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SMCI Stock Study (8-28-24)

Posted by on October 20, 2024 at 06:54 | Last modified: August 28, 2024 12:25

I recently did a stock study on Super Micro Computer Inc. (SMCI) with a closing price of $547.64.

M* writes:

     > Super Micro Computer Inc provides high-performance server technology
     > services to cloud computing, data center, Big Data, high-performance
     > computing, and “Internet of Things” embedded markets. Its solutions
     > include server, storage, blade and workstations to full racks,
     > networking devices, and server management software. The firm follows
     > a modular architectural approach, which provides flexibility to
     > deliver customized solutions. The Company operates in one operating
     > segment that develops and provides high-performance server solutions
     > based upon an innovative, modular and open-standard architecture.
     > More than half of the firm’s revenue is generated in the United
     > States, with the rest coming from Europe, Asia, and other regions.

Over the last 10 years, this large-size company has grown sales and earnings at annualized rates of 20.0% and 31.5%, respectively. Lines are mostly up, straight, and parallel except for YOY sales dip in ’20 and EPS declines in ’16, ’17, and ’18 [FY ends 6/30]. Ten-year EPS R^2 triggers the audit flag at 0.64, and Value Line gives an Earnings Predictability score of 50.

Over the past decade, PTPM falls from 7.3% in ’15 to 2.5% in ’20 before rallying to 8.5% in ’24 for a last-5-year mean of 6.3% [no peer or industry data available]. ROE traces a similar pattern falling from 16.4% in ’15 to 8.1% in ’20 then rallying to 23.9% in ’24 for a last-5-year mean of 19.5%. Debt-to-Capital ranges from 2.5% in ’19 to 30.3% in ’22 with a last-5-year mean of 17.2%. Of 10 peers listed by CFRA, Super Micro Computer’s 23.2% is below the 30.2% median.

Quick Ratio is 2.2 and Interest Coverage is 58.7 per M* who awards a “Narrow” (quantitative) Economic Moat. Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

My 15.0% per year forecast is below the range.

With regard to EPS growth:

My 15.0% per year forecast is at bottom of the long-term-estimate range (mean of five: 36.7%). Initial value is ’24 EPS of $20.09/share despite being up 75.8% YOY.

My Forecast High P/E is 17.0. Over the last decade, high P/E ranges from 11.0 in ’22 to 61.2 in ’24 with a last-5-year mean of 27.2 and a last-5-year-mean average P/E of 17.7. I am near bottom of the range (only ’22 is less).

My Forecast Low P/E is 6.0. Over the last decade, low P/E ranges from 3.2 in ’23 to 18.1 in ’18 with a last-5-year mean of 8.2. I am forecasting near bottom of the range (only ’23 is less).

My Low Stock Price Forecast (LSPF) is $380.00. Default ($265.20) based on initial value given above seems unreasonably low at 78.0% (46.8%) less than the previous close (52-week low). My forecast is 30.6% less and 67.7% greater, respectively.

These inputs land SMCI in the HOLD zone with a U/D ratio of 0.7. Total Annualized Return (TAR) is 4.1%.

PAR (using Forecast Average—not High—P/E) of -3.7% is unacceptable for any size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR but even that is less than current yield on T-bills.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 117 studies (my study and 44 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 20.0%, 20.0%, 27.2, and 8.2, respectively. I am lower across the board. Value Line’s projected average annual P/E of 35.0 is double that of MS (17.7) and triple mine (11.5).

MS high / low EPS are $45.96 / $17.84 versus my $40.41 / $20.09 (per share). My high EPS is less due to a lower growth rate. Value Line’s $45.00 is in the middle.

MS Low Stock Price Forecast (LSPF) of $226.00 implies Forecast Low P/E of 12.7: greater than the above-stated 8.2. MS LSPF is 54.5% greater than the default $17.84/share * 8.2 = $146.29 resulting in more aggressive zoning. MS LSPF is still 40.5% less than mine, however.

With regard to valuation, PEG is 0.53 and 1.6 per Zacks and my projected P/E, respectively: fairly valued on average. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely high at 1.59.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. That is further supported by an MS TAR of 15.0%, which is 10.9%/year greater than mine.

Super Micro Computer is a perplexing stock study for multiple reasons. With the stock down 37.4% in the last three months, I would expect MS LSPF closer to current price (if not INVALID). Such is the opposite with MS LSPF much lower than mine. Even with other studies also overriding default, the earlier the study date the closer to my number their LSPF should be.

Besides LSPF, projected future P/E is also perplexing. P/E range for the stock is ~ 6 to 25 from ’15-’22. In ’23 we get a low P/E of 3.2 and in ’24 we get a high P/E of 61.2. Are we suddenly in a new range? Value Line suggests “yes” with a 5-year average annual P/E of 35. I just think it’s too soon to tell.

The other long-term estimates (arithmetic mean 38.0%/year) seem to support Value Line’s 5-year average annual P/E. I’m not buying into the sky-high growth rate so soon and neither does MS (20.0%).

Analyst 12-month stock projections are strange with the lowest (of 19 analysts covered by CNN Business) at -53.4%. I routinely collect but rarely mention these data since analysts are notorious for bullish bias. Nevertheless, I can never recall a low projection of this magnitude. As potential caveats, -53.4% may not be so bad with the stock up 91.9% YTD and 684% over the past two years. It also may be a single downside outlier.

The final mysteries are why Nasdaq.com reports: 1) only one; 2) extremely low estimate (11.0%). The stock is not short on analyst estimates. MarketWatch projects 36.5%/year (albeit for two years) while YF and Zacks project > 50% YOY for ’25. I don’t recall ever seeing this combination of circumstances.

Per U/D, SMCI is a BUY under $456. BI TAR criterion is met ~ $344/share given a forecast high price of $687 (no dividend).

