS at annualized rates of 12.1% and 127%, respectively. The latter is misleading. GAAP losses are posted in ’14, ’15, and ’18 while big YOY EPS declines are seen in ’17 and ’20.

I am on the fence whether the company passes visual inspection. As a small company, perhaps it deserves some leeway for “growing pains.” Value Line, which excludes nonrecurrent gains/losses, is more encouraging in reporting positive EPS since ’16 and growing EPS since ’17. Lines are generally improving since ’14 albeit somewhat cyclical and sometimes negative. Only since ’21 are lines strictly up, straight, and parallel.

Over the past 10 years, PTPM leads peer averages but trails the industry while increasing from -8.6% (’14) to 26.6% (’23) with a last-5-year mean of 17.8%. ROE trails peer and industry averages despite climbing from -3.9% (’14) to 21.0% (’23) with a last-5-year mean of 12.7%. Debt-to-Capital is lower than peer and industry averages despite increasing from 13.4% (’14) to 19.0% (’21) and then to 49.4% (’23 after acquiring BAQSIMI from Eli Lilly) for a last-5-year mean of 22.8%.

Quick Ratio is 1.7 and Interest Coverage is 6.3. Value Line gives a B+ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 16.7% and 6.1% for ’24 and ’25, respectively (based on 6 analysts).
• Zacks projects YOY 16.1% and 14.0% for ’24 and ’25, respectively (3 analysts).
• Value Line projects 10.6% annualized growth from ’23-’28.
• CFRA gives ACE of 16.7% YOY and 14.3% per year for ’24 and ’23-’25, respectively (5).

I am forecasting below the range at 6.0% per year.

With regard to EPS growth:

• MarketWatch projects 11.4% and 12.9% per year for ’23-’25 and ’23-’26, respectively (based on 6 analysts).
• Nasdaq.com projects 25.9% YOY and 20.0% per year for ’24-’26 and ’24-’27 [4/1/1 analyst(s) for ’24/’26/’27].
• Seeking Alpha projects 4-year annualized growth of 13.5%.
• YF projects YOY 14.2% and 15.6% for ’24 and ’25, respectively (6), along with 5-year annualized growth of 22.6%.
• Zacks projects YOY 16.2% and 13.5% for ’24 and ’25, respectively (4), along with 5-year annualized growth of 13.5%.
• Value Line projects 12.6% annualized growth from ’23-’28.
• CFRA gives ACE of 42.3% YOY and 25.4% per year for ’24 and ’23-’25, respectively (5).

My 10.0% per year forecast is below the long-term-estimate range (mean of four: 15.6%). Initial value is ’23 EPS of $2.60/share rather than 2024 Q1 EPS of $2.89 (annualized).

My Forecast High P/E is 18.0. Since 2016, high P/E falls from 98.9 (’16) to 26.0 (’23) (excluding NMF in ’18 and triple-digit values in ’17 and ’20) with a last-5-year mean of 24.2 and a last-5-year-mean average P/E of 18.8. I am below the range.

My Forecast Low P/E is 11.0. Since 2016, low P/E falls from 47.8 (’16) to 10.6 (’23) (excluding NMF in ’18 and triple-digit values in ’17 and ’20) with a last-5-year mean of 13.5. I am forecasting near bottom of the range (only ’23 is lower).

My Low Stock Price Forecast (LSPF) of $28.60 is default based on initial value given above. This is 30.0% less than the previous closing price and 25.5% less than the 52-week low.

These inputs land AMPH in the HOLD zone with a U/D ratio of 2.8. Total Annualized Return (TAR) is 13.1%.

PAR (using Forecast Average—not High—P/E) is less than I seek for a small-size company at 8.3%. 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 62 studies (my study and nine 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 12.0%, 13.3%, 20.0, and 12.4, respectively. I am lower across the board. Value Line’s projected average annual P/E of 13.5 is less than MS (16.2) and less than mine (14.5).

MS high / low EPS are $5.29 / $2.77 versus my $4.19 / $2.60 (per share). My high EPS is less due to a lower growth rate. Value Line tops both at $6.00/share.

MS LSPF of $31.00 implies a Forecast Low P/E of 11.2: less than the above-stated 12.4. MS LSPF is 9.8% less than the default $2.77/share * 12.4 = $34.35 thereby resulting in more conservative zoning. MS LSPF is still 8.4% higher than mine.