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PLAB Stock Study (8-27-24)

Posted by on October 19, 2024 at 06:36 | Last modified: August 27, 2024 10:01

I recently did a stock study on Photronics, Inc. (PLAB) with a closing price of $23.79.

M* writes:

     > Photronics Inc is a U.S.-based company that is principally engaged in
     > manufacturing photomasks. The photomasks are photographic quartz
     > plates that contain microscopic images of electronic circuits that
     > are used as a component in the manufacture of integrated circuits
     > and flat-panel displays. The revenue from products designed for
     > integrated circuits production accounts for the majority of total
     > revenue, with the rest derived from products for flat-panel display
     > production. The company’s assets are located in Taiwan, Korea, and
     > the United States. It generates revenue worldwide, including in
     > the United States, Europe, Taiwan, Korea, China, and elsewhere in
     > Asia, with Taiwan contributing the majority of total revenue.

Over the past 10 years, the small-size company has grown sales and earnings at annualized rates of 7.4% and 17.5%, respectively. Lines are somewhat up, straight, and parallel except for YOY sales dips in ’16 and ’17 (sizeable—perhaps due to TCJA) and EPS declines in ’17 and ’19 [FY ends 10/31]. Ten-year EPS R^2 is 0.48 (0.56 excluding ’17), and Value Line gives an Earnings Predictability score of 55.

Over the past decade, PTPM leads peer averages but trails the industry while rising from 9.1% (’14) to 30.3% (’23) with a last-5-year mean of 18.8%. ROE also leads peer averages but trails the industry while rising from 4.2% (’14) to 13.0% (’23) with a last-5-year mean of 8.3%. Debt-to-Capital is lower than peer and industry averages while falling from 18.5% (’14) to 2.6% (’23) with a last-5-year mean of 6.9%.

Quick Ratio is 3.9 and Interest Coverage is 640 per M*. Value Line [surprisingly only] gives a B grade for Financial Strength.

With regard to sales growth:

My 3.0% per year forecast is nearly halving the long-term estimate due to projected short-term weakness.

With regard to EPS growth:

My 5.0% per year forecast is below both long-term estimates (8.1% average). Initial value is ’23 EPS of $2.03/share rather than 2024 Q2 EPS of $2.16 (annualized).

My Forecast High P/E is 15.0. Over the past decade, high P/E falls from 23.8 (’14) to 13.3 (’23) with a last-5-year mean of 20.9 and a last-5-year-mean average P/E of 16.3. I am near bottom of the range [only ’23 and ’22 (13.3) are less].

My Forecast Low P/E is 8.0. Over the past decade, low P/E falls from 17.3 (’14) to 6.8 (’23) with a last-5-year mean of 11.7. I am forecasting near bottom of the range [only ’23 and ’22 (6.8) are less].

My Low Stock Price Forecast (LSPF) of $17.30 is default based on initial value given above. This is 27.3% less than the previous closing price and 3.9% less than the 52-week low.

These inputs land PLAB in the HOLD zone with a U/D ratio of 2.3. Total Annualized Return (TAR) is 10.3%.

PAR (using Forecast Average—not High—P/E) of 4.6% is less than I seek for a small-size company. If a healthy margin of safety (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 only 22 studies (my study and 9 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 7.4%, 5.6%, 16.9, and 11.0, respectively. I am lower across the board. Value Line’s projected average annual P/E of 14.0 is equal to MS and greater than mine (11.5).

MS high / low EPS are $2.78 / $2.14 versus my $2.59 / $2.16 (per share). My high EPS is less due to a lower growth rate. Value Line’s $2.75 is in the middle.

MS LSPF of $18.00 implies Forecast Low P/E of 8.4: less than the above-stated 11.0. MS LSPF is 23.5% less than the default $2.14/share * 11.0 = $23.54 resulting in more conservative zoning. MS LSPF is 4.1% greater than mine, though.

With regard to valuation, PEG is 2.1 per my projected P/E: a bit high. Relative Value [(current P/E) / 5-year-mean average P/E] is low at 0.67.

MOS is robust because my inputs are near or below respective analyst/historical ranges. Although MS sample size limits an impactful comparison, MS TAR is anecdotally 4.3% per year greater than mine.

We must realize much of this analysis is based on the estimates of only two analysts (one aside from Value Line). I believe the fewer the analysts, the larger MOS is needed. I try to achieve that by forecasting below the range.

Per U/D, PLAB is a BUY under $22/share. BI TAR criterion is met ~ $19/share given a forecast high price ~ $39 (no dividend).

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OPCH Stock Study (8-26-24)

Posted by on October 18, 2024 at 06:11 | Last modified: August 26, 2024 16:35

I recently did a stock study on Option Care Health, Inc. (OPCH) with a closing price of $31.83.

M* writes:

     > Option Care Health Inc is the provider of home and alternate-
     > site infusion services. It provides treatment for bleeding
     > disorders, neurological disorders, heart failure, anti-
     > infectives, and chronic inflammatory disorders among others.

Since 2014 and 2021 (first year of profitability), this medium-size company has grown sales and earnings at annualized rates of 11.9% and 23.4%, respectively. Lines are somewhat up, straight, and parallel (since ’21) with YOY sales dips each year between ’14-’18. EPS R^2 is 0.83 (three data points) but Value Line gives an Earnings Predictability score of 30.

Since 2021, PTPM trails peer and industry averages despite increasing from 3.4% to 8.3% (mean 5.6%). ROE leads industry averages while increasing from 12.6% to 17.9% (mean 14.0%). Debt-to-Capital is less than industry averages while falling from 49.6% to 45.1% (mean 46.7%).

Quick Ratio is 1.2 and Interest Coverage is 6.6 per M* who assigns a “Narrow” [Quantitative] Economic Moat. Value Line gives a B+ grade for Financial Strength.

With regard to sales growth:

My 8.0% per year forecast is near bottom of the range.

With regard to EPS growth:

The spectre of data duplication is raised with YF and Zacks having almost identical estimates. Even assuming this to be the case, however, the mean [of four] is little changed [at 11.5% per year].