With regard to valuation, PEG is 0.8 and 1.3 per Zacks and my projected P/E: fair and lower than I usually see. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is low at 0.75 (triple-digit values excluded as discussed above).

MOS in this study is robust. TAR (over 15.0% preferred) is much less than the MS 20.6%. My forecast growth rates and P/E range are at or below analyst estimates.

In case visual inspection is deemed to fail, a smaller-than-core position size can allow for participation with decreased risk.

U/D has AMPH a BUY under $40/share. The stock needs to approach $37 in order to meet the BI TAR criterion given a forecast high price ~$75.

RGLD Stock Study (6-24-24)

I recently studied Royal Gold Inc. (RGLD) with a closing price of $124.85.

M* writes:

     > Royal Gold Inc enquires and manages precious metal royalties and
     > streams, with a focus on gold. The company operates by purchasing
     > a percentage of the metal produced from a mineral property for
     > an initial payment, without assuming responsibility of mining
     > operations. Similarly, precious metal streams are purchase
     > agreements with mine operators providing the right to purchase
     > all or a portion of one or more metals produced from a mine, in
     > exchange for an upfront deposit payment. Generally Royal Gold
     > does not conduct any work on the properties in which it holds
     > royalty and streaming assets. The company owns a portfolio of
     > producing, development, evaluation, and exploration royalties
     > and streams, and the majority of group revenue is generated
     > from Canada, Mexico, Chile, and the United States.

Over the past decade, this small-size company has grown sales and EPS at annualized rates of 10.7% and 20.8%, respectively [excluding for the entire study non-recurrent-loss years ’16 and ’18 (although Value Line does not report any exclusion for the latter nor do they report the $1.73/share GAAP loss seen on the BI website and CFRA report)]. Lines are mostly up and parallel with sales declines in ’19 and ’22 and EPS declines in ’19 and ’22.

Over the past decade, PTPM leads peer averages and matches the industry while increasing from 35.0% (’14) to 46.6% (’23) with a last-5-year mean of 42.1%. ROE leads peer and industry averages while increasing from 2.7% (’14) to 8.4% (’23) with a last-5-year mean of 8.6%. Debt-to-Capital is lower than peer and industry averages while falling from 11.7% (’14) to 7.8% (’23) with a last-5-year mean of 9.2%.

Quick Ratio is 2.3 and Interest Coverage is 11.5. Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 2.0% and 24.1% for ’24 and ’25, respectively (based on 8 analysts).
• Zacks projects YOY 6.4% and 26.3% for ’24 and ’25, respectively (2 analysts).
• Value Line projects 5.3% annualized growth from ’23-’28.
• CFRA projects 9.0% YOY and 12.0% per year for ’24 and ’23-’25, respectively.
• M* offers a 2-year ACE of 39.7% per year.

I am forecasting toward the lower end of the range at 3.0% per year.

With regard to EPS growth:

• MarketWatch projects 21.3% and 19.9% per year for ’23-’25 and ’23-’26, respectively (based on 13 analysts).
• Nasdaq.com projects 21.7% YOY and 9.9% per year for ’25 and ’24-’26 (4/4/2 analysts for ’24/’25/’26).
• Seeking Alpha projects 4-year annualized growth of 26.4%.
• YF projects YOY 28.9% and 27.9% for ’24 and ’25, respectively (9), along with 5-year annualized growth of 4.0%.
• Zacks projects YOY 28.1% and 21.7% for ’24 and ’25, respectively (4), along with 5-year annualized growth of 26.4%.
• Value Line projects 15.3% annualized growth from ’23-’28.
• CFRA projects 17.3% YOY and 19.6% per year for ’24 and ’23-’25, respectively, along with a 3-year CAGR of 15.0%.

My 4.0% per year forecast is at the bottom of the long-term estimate range (mean of four: 18.0%). Initial value is ’23 EPS of $3.63/share rather than 2024 Q1 EPS of $3.39 (annualized).

My Forecast High P/E is 37.0. Over the past decade, high P/E falls from 80.1 (’14) to 40.7 (’23) with a last-5-year mean of 46.3 and a last-5-year-mean average P/E of 37.3. I am near the bottom of the range [only ’21 (32.1) is less].

My Forecast Low P/E is 24.0. Over the past decade, low P/E falls from 42.1 (’14) to 28.0 (’23) with a last-5-year mean of 28.3. I am forecasting near the bottom of the range [’20 (19.7), ’21 (21.6), and ’22 (23.3) are lower].