My 8.0% per year forecast is near bottom of the long-term-estimate range (mean of five: 11.2%). Initial value is 2024 Q2 EPS of $1.19/share (annualized) rather than ’23 EPS of $1.52.

My Forecast High P/E is 24.0. From 2021-3, high P/E is 37.5, 43.2, and 24.1, respectively (mean 34.9). The mean average P/E is 27.8. I am below the range.

My Forecast Low P/E is 19.0. From 2021-3, low P/E is 20.0, 25.7, and 16.4, respectively (mean 20.7). I am forecasting in lower portion of the range.

My Low Stock Price Forecast (LSPF) of $22.60 is default based on initial value given above. This is 29.0% less than the previous closing price and 13.4% less than the 52-week low.

These inputs land OPCH in the HOLD zone with a U/D ratio of 1.1. Total Annualized Return (TAR) is 5.7%.

PAR (using Forecast Average—not High—P/E) of 3.4% is less than I seek for a medium-size company. If a healthy margin of safety (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 only 10 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, and Forecast Low P/E, are 9.7%, 10.0%, 28.1, and 17.7, respectively. I am lower on all but the latter (19.0). Value Line’s projected average annual P/E of 29.0 is greater than MS (22.9) and greater than mine (21.5).

MS high / low EPS are $2.38 / $1.45 versus my $1.75 / $1.19 (per share). My high EPS is less due to a lower growth rate and initial value. Value Line’s $1.90 is in the middle.

MS LSPF of $22.90 implies Forecast Low P/E of 15.8: less than the above-stated 17.7. MS LSPF is 10.8% less than the default $1.45/share * 17.7 = $25.67 resulting in more conservative zoning. MS LSPF is 1.3% greater than mine, however.

With regard to valuation, PEG is 2.4 and 3.1 per Zacks and my projected P/E, respectively: a bit rich. Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 0.96.

MOS is robust because my inputs (including quarterly initial value) are near or below respective analyst/historical ranges. While MS sample size is too small for a meaningful comparison, its 15.3% TAR is anecdotally 9.6% per year greater than mine.

With only three years of profitable data recorded, I think estimates have to lean conservative because few analysts have little on which to base judgments.

Per U/D, OPCH is a BUY under $27/share. BI TAR criterion is met at $21/share given a forecast high price of $42 (no dividend).

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

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CNC Stock Study (8-26-24)

Posted by on October 16, 2024 at 06:47 | Last modified: August 26, 2024 07:27

I recently did a stock study on Centene Corp. (CNC) with a closing price of $78.55. The previous study is here.

M* writes:

     > Centene is a managed-care organization focused on government-
     > sponsored healthcare plans, including Medicaid, Medicare, and
     > the individual exchanges. Centene served 24 million medical
     > members as of June 2023, mostly in Medicaid (67% of membership),
     > the individual exchanges (14%), Medicare Advantage (6%), and
     > the balance in Tricare (West region), correctional facility,
     > and commercial plans. The company also serves traditional
     > Medicare users with its Medicare Part D pharmaceutical program.

Over the past 10 years, the mega-size ( > $50B annual revenue) company has grown sales and earnings at annualized rates of 28.5% and 11.9%, respectively. Lines are somewhat up, straight, and parallel except for YOY EPS declines in ’18, ’20, ’21, and ’22 (recent year catches back up to previous trendline). Ten- (Five-) year EPS R^2 is 0.65 (0.05), but Value Line gives an Earnings Predictability score of 90.

Over the past decade, PTPM trails peer and industry averages while falling from 2.8% (’14) to 2.3% (’23) with a last-5-year mean of 2.0%. ROE also trails peer and industry averages while falling from 16.2% (’14) to 10.5% (’23) with a last-5-year mean of 7.5%. Debt-to-Capital is about even with peer and industry averages while increasing from 33.9% (’14) to 42.2% (’23) with a last-5-year mean of 44.8%.

Value Line gives a B++ grade for Financial Strength. Quick Ratio is 1.1 and Interest Coverage is 6.3 per M* who assigns a “Narrow” Economic Moat, “Standard” Capital Allocation, and writes:

     > Overall, while the balance sheet appears weak to us, it is
     > improving and could reach sound territory in the near future if the
     > firm refrains from significant, leverage-increasing acquisitions.

With regard to sales growth:

My 2.0% per year forecast is near bottom of the range.

With regard to EPS growth:

My 8.0% per year forecast is near bottom of the long-term-estimate range (mean of six using lower for M*: 10.8%). Initial value is ’23 EPS of $4.95/share rather than 2024 Q2 EPS of $5.27 (annualized).

My Forecast High P/E is 17.0. Over the past decade, high P/E ranges from 16.9 in ’23 to 47.6 in ’22 with a last-5-year mean of 29.6 and a last-5-year-mean average P/E of 24.8. I am near bottom of the range (only ’23 is less).

My Forecast Low P/E is 12.0. Over the past decade, low P/E ranges from 11.9 in ’17 to 35.4 in ’22 with a last-5-year mean of 20.2. I am forecasting near bottom of the range (only ’17 is less).

My Low Stock Price Forecast (LSPF) of $59.40 is default based on initial value given above. This is 24.4% less than the previous closing price and 2.3% less than the 52-week low.

These inputs land CNC in the HOLD zone with a U/D ratio of 2.4. Total Annualized Return (TAR) is 9.5%.

PAR (using Forecast Average—not High—P/E) of 6.1% is less than I seek for a mega-size company. If a healthy margin of safety (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 only 55 studies (my study and 18 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 4.5%, 10.0%, 22.0, and 14.0, respectively. I am lower across the board. Value Line’s projected average annual P/E of 13.5 is less than MS (18.0) and less than mine (14.5).