My Low Stock Price Forecast (LSPF) of $87.10 is default based on initial value given above. This is 30.2% less than the previous closing price and 13.3% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 25.7% in ’21 to 109% in ’15 with a last-5-year mean of 43.3%. I am forecasting below the range at 25.0%.

These inputs land RGLD in the HOLD zone with a U/D ratio of 1.0. Total Annualized Return (TAR) is 6.2%.

PAR (using Forecast Average—not High—P/E) is lower than I seek for a small-size company at 2.4%. 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 10 studies (seven outliers including mine 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 11.6%, 12.0%, 37.1, 26.0, and 43.3%. I am lower across the board. Value Line’s projected average annual P/E of 31.0 is lower than MS (31.6) and higher than mine (30.5).

MS high / low EPS are $6.40 / $3.38 versus my $4.42 / $3.63 (per share). My high EPS is less due to a lower growth rate. Value Line soars above both at $7.20/share.

MS LSPF of $86.60 implies a Forecast Low P/E of 25.6: close to the above-stated 26.0. MS LSPF is 1.5% less than the default $3.38/share * 26.0 = $87.88 thereby resulting in more conservative zoning. MS LSPF is also 0.6% less than mine.

MOS in this study is solid. My TAR (over 15.0% preferred) is much less than the 16.2% from MS. Although this carries decreased impact due to the small MS sample size, I use a low growth rate to match YF’s extremely low estimate.

Since I like to forecast below the range, without the YF estimate my forecast EPS growth would be a whopping 11 percentage points higher. That would put the stock in the BUY zone with an U/D of 3.6 and TAR >15.0%. If YF remains unchanged next time while others are noticeably different, I may consider excluding it or at least splitting the difference.

With regard to valuation, PEG is 1.1 and 8.9 per Zacks and my projected P/E, respectively: discrepancy proportional to growth rates. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is fair at 0.99.

U/D has RGLD a BUY under $106/share. The stock needs to approach $82 in order to meet the BI TAR criterion given a forecast high price ~$163.

RHI Stock Study (6-24-24)

I recently studied Robert Half Inc. (RHI) with a closing price of $65.05. The previous study is here.

M* writes:

     > Founded in 1948, Robert Half provides temporary, permanent,
     > and outcome-based staffing for both in-person and remote
     > positions in the finance and accounting, technology, legal,
     > marketing, and administrative fields. Its subsidiary consulting
     > arm, Protiviti, specializes in technology, risk, auditing, and
     > compliance matters. The firm generates most of its sales inside
     > the U.S. and stands as one of the largest specialized firms in
     > the highly fragmented U.S. staffing industry. The firm
     > generates annual revenue of around $7 billion.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 3.8% and 9.2%. Lines are zigzag up and parallel with sales declines in ’20 and ’23 along with EPS declines in ’16, ’17, ’20, and ’23. The stock appears more cyclical than “up, straight, and parallel.” While it passed in Oct 2024, I’m not sure it passes visual inspection now.

Over the past decade, PTPM leads peer and industry averages while ranging from 8.3% in ’20 to 12.4% in ’21 and ’22 with a last-5-year mean of 10.5%. ROE trails peer and industry averages while ranging from 25.4% in ’17 to 45.1% in ’21 with a last-5-year mean of 36.1%. Debt-to-Capital is lower than peer and industry averages as the company has no long-term debt; the last-5-year mean is 16.4% (e.g. uncapitalized leases, rentals).

Quick Ratio is 1.2 but M* no longer has an analyst assigned. Value Line gives an A+ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 6.1% contraction and 7.6% growth for ’24 and ’25, respectively (based on 12 analysts).
• Zacks projects YOY 5.7% contraction and 6.9% growth for ’24 and ’25, respectively (6 analysts).
• Value Line projects 5.9% annualized growth from ’23-’28.
• CFRA projects contraction of 10.2% YOY and 4.0% per year for ’24 and ’23-’25, respectively.
• M* offers a 2-year ACE of 0.8% annualized growth.

I am giving the long-term estimate a major haircut to 1.0% per year due to the negative short-term projections.

With regard to EPS growth:

• MarketWatch projects annualized growth of 7.2% and 10.2% for ’23-’25 and ’23-’26 (based on 14 analysts).
• Nasdaq.com projects growth of 32.2% YOY and 26.9% per year for ’25 and ’24-’26 (7/7/2 analysts for ’24/’25/’26).
• Seeking Alpha projects 4-year annualized growth of 4.2%.
• YF projects YOY 23.7% contraction (33.8% growth) for ’24 (’25) and 5-year annualized contraction of 1.3% (13).
• Zacks projects YOY 24.7% contraction (32.2% growth) for ’24 (’25) along with 5-year annualized growth of 4.2% (7).
• Value Line projects 10.9% annualized growth from ’23-’28.
• CFRA projects contraction of 20.1% YOY and 7.2% per year for ’24 and ’23-’25, respectively.

The YF estimate is a bit suspect being unchanged since my previous October study. I am keeping it, though, with my 2.0% annualized forecast toward the lower end of the long-term estimate range (mean of four: 4.5%). Initial value is ’23 EPS of $3.88/share rather than 2024 Q1 EPS of $3.34 (annualized).

My Forecast High P/E is 17.0. Over the past decade, high P/E ranges from 17.7 in ’19 to 26.3 in ’14 with a last-5-year mean of 21.8 and a last-5-year-mean average P/E of 17.3. I am below the range.

My Forecast Low P/E is 12.0. Over the past decade, low P/E ranges from 10.8 in ’22 to 18.4 in ’17 with a last-5-year mean of 12.8. I am forecasting near the bottom of the range [only ’22 and ’21 (11.4) are lower].

My Low Stock Price Forecast (LSPF) of $46.60 is default based on initial value given above. This is 28.4% less than the previous closing price and 23.7% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 28.4% in ’21 to 50.4% in ’20 with a last-5-year mean of 37.7%. I am forecasting below the range at 28.0%.

These inputs land RHI in the HOLD zone with a U/D ratio of 0.4. Total Annualized Return (TAR) is 3.9%.

PAR (using Forecast Average—not High—P/E) is much lower than I seek for any size company at 1.0%. 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 only 10 studies (mine 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 2.9%, 5.9%, 20.8, 12.5, and 36.2%. I am lower across the board. Value Line’s projected average annual P/E of 20.0 is higher than MS (16.7) and higher than mine (14.5).

MS high / low EPS are $5.08 / $3.34 versus my $4.28 / $3.88 (per share). My high EPS is less due to a lower growth rate. Value Line projects $6.50/share: greatest high EPS of all.

MS LSPF of $53.00 implies a Forecast Low P/E of 15.9: higher than the above-stated 12.5. MS LSPF is 27.0% greater than the default $3.34/share * 12.5 = $41.75 thereby resulting in more aggressive zoning. MS LSPF is also 13.7% greater than mine.

MOS in this study is solid. My TAR (over 15.0% preferred) is much less than the 9.7% from MS. Although this carries decreased impact due to the small MS sample size, I use a very low growth rate, a conservative forecast P/E range, and a low initial value (down 35.7% YOY).

It’s the poor visual inspection mentioned near the top that really necessitates a healthy MOS. 5-year and 10-year EPS R^2 are 0.16 and 0.61: not very good for either.

With regard to valuation, PEG is 5.3 and 9.5 per Zacks and my projected P/E, respectively: both significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is fair at 1.1.

U/D has RHI a Buy under $53/share. The stock needs to approach $36 in order to meet the BI TAR criterion given a forecast high price ~$73.

NTES Stock Study (6-20-24)

I recently did a stock study on NetEase Inc. ADR (NTES) with a closing price of $90.63.

M* writes:

     > NetEase, which started on an internet portal service in 1997, is a
     > leading online services provider in China. Its key services include
     > online/mobile games, cloud music, media, advertising, email, live
     > streaming, online education, and e-commerce. The company develops
     > and operates some of the China’s most popular PC client and mobile
     > games, and it partners with global leading game developers, such
     > as Blizzard Entertainment and Mojang (a Microsoft subsidiary).

Over the past 10 years, this large-size company has grown sales and earnings at annualized rates of 22.1% and 16.5%, respectively. Lines are mostly up, straight, and parallel except for sales decline in ’19 and EPS declines in ’17, ’18, and ’20.

Over the past decade, PTPM leads industry averages despite falling from 46.6% (’14) to 32.9% (’23) with a last-5-year mean of 26.1%. ROE leads industry averages while ranging from 13.4% in ’20 to 34.3% in ’16 with a last-5-year mean of 19.4%. Debt-to-Capital is below industry averages despite rising from 8.1% (’14) to 14.1% (’23) with a last-5-year mean of 19.2%.