MS high / low EPS are $8.13 / $5.03 versus my $7.27 / $4.95 (per share). My high EPS is less due to a lower growth rate. Value Line’s $10.50 soars above both.

MS LSPF of $55.60 implies Forecast Low P/E of 11.0: less than the above-stated 14.0. MS LSPF is 21.5% less than the default $5.03/share * 14.0 = $70.42 resulting in more conservative zoning. MS LSPF is also 6.9% less than mine.

With regard to valuation, PEG is 1.1 and 1.7 per Zacks and my projected P/E, respectively: fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is quite low at 0.60.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. That is further supported by an MS TAR that is 9.9% per year greater than mine at 19.4%.

I approach Centene with hesitation because of its low sales growth and high debt load. M* comments like those included above are unusually sour. Value Line forecasts long-term debt to decrease by 38% over the next five years, which should help.

Per U/D, CNC is a BUY under $75/share. BI TAR criterion is met ~ $62/share given a forecast high price ~ $124 (no dividend).

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

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ACMR Stock Study (10-14-24)

Posted by on October 14, 2024 at 06:23 | Last modified: August 23, 2024 11:16

I recently did a stock study on ACM Research, Inc. (ACMR) with a closing price of $19.22.

CFRA writes:

     > ACM Research, Inc… develops, manufactures, and sells single-wafer wet
     > cleaning equipment for enhancing the manufacturing process and yield for
     > integrated chips worldwide. It offers space alternated phase shift
     > technology for flat and patterned wafer surfaces, which employs
     > alternating phases of megasonic waves to deliver megasonic energy in a
     > uniform manner on a microscopic level; timely energized bubble oscillation
     > technology for patterned wafer surfaces at advanced process nodes, which
     > provides cleaning for 2D and 3D patterned wafers; Tahoe technology for
     > delivering cleaning performance using less sulfuric acid and hydrogen
     > peroxide; and electro-chemical plating technology for advanced metal
     > plating. The company markets and sells its products under the SAPS,
     > TEBO, ULTRA C, ULTRA Fn, Ultra ECP, Ultra ECP map, and Ultra ECP ap
     > trademarks through direct sales force and third-party representatives.

Since 2018, this small-size company has grown sales and earnings at annualized rates of 51.0% and 47.6%, respectively (pre-2018 data excluded from full analysis due to fractional/negative EPS numbers, triple-digit Debt-to-Capital, and a negative ROE print). Lines are up, straight, and parallel except for a YOY EPS decline in ’20. Five-year EPS R^2 is 0.86. Value Line SMC edition mentions a page 4210 that is inaccessible online.

Since 2018, PTPM leads peer averages but trails the industry while increasing from 9.9% to 20.8% (’23) with a last-5-year mean of 16.9%. ROE also leads peer averages and trails the industry while ranging from 5.5% in ’22 to 19.6% in ’19 and ’21 with a last-5-year mean of 13.5%. Debt-to-Capital is slightly higher than peer averages and lower than the industry while ranging from 5.5% in ’21 to 26.2% in ’20 with a last-5-year mean of 13.8%.

Quick Ratio is 1.2 and Interest Coverage is 43.7 per M*.

With regard to sales growth:

My 19.0% per year forecast is below the range.

With regard to EPS growth:

My 15.0% per year forecast is below the long-term-estimate range (mean of only two: 31.4%). Initial value is ’23 EPS of $1.16/share rather than 2024 Q2 EPS of $1.26 (annualized).

My Forecast High P/E is 18.0. Since 2018, high P/E ranges from 18.2 in ’23 to 83.7 in ’21 (excluding 128 in ’20) with last-5-year mean of 43.9 and last-5-year-mean average P/E (also excluding 35.1 low P/E in ’21) of 27.4. I am below the range.

My Forecast Low P/E is 8.0. Since 2018, low P/E ranges from 7.5 in ’23 to 17.9 in ’20 (excluding 35.1 in ’21) with a last-5-year mean of 11.0. I am forecasting near bottom of the range (only ’23 is less).

My Low Stock Price Forecast (LSPF) is $12.50. Default ($10.10) based on initial value seems unreasonably low at 47.5% (19.2%) less than the previous closing price (52-week low). I am using the 52-week low instead: previous close less 35.0%.

These inputs land ACMR on the cusp of the HOLD zone with U/D ratio of 3.0. Total Annualized Return (TAR) is 16.1%.

PAR (using Forecast Average—not High—P/E) of 8.8% is less than I seek for a small-size company. If a healthy margin of safety (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 109 studies (my study and 32 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 18.4%, 18.2%, 23.2, and 12.0, respectively. I am lower on all but sales (19.0%). MS projected average annual P/E is 17.6 versus my 13.0.

MS high / low EPS are $2.95/ $1.31 versus my $2.23 / $1.26 (per share). My high EPS is less due to a lower growth rate.

MS LSPF of $13.70 implies Forecast Low P/E of 10.5: less than the 12.0 above. MS LSPF is 12.9% less than the default $1.31/share * 12.0 = $15.72, which results in more conservative zoning. MS LSPF is still 9.6% greater than mine, though.

With regard to valuation, PEG is 0.9 per my projected P/E (Zacks unavailable): one of the lowest I have seen. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.58. While the latter excludes the two highest extremes around COVID, subsequent values may also prove to be inflated.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages (sales immaterial to the analysis). Consistent with this is MS TAR being 10.1%/year greater than mine.

I’ve done a decent job putting ACM Research through the ringer and multiple facets look pretty good. I learned about it in a Manifest Investing “Bull Sessions” as a candidate for the 2024 Best Small Companies portfolio. Hopefully soon we can get a more complete data set (e.g. Value Line and possibly M* coverage, Zacks EPS estimate, more from Nasdaq.com and perhaps Argus). Until then, maybe we can also get a lower stock price for the volatile issue [beta 1.55 and “Extreme” uncertainty rating by M* (quantitative)].