Quick Ratio is 2.4 per M* and Interest Coverage is 43.2 per alphaspread.com. M* rates the company “Standard” for Capital Allocation, describes the balance sheet as “sound,” and writes:

     > Given the business’ cash position and the cash flow generation, we
     > believe that NetEase can issue a very large amount of debt to fund
     > any potential acquisitions.

Value Line has not issued a report on the company.

With regard to sales growth:

• YF projects YOY 6.9% and 9.6% for ’24 and ’25, respectively (based on 25 analysts).
• Zacks projects YOY 5.5% and 8.2% for ’24 and ’25, respectively (3 analysts).
• CFRA projects 7.2% YOY for ’24.
• M* gives a 2-year ACE of 7.7% growth per year and projects 5-year annualized growth of 11.0% in its analyst note.

I am forecasting below the range at 5.0% per year.

• MarketWatch projects 9.4% YOY and 9.6% per year for ’25 and ’24-’26, respectively (based on 29 analysts).
• Nasdaq.com projects 11.1% YOY and 15.2% per year for ’25 and ’24-’26 [3/3/1 analyst(s) for ’24/’25/’26].
• Seeking Alpha projects 4-year annualized growth of 8.8%.
• YF projects YOY 2.1% and 9.4% for ’24 and ’25, respectively (22), along with 5-year annualized growth of 0.9%.
• Zacks projects YOY 9.8% and 11.3% for ’24 and ’25, respectively (2), along with 5-year annualized growth of 7.5%.
• CFRA projects 10.5% YOY and 12.3% per year for ’24 and ’23-’25 along with a 3-year CAGR of 12.0%.
• M* projects long-term annualized growth of 10.7%.

My 3.0% per year forecast is toward the lower end of the range (mean of four: 7.0%). Initial value is ’23 EPS of $6.40/share rather than 2024 Q1 $6.52 (annualized).

My Forecast High P/E is 19.0. Over the past decade, high P/E ranges from 18.3 in ’14 to 49.8 in ’18 with a last-5-year mean of 27.9 and a last-5-year-mean average P/E of 21.8. I am toward the lower end of the range [only ’14 and ’23 (18.6) are less].

My Forecast Low P/E is 11.0. Over the past decade, low P/E ranges from 9.8 in ’16 to 25.8 in ’18 with a last-5-year mean of 15.7. I am forecasting toward the lower end of the range [only ’16 and ’14 (10.7) are less].

My Low Stock Price Forecast (LSPF) of $70.40 is default based on initial value given above. This is 22.3% less than the previous close and 18.9% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 21.1% in ’21 to 43.7% in ’19 with a last-5-year mean of 32.6%. I am forecasting below the range at 21.0%.

These inputs land NTES in the HOLD zone with a U/D ratio of 2.3. Total Annualized Return (TAR) is 10.1%.

PAR (using Forecast Average—not High—P/E) is lower than I seek in a large-size company at 5.4%. 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 14 studies (my study and 3 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 7.9%, 5.9%, 22.3, 14.9, and 32.6%.

MS high / low EPS are $8.62 / $6.39 versus my $7.41 / $6.40 (per share). My high EPS is less due to a lower growth rate.

MS LSPF of $75.00 implies a Forecast Low P/E of 11.7: lower than the above-stated 14.9. MS LSPF is 21.2% less than the default $6.39/share * 14.9 = $95.21 (INVALID on today’s date) thereby resulting in more conservative zoning. MS LSPF is 6.5% higher than mine, though.

Despite the small MS sample size, MOS seems robust in this study. My TAR (over 15.0% preferred) is less than MS 15.9%. I am toward the lower end of historical P/E ranges and long-term EPS projections. Were it not for the head-scratching YF long-term forecast, the stock may look much more attractive.

With regard to valuation, PEG is 1.6 and 4.5 per Zacks and my projected P/E, respectively: the latter significantly overvalued in part because of my low growth rate. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is very low at 0.64.

U/D has NTES a BUY under $88/share. The stock needs to approach $70 in order to meet the BI TAR criterion given a forecast high price ~$141.

JBL Stock Study (6-19-24)

I recently did a stock study on Jabil Inc. (JBL) with a closing price of $126.23.

M* writes:

     > Jabil Inc is a United States-based company engaged in providing
     > manufacturing services and solutions. It provides comprehensive electronics
     > design, production and product management services to companies in various
     > industries and end markets. It operates in two segments. The Electronics
     > Manufacturing Services (EMS) segment, which is the key revenue driver, is
     > focused on leveraging IT, supply chain design and engineering, technologies
     > largely centered on core electronics. The Diversified Manufacturing
     > Services (DMS) segment is focused on providing engineering solutions, with
     > an emphasis on material sciences, technologies, and healthcare.

Since 2015, this large-size company grows sales and earnings at annualized rates of 9.6% and 30.6% (including -$0.01 EPS in ’14 boosts the latter to 83.6%; ’21 EPS, down 80.7% YOY due to COVID, is excluded). Sales are mostly up and straight, but YOY EPS declines in ’16, ’17, ’18, and ’23 make visual inspection questionable (9-year R^2 = 0.62). FY ends Aug 31.

Over the past decade, PTPM trails peer and industry averages despite increasing from 0.5% (’14) to 3.6% (’23) with a last-5-year mean of 2.7%. ROE leads peer and industry averages (mostly due to last three years) while increasing from 0% (’14) to 28.9% (’23) with a last-5-year mean of 23.5%. Debt-to-Capital is above peer and industry averages while climbing from 42.9% (’14) to 53.1% (’23) with a last-5-year mean of 58.5%.

Quick Ratio is 0.6 and Interest Coverage is 11.0. Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 17.9% contraction and 3.4% growth for ’24 and ’25, respectively (based on 10 analysts).
• Zacks projects YOY 17.9% contraction and 3.9% growth for ’24 and ’25, respectively (3 analysts).
• Value Line projects 2.1% annualized growth from ’23-’28.
• CFRA projects contraction of 17.8% YOY and 7.5% per year for ’24 and ’23-’25, respectively.
• M* gives a 2-year ACE of 7.9% annualized contraction.

I am forecasting flat sales growth: less than the long-term estimate given near-term projections of contraction.

With regard to EPS growth:

• MarketWatch projects 11.5% and 11.8% per year for ’23-’25 and ’23-’26, respectively (based on 12 analysts).
• Nasdaq.com projects 29.7% YOY for 2025 (3 analysts).
• Seeking Alpha projects 4-year annualized growth of 10.3%.
• YF projects YOY 3.0% contraction and 22.8% growth for ’24 and ’25 (9) along with 5-year annualized growth of 12.5%.
• Zacks projects YOY 3.2% contraction and 26.8% growth for ’24 and ’25 (4) along with 5-year growth of 10.3%/year.
• Value Line projects 13.8% annualized growth from ’23-’28.
• CFRA projects 3.4% YOY contraction and 9.1% growth per year for ’24 and ’23-’25 along with a 3-year CAGR of 11.0%.

My 9.0% per year forecast is below the long-term estimate range (mean of four: 11.7%). Initial value is ’23 EPS of $6.02/share (down 12.8% YOY) rather than 2024 Q2 $11.65 (annualized).

My Forecast High P/E is 15.0. Over the past decade, high P/E ranges from 10.5 in ’22 to 64.8 in ’18 (’17 and ’18 much higher due to depressed earnings; I am excluding 126 in ’20) for a last-5-year mean of 15.4 and a last-5-year-mean average P/E of 12.0 (also excluding 50.4 low P/E in ’20). I am forecasting toward the lower end of the range [’22 and ’23 (13.8) are less].

My Forecast Low P/E is 8.0. Over the past decade, low P/E ranges from 6.6 in ’21 to 48.4 in ’18 (’17 and ’18 much higher due to depressed earnings; I am excluding 50.4 in ’20) with a last-5-year mean of 8.7. I am just below the 5-year median of 8.2.

My Low Stock Price Forecast (LSPF) is $88.00. Default based on initial value is unreasonably low at 61.8% less than the previous close. My forecast is 30.3% less than the previous close and 12.2% less than the 52-week low.

Over the past decade, the lowest (highest) Payout Ratio (PR) is 4.6% (91.4%) in ’22 (’20). I am forecasting just below the range at 4.0%.

These inputs land JBL in the HOLD zone with an U/D ratio of 0.4. Total Annualized Return (TAR) is 2.5%.

PAR (using Forecast Average—not High—P/E) is unacceptable for any size company at -2.7%. 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 only 13 studies (my study and 5 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 4.0%, 7.9%, 17.0, 8.7, and 24.6%. I am lower on all except for the second (9.0%). Value Line’s projected average annual P/E of 16.0 is higher than MS (12.9) and higher than mine (11.5).