Per U/D, ACMR is a BUY under $19.90/share. BI TAR criterion is met right now given a forecast high price ~ $42 (no dividend; this is an unusual circumstance of U/D criterion being more stringent than the TAR criterion).

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

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DGII Stock Study (8-22-24)

Posted by on October 13, 2024 at 06:45 | Last modified: August 22, 2024 12:04

I recently did a stock study on Digi International Inc. (DGII) with a closing price of $28.87.

M* writes:

     > Digi International Inc… provides business and mission-critical and
     > Internet of Things (IoT) connectivity products and services. It
     > has two segments: IoT Products and Services and IoT Solutions.
     > The IoT Products and Services segment consists of distinct
     > communications products and communication product development
     > services. IoT Solutions segment offers wireless temperature and
     > other environmental condition monitoring services as well as
     > employee task management services. The company generates
     > majority of its revenue from the IoT Products & Services segment.
     > Geographically, the company generates majority of its revenue
     > from its business in the United States and also has its presence
     > in Europe, Middle East and Africa and Rest of the world.

Over the past 10 years, the small-size company has grown sales and earnings at annualized rates of 9.7% and 15.8%, respectively (FY ends Sep 30). Lines are somewhat up, straight, and parallel except for YOY sales declines in ’16 and ’17 along with EPS declines in ’17, ’18, and ’20. Ten- (Five-) year EPS R^2 is 0.27 (0.68), and Value Line gives a lackluster Earnings Predictability score of 40.

I deem visual inspection to be “fair.” Sales looks better than EPS albeit single digits. EPS is hurt by ’18 (exclusion improves 10-year R^2 to 0.44). Leaving a more sour taste in my mouth is ’16 EPS of $0.51/share not being eclipsed until $0.54 in ’22.

Over the past decade, PTPM leads peer averages but trails the industry while ranging from 0.4% in ’14 to 8.2% in ’16 with a last-5-year mean of 4.1%. ROE also leads peer averages and trails the industry while ranging from 0.4% in ’18 to 4.6% in ’23 with a last-5-year mean of 3.2%. Debt-to-Capital is less than peer and industry averages despite increasing from 0% (through ’19) to 29.0% (’23) with a last-5-year mean of 18.6%.

Quick Ratio is 1.2 and Interest Coverage is 2.0 per M*. Value Line gives a B+ grade for Financial Strength and writes:

     > Since the end of fiscal 2022, the amount of outstanding debt
     > has declined 36%, from about $238 million to under $152 million.
     > The ratio of total debt to equity stands at a modest 21%.

With regard to sales growth:

My 1.0% per year forecast applies a significant haircut to Value Line due to multiple estimates of short-term contraction.

With regard to EPS growth:

Given the limited number of analysts for this small-size company, I have data concerns:

All that aside, my 12.0%/year forecast undercuts the long-term-estimate range [mean of three unique estimates is 15.3% (versus 16.0% across all five)]. Initial value is 2024 Q3 EPS of $0.46/share (annualized) rather than ’23 EPS of $0.67.

My Forecast High P/E is 40.0. Since 2015 (excluding 182 in ’14), high P/E increases from 46.5 to 65.2 (excluding 294 in ’18) with last-5-year mean of 65.4 and last-5-year-mean average P/E of 49.7. I am near range bottom [only ’16 (26.5) is less].

My Forecast Low P/E is 22.0. Since 2015 (excluding 107 in ’14), low P/E increases from 26.5 to 40.3 (excluding 184 in ’18) with a last-5-year mean of 34.0. I am forecasting below the range [only ’16 (15.1) is less].

My Low Stock Price Forecast is $20.20. Default ($10.10) based on initial value seems unreasonably low at 65.0% (50.0%) less than the previous closing price (52-week low). I will use the 52-week low instead: 30.0% discount to previous close.

These inputs land DGII in the HOLD zone with a U/D ratio of 0.4. Total Annualized Return (TAR) is 2.3%.

PAR (using Forecast Average—not High—P/E) of -2.8% is unacceptable for any size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead but even that is less than the current yield on T-bills.

To assess MOS, I usually start by comparing my inputs with those of Member Sentiment. I will skip because only four other studies have been done over the past 90 days (two outliers including mine excluded).

Value Line is more aggressive than me with average annual P/E of 41.0 (31.0) and high EPS of $1.30/share ($0.81).

My Low Stock Price Forecast exceeds the pseudo-rule-of-thumb 20% discount to previous closing price.

With regard to valuation, PEG is 0.9 and 4.7 per Zacks and my projected P/E. The latter is much higher due to my lower growth rate and initial value selection. Relative Value [(current P/E) / 5-year-mean average P/E] is also high at 1.3.

MOS is robust because my inputs are near/below analyst/historical ranges. This especially pertains to the most-recent-quarter initial value, which might be unreasonably low.

I do not share Value Line’s rosy outlook for this company. Sales growth and ROE are minimal. Interest Coverage is minimal (although Quick Ratio and Debt-to-Capital are fine). Historical EPS includes a disturbing flat time. 2-year sales estimates are negative. YTD EPS is contracting. Long-term EPS estimates light the way—if I can believe and [big if] P/E remains elevated.

I am eager to see next year’s SSG right now.

Per U/D, DGII is a BUY under $23/share. BI TAR criterion is met ~ $16/share given a forecast high price $32.40 (no dividend).

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AXTA Stock Study (8-21-24)

Posted by on October 12, 2024 at 06:43 | Last modified: August 21, 2024 10:23

I recently did a stock study on Axalta Coating Systems Ltd. (AXTA) with a closing price of $34.33.

M* writes:

     > Axalta Coating Systems Ltd is a manufacturer, marketer and
     > distributor of high-performance coatings systems. It operates in
     > two segments. The Performance Coatings segment provides liquid
     > and powder coatings solutions to a fragmented and local customer
     > base. Its end markets include refinish and industrial. The Mobility
     > Coatings segment relates to the provision of coating technologies
     > to original equipment manufacturers of light and commercial
     > vehicles. The company operates in the geographic areas of North
     > America, EMEA countries, Asia-Pacific and Latin America.

Over the past 10 years, the medium-size company has grown sales and earnings at annualized rates of 1.6% and 27.3%, respectively. Lines are narrowing, somewhat up, and somewhat straight except for YOY sales declines in ’15, ’16, ’19, and ’20 along with EPS declines in ’16, ’17, ’20, and ’22. Ten- (Five-) year EPS R^2 is 0.66 (0.13), and Value Line gives an Earnings Predictability score of 40.

I think visual inspection just barely clears the barbed-wire fence. Sales growth is subbornly low while EPS—despite starting from a fractional base ($0.12 in ’14)—appears somewhat cyclical but certainly growing.

Over the past decade, PTPM trails peer and industry averages while increasing from 0.8% (’14) to 6.8% (’23) with a last-5-year mean of 6.1%. ROE also trails peer and industry averages despite increasing from 2.4% (’14) to 16.6% (’23) with a last-5-year mean of 15.6%. Debt-to-Capital is higher than peer and industry averages despite falling from 78.0% (’14) to 67.2% (’23) with a last-5-year mean of 71.7%.

Quick Ratio is 1.6 and Interest Coverage is 3.0 per M* who assigns a “Narrow” [quantitative] Economic Moat.

Value Line gives a B+ grade for Financial Strength and says the company is putting cash to good use:

     > Axalta closed the June quarter with $840 million in cash (up
     > from approximately $700 million at the end of 2023). The
     > company expanded its revolving credit facility to $800 million
     > in order to complete the CoverFlexx acquisition. The board
     > recently authorized a $700 million stock-repurchase program.
     > It may also use resources to refinance some of its debt.

With regard to sales growth:

My 2.0% per year forecast is below the range.

With regard to EPS growth:

My 12.0% per year forecast is below the long-term-estimate range (mean of four: 18.2%). Initial value is ’23 EPS of $1.21/share rather than 2024 Q2 EPS of $1.35 (annualized).

My Forecast High P/E is 28.0. Over the past decade, high P/E falls from 229 (’14) to 28.5 (’23) with a last-5-year mean of 37.7 and a last-5-year-mean average P/E of 30.3. I am below the range.

My Forecast Low P/E is 20.0. Over the past decade, low P/E falls from 168 (’14) to 20.7 (’23) with a last-5-year mean of 22.8. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $24.20 is default based on initial value given above. This is 29.5% less than the previous closing price and 3.2% less than the 52-week low.

These inputs land AXTA in the HOLD zone with a U/D ratio of 2.4. Total Annualized Return (TAR) is 11.5%.

PAR (using Forecast Average—not High—P/E) of 8.2% is less than I seek from a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I usually start by comparing my inputs with those of Member Sentiment. I will skip because only one other study has been done over the past 90 days.

Value Line is more aggressive than me with average annual P/E of 30.0 (24.0) and high EPS of $2.30/share ($2.13).

My LSPF exceeds the pseudo-rule-of-thumb 20% discount to previous closing price.

MOS is robust because my inputs are near/below respective analyst/historical ranges.

With regard to valuation, PEG is 0.8 and 1.9 per Zacks and my projected P/E, respectively: fairly valued on average. Relative Value [(current P/E) / 5-year-mean average P/E] is somewhat low at 0.84.

I am concerned that sales may eventually be a drag on EPS growth, but the former is not material to this analysis.

Per U/D, AXTA is a BUY under $33/share. BI TAR criterion is met ~ $30/share given a forecast high price ~ $60 (no dividend).

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EPD Stock Study (8-20-24)

Posted by on October 11, 2024 at 06:40 | Last modified: August 20, 2024 12:12

I recently did a stock study on Enterprise Product Partners L.P. (EPD) with a closing price of $29.44.

M* writes:

     > Enterprise Products Partners is a master limited partnership
     > that transports and processes natural gas, natural gas liquids,
     > crude oil, refined products, and petrochemicals. It is one of
     > the largest midstream companies, with operations servicing
     > most producing regions in the Lower 48 states. Enterprise is
     > particularly dominant in the NGL market and is one of the
     > few MLPs that provide midstream services across the full
     > hydrocarbon value chain.

Master Limited Partnerships are not recommended for investment clubs. Slide 23 of Doug Gerlach’s presentation explains why.

I don’t think this should necessarily preclude individual investors from buying units (shares) as long as we stay mindful of tax implications and additional tax preparation costs depending on whether we hold in taxable or retirement accounts. I encourage doing your own research (i.e. search “should MLPs be held in an IRA”) and/or consulting a tax specialist.

Over the past 10 years, this large-size company has grown sales and earnings at annualized rates of 5.1% and 8.4%, respectively. Lines are somewhat up, straight, and parallel except for YOY sales declines in ’19 and ’23 and sales+EPS declines in ’15, ’16, and ’20. Ten- (Five-) year EPS R^2 is 0.77 (0.56), and Value Line gives an Earnings Predictability score of 80.

Over the past decade, PTPM leads peer and industry averages while increasing from 6.0% (’14) to 11.5% (’23) with a last-5-year mean of 12.3%. ROE also leads peer and industry averages by ranging from 11.7% in ’16 to 20.6% in ’22 with a last-5-year mean of 18.5%.

Remaining at 100.0% throughout, Debt-to-Capital is greater than peer and industry averages (~93% with minimum ~91% in ’17-’18). I wonder if this takes on a different M* meaning for MLPs, which pay out majority of cash flows as distributions to unit holders [and therefore depend nearly as much on loans/debt to finance operations as they do equity]. CFRA provides a table with eight peers for whom “LTD-to-Cap” ranges from 45.3% to 63.9%. EPD is second-lowest at 47.4%.