MS high / low EPS are $12.69 / $6.02 versus my $9.26/ $6.02 (per share). My high EPS is less due to a lower initial value ($6.02 is median while mean is $8.43; large discrepancies are more likely with low sample sizes). Value Line projects $16.50/share for high EPS, which soars above the others.

MS LSPF of $76.10 implies a Forecast Low P/E of 12.6: higher than the above-stated 8.7. MS LSPF is 45.3% greater (large discrepancy suggests others also used a manual override to higher values) than default $6.02/share * 8.7 = $52.37 resulting in more aggressive zoning. MS LSPF is 13.5% less than mine, however.

I believe MOS in this study is moderate. TAR (over 15.0% preferred) much less than MS 13.9% gets less emphasis due to a small sample size. My forecast EPS growth rate ends up higher than that small sample. Furthermore, I use a median Forecast Low P/E then still do a LSPF override.

With regard to valuation, PEG is 1.5 and 1.1 per Zacks and my projected P/E, respectively: relatively close and reasonable. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is fair at 0.9.

I am admittedly surprised by the limited current investment potential for JBL. I cannot overlook the stock’s 12-month climb of 33% (per Value Line), though, which will usually put BUY in the rearview mirror. EPS inconsistency led to ambivalence with one choice dramatically impacting results. Also pertaining to the latter was exclusion of [historical P/E] values that changes 5-year-mean high P/E in addition to 5-year-mean average P/E.

Moral of the story (once again): seek out high-quality stocks that definitively pass visual inspection. This one does not.

U/D has JBL a BUY under $100/share. The stock needs to approach $70 in order to meet the BI TAR criterion given a forecast high price ~$139.

STM Stock Study (6-18-24)

I recently did a stock study on STMicroelectronics N.V. (STM) with a closing price of $43.10. The previous study is here.

Value Line writes:

     > STMicroelectronics N.V. is a large multinational firm that designs,
     > develops, and manufactures semiconductors. Active markets include
     > telecom, networking, autos, industrial products, and consumer
     > devices. Offers thousands of products to over 100,000 customers.

Since 2017, this large-size company has grown sales and earnings at annualized rates of 13.3% and 31.4%, respectively [’13-’16 EPS excluded due to negative and/or small fractional values that artificially boost growth rate]. Lines are generally up, straight, and narrowing except for an EPS dip in ’19.

Over the past decade, PTPM trails peer and industry averages despite increasing from 1.4% (’14) to 27.6% (’23) with a last-5-year mean of 17.7%. ROE also trails peer and industry averages despite rallying from 2.3% (’14) to 26.1% (’23) with a last-5-year mean of 22.7%. Debt-to-Capital is lower than peer and industry averages while falling from 26.5% (’14) to 15.9% (’23) with a last-5-year average of 21.1%.

M* reports Quick Ratio of 2.5 and Interest Coverage an eye-popping 63.7. M* also rates the company “Standard” for Capital Allocation and “Narrow” for Economic Moat. Value Line grades the company B++ for Financial Strength.

With regard to sales growth:

• YF projects YOY 16.9% contraction and 12.3% growth for ’24 and ’25, respectively (based on 9 analysts).
• Zacks projects YOY 17.0% contraction and 11.6% growth for ’24 and ’25, respectively (2 analysts).
• Value Line projects 3.0% annualized growth from ’23-’28.
• CFRA projects 16.3% YOY contraction and 0.8% growth per year for ’24 and ’23-’25, respectively.
• M* offers a 2-year annualized ACE of 1.8% growth while projecting 5.0% long-term growth in its analyst note.

I am forecasting less than both long-term estimates at 2.0% per year.

With regard to EPS growth:

• MarketWatch projects 3.1% per year contraction and growth for ’23-’25 and ’23-’26, respectively (based on 26 analysts).
• Nasdaq.com projects growth of 38.5% YOY and 31.3% per year for ’25 and ’24-’26 [4/4/1 analyst(s) for ’24/’25/’26].
• Seeking Alpha projects 4-year annualized growth of 10.5%.
• YF projects YOY 51.8% contraction and 38.1% growth for ’24 and ’25 (9) along with 5-year contraction of 1.3%/year.
• Zacks projects YOY 52.2% contraction and 38.5% growth for ’24 and ’25 (4) along with 5-year growth of 5.0%/year.
• Value Line projects annualized growth of 1.1% (20.9%) from ’23 (’24) – ’28.
• CFRA projects contraction of 47.5% YOY and 8.9% per year for ’24 and ’23-’25, along with a 3-year CAGR of -4.0%.
• M* projects long-term annualized growth of 1.1%.