Quick Ratio is 0.6 and Interest Coverage is 5.5 per M* who also rates the company “Exemplary” for Capital Allocation and assigns a “Wide” Economic Moat.

Value Line gives a B++ grade for Financial Strength and writes:

     > Enterprise is one of the few dividend aristocrats in the MLP
     > sector… Finances are solid. Many MLPs are finally recovering
     > from the damage sustained during the pandemic. So, there
     > aren’t many members here with even average balance
     > sheets. Enterprise has managed to fund a large construction
     > program while keeping its debt levels under control.

With regard to sales growth:

My 4.0% per year forecast is near bottom of the range.

With regard to EPS growth:

I don’t typically include CFRA’s 3-year CAGR as a long-term estimate because sometimes it makes no sense. EPD EPS from ’20 through ’25 [with the last two being estimated] are $2.11/share, $2.21, $2.52, $2.53, $2.71, and $2.97: nowhere is a 24.0% 3-year CAGR even close (6.2%, 7.0%, and 5.6%, respectively).

My 4.0% per year forecast is near bottom of the long-term-estimate range (mean of six: 6.1%). Initial value is ’23 EPS of $2.52/share rather than 2024 Q2 EPS of $2.62 (annualized).

My Forecast High P/E is 12.0. Over the past decade, high P/E falls from 18.1 (’14) to 11.1 (’23) with a last-5-year mean of 13.3 and a last-5-year-mean average P/E of 11.2. I am near bottom of the range [only ’22 (11.5) and ’23 (11.1) are less].

My Forecast Low P/E is 8.5. Over the past decade, low P/E falls from 20.9 (’14) to 9.5 (’23) with a last-5-year mean of 9.0. I am forecasting toward bottom of the range [only ’20 (6.0) is less].

My Low Stock Price Forecast (LSPF) of $22.30 is default based on initial value from above. This is 24.3% less than the previous closing price and 12.9% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 75.2% in ’22 to 133% in ’16 with a last-5-year mean of 85.5%. I am forecasting below the range at 75.0%.

These inputs land EPD in the HOLD zone with a U/D ratio of 1.1. Total Annualized Return (TAR) is 11.0%.

PAR (using Forecast Average—not High—P/E) of 8.8% is less than I seek from a large-size company. If a healthy margin of safety (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 only 24 studies (my study and 18 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 7.5%, 5.9%, 12.8, 9.0, and 85.5%, respectively. I am lower across the board. Value Line’s projected average annual P/E of 16.0 is higher than MS (10.9) and higher than mine (10.3).

MS high / low EPS are $3.39 / $2.55 versus my $3.07 / $2.55 (per share). My high EPS is less due to a lower growth rate. Value Line is in the middle at $3.55.

MS LSPF of $22.80 implies Forecast Low P/E of 8.9: roughly equal to the 9.0 mentioned above. MS LSPF is 2.2% greater than mine thereby resulting in slightly more aggressive zoning.

With regard to valuation, PEG is 1.5 and 2.7 per Zacks and my projected P/E, respectively: somewhat overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 1.0.

MOS is robust because my inputs are near or below respective analyst/historical ranges. MS sample is too small for meaningful comparison, but anecdotally its 15.2% TAR is 4.2%/year greater than mine.

Per U/D, EPD is a BUY under $25.90.

Until today, I would go on to say BI TAR criterion is met at $18.50/share given a forecast high price ~ $37.

This is incorrect because it excludes the [sizeable] dividend. Going forward, I will proceed by subtracting average yield (given my conservative PR) at Forecast High P/E (lower than yield at average P/E) from 15.0% (actually 14.87% with this number being inversely proportional to BUY threshold) and discounting forecast high price by resultant percentage for five years.

In this case, BI TAR criterion is actually met closer to $23.30 not $18.50: 6.3% average yield at Forecast High P/E subtracted from 15.0% equals 8.7% and $36.80 * (1 – (8.7 / 100) ) ^ 5 = $23.35.

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EOG Stock Study (8-19-24)

Posted by on October 9, 2024 at 07:00 | Last modified: August 19, 2024 11:33

I recently did a stock study on EOG Resources, Inc. (EOG) with a closing price of $128.06.

M* writes:

     > EOG Resources is an oil and gas producer with acreage in several
     > US shale plays, primarily in the Permian Basin and the Eagle
     > Ford. At the end of 2023, it reported net proven reserves of
     > 4.5 billion barrels of oil equivalent. Net production averaged
     > roughly 985,000 barrels of oil equivalent per day in 2023 at a
     > ratio of 71% oil and natural gas liquids and 29% natural gas.

Energy is notorious for being cyclical. As a result, I usually avoid these companies because visual inspection fails. I wonder, though, are we really to blacklist an entire sector for this reason? Is it not possible to realize phenomenal investment returns here? The recent inclusion of SLB in a Manifest Investing portfolio (along with its 99 Quality score) suggests otherwise.

Visual inspection for EOG cleans up relatively well with the exclusion of 2015, ’16, and ’20 from the full analysis. ’20 probably makes sense due to COVID-19. Rather than dig to figure out plausible excuses for ’15-’16, I will defer to the overriding question asked in the first paragraph.

Pressing onward with stated exclusions, over the past 10 years this large-size company has grown sales and earnings at annualized rates of 7.1% and 12.8%, respectively. Lines are somewhat up and parallel with YOY sales+EPS declines in ’19 and ’23. Ten-year EPS R^2 is 0.67, but Value Line gives a weak Earnings Predictability score of 30.

Over the past decade, PTPM leads peer and industry averages while ranging from 5.9% in ’17 to 41.8% in ’23 with a last-5-year mean of 31.6%. ROE also leads peer and industry averages while increasing from 14.5% (’14) to 27.2% (’23) with a last-5-year mean of 23.6%. Debt-to-Capital completes the trifecta being much lower than peer and industry averages while falling from 25.0% (’14) to 14.6% (’23) with a last-5-year mean of 18.9%.