My 1.0% per year forecast is toward the bottom of the long-term-estimate range (mean of five: 3.3%). Initial value is ’23 EPS of $4.46/share.

My Forecast High P/E is 16.0. Over the past decade, high P/E falls from 71.4 (’14) to 12.5 (’23) with a last-5-year mean of 21.7 and a last-5-year-mean average P/E of 16.1. I am toward the lower end of the range [only ’22 (12.3) and ’23 are less].

My Forecast Low P/E is 7.5. Over the past decade, low P/E falls from 44.8 (’14) to 7.9 (’23) with a last-5-year average of 10.6. I am forecasting toward the bottom of the range [only ’22 (6.8) is less].

My Low Stock Price Forecast (LSPF) of $33.50 is default given the initial value mentioned above. This is 22.3% less than the previous close and 9.9% less than the 52-week low.

Over the last decade, Payout Ratio (PR) has decreased from 214% (’14) to 5.4% (’23) with a last-5-year mean of 11.6%. I am forecasting below the entire range at 5.0%.

These inputs land STM in the BUY zone with an U/D ratio of 3.3. Total Annualized Return (TAR) is 12.0%.

PAR (using Forecast Average—not High—P/E) is 5.5%, which is less than I seek for a large 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 23 studies (my study and 10 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 4.4%, 4.0%, 17.5, 10.1, and 11.6%. I am lower across the board. Value Line’s projected average annual P/E of 16.0 is higher than MS (13.8) and higher than mine (11.8).

MS high / low EPS are $5.34 / $4.18 vs. my $4.69 / $4.46 (per share). My high EPS is less due to a lower growth rate. Value Line projects $4.70/share for high EPS, which is very close to mine.

MS LSPF $34.60 implies Forecast Low P/E of 8.3: lower than the above-stated 10.1. MS LSPF is 18.0% less than default $4.18/share * 10.1 = $42.22, which results in more conservative zoning. MS LSPF is 3.3% greater than mine, however.

MOS in the study is robust. TAR (over 15.0% preferred) is much less than MS 17.1%. In addition (and MS small sample size aside), my inputs are near the bottom of or below estimate and historical ranges.

With regard to valuation, PEG is 4.1 and 10.9 per Zacks and my projected P/E, respectively: both significantly overvalued due to low EPS growth rates (denominator). Relative Value [(current P/E) / 5-year-mean average P/E] per M* is cheap at 0.7.

U/D has STM a BUY under $43.90/share. The stock needs to approach $37.50 in order to meet the BI TAR criterion given a forecast high price of $75.

ASML Stock Study (6-17-24)

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:

• YF projects YOY 1.6% and 32.4% for ’24 and ’25, respectively (based on 19 analysts).
• Zacks projects YOY 1.3% contraction and 36.2% growth for ’24 and ’25, respectively (3 analysts).
• Value Line projects 10.5% annualized growth from ’23-’28.
• CFRA projects 1.1% YOY contraction and 15.4% growth per year for ’24 and ’23-’25, respectively.
• M* provides a 2-year ACE of 15.4% per year and projects 10.0% over the next decade in its analyst note.

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

With regard to EPS growth:

• MarketWatch projects 20.3% per year for ’23-’25 and ’23-’26 (based on 39 analysts).
• Nasdaq.com projects 55.0% YOY and 38.1% per year for ’25 and ’24-’26 (6/6/2 analysts for ’24/’25/’26).
• Seeking Alpha projects 4-year annualized growth of 22.8%.
• YF projects YOY 3.2% contraction and 56.4% growth for ’24 and ’25, respectively (20), along with 5-year annualized growth of 21.5%.
• Zacks projects YOY 6.6% contraction and 55.0% growth for ’24 and ’25, respectively (6), along with 5-year annualized growth of 23.5%.
• Value Line projects 15.5% annualized growth from ’23-’28.
• CFRA projects 5.3% YOY contraction and 22.5% growth/year for ’24 and ’23-’25 along with 3-year CAGR of 28.0%.
• M* projects long term annualized growth of 17.1%.

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.