Quick Ratio is 1.7 and Interest Coverage is 69.3 per M* who also rates the company “Exemplary” for Capital Allocation and assigns a “Narrow” Economic moat. Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

My 2.0% per year forecast is near bottom of the range.

With regard to EPS growth:

My 3.0% per year forecast is toward bottom of the long-term-estimate range (mean of six: 7.2%). Initial value is 2024 Q2 EPS of $12.95/share (annualized) rather than ’23 EPS of $13.00.

My Forecast High P/E is 11.0. Over the past decade, high P/E falls from 22.3 (’14) to 10.6 (’23) with a last-5-year mean of 14.3 and a last-5-year-mean average P/E of 11.4. I am near bottom of the range (only ’23 is less).

My Forecast Low P/E is 7.0. Over the past decade, low P/E falls from 15.2 (’14) to 7.6 (’23) with a last-5-year mean of 8.5. I am forecasting toward bottom of the range [only ’21 (6.1) and ’22 (6.7) are less].

My Low Stock Price Forecast (LSPF) of $90.60 is default based on initial value from above. This is 29.3% less than the previous closing price and 16.8% less than the 52-week low.

Over the past decade, Payout Ratio (PR) increases from 9.6% in ’14 to 25.4% in ’23 with a last-5-year mean of 22.5%. I am forecasting below the range at 9.0%.

These inputs land EOG in the HOLD zone with a U/D ratio of 1.0. Total Annualized Return (TAR) is 6.0%.

PAR (using Forecast Average—not High—P/E) of 2.1% is less than I seek for any 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 19 studies (my study and eight 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 5.7%, 4.1%, 13.4, 8.2, and 21.9%, respectively. I am lower across the board. Value Line’s projected average annual P/E of 14.0 is higher than MS (10.8) and higher than mine (9.0).

MS high / low EPS are $15.55/ $12.66 versus my $15.01 / $12.95 (per share). My high EPS is less due to a lower growth rate. Value Line soars above both with its $17.50 projection.

MS LSPF of $102.30 implies Forecast Low P/E of 8.1: very close to the 8.2 mentioned above. MS LSPF is 12.9% greater than mine thereby resulting in more aggressive zoning.

With regard to valuation, PEG is 2.2 and 3.2 per Zacks and my projected P/E, respectively: somewhat overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is a bit low at 0.87.

MOS is robust because my inputs (and most-recent-quarter initial value) are near or below respective analyst/historical ranges. MS sample size is too small for valid comparison, but its 12.3% TAR is anecdotally 6.3%/year greater than mine.

EPS estimates for the company don’t level up to management metrics. The latter [three described near top] would have me believe it to be an industry leader. The former is particularly dogged by M*’s 0.2%.

Per U/D, EOG is a BUY under $109. BI TAR criterion is met ~ $82/share given a forecast high price ~ $165.

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ARCB Stock Study (8-14-24)

Posted by on October 7, 2024 at 06:25 | Last modified: August 14, 2024 16:23

I recently did a stock study on ArcBest Corp. (ARCB) with a closing price of $106.04.

M* writes:

     > ArcBest Corp is engaged in logistics operations. The company operates
     > in two operating segments, The Asset-Based segment includes
     > the results of operations of ABF Freight System, Inc. and certain
     > other subsidiaries. The segment operations include national, inter-
     > regional, and regional transportation of general commodities through
     > standard, expedited, and guaranteed LTL services. The services
     > including freight transportation related to managed transportation
     > solutions and other services. The Asset-Light segment includes the
     > results of operations of the Company’s service offerings in truckload,
     > ground expedite, dedicated, intermodal, household goods moving,
     > managed transportation, warehousing and distribution, and
     > international freight transportation for air, ocean, and ground.

Over the past 10 years, the medium-size company has grown sales and EPS at annualized rates of 7.3% and 25.0%, respectively. Lines are borderline up and parallel with YOY sales declines in ’19, ’20, and ’23 along with EPS declines in ’15, ’16, ’19, and ’23. Five- and 10-year EPS R^2 are both 0.63 and Value Line gives an Earnings Predictability score of 45.

Over the past decade, PTPM trails peer and industry averages (both appear identical) despite increasing from 2.7% (’14) to 4.2% (’23) with a last-5-year mean of 4.7%. ROE trails peer and industry averages (both appear identical) despite increasing from 8.0% (’14) to 11.1% (’23) with a last-5-year mean of 14.1%. Debt-to-Capital is less than peer and industry averages (both appear identical) despite increasing from 20.4% (’14) to 26.1% (’23) with a last-5-year mean of 29.5%.

Quick Ratio is 1.1 and Interest Coverage is 19.0 per M* who also assigns a Narrow (quantitative) Economic Moat. Value Line gives a B+ grade for Financial Strength.

With regard to sales growth:

My 1.0% per year forecast is near bottom of the range.

With regard to EPS growth:

My 9.0% per year forecast is below the long-term-estimate range (mean of four: 12.4%). Initial value is 2024 Q2 EPS of $5.27/share (annualized) rather than ’23 EPS of $5.77.

My Forecast High P/E is 15.0. Over the past decade, high P/E ranges from 10.6 in ’22 to 47.8 in ’16 with a last-5-year mean of 18.6 and a last-5-year-mean average P/E of 13.7. I am near bottom of the range (only ’22 is less).

My Forecast Low P/E is 11.0. Over the past decade, low P/E falls from 17.7 (’14) to 11.8 (’23) with a last-5-year mean of 8.8. I am forecasting near bottom of the range [’20 (5.0), ’21 (5.3), ’22 (5.6), and ’17 (7.5) are less].

My Low Stock Price Forecast (LSPF) is $74.00. Default ($58.00) based on initial value given above seems unreasonably low at 45.3% (33.3%) less than previous close (52-week low). My [arbitrary] forecast is 30.2% and 14.8% less, respectively.

Over the past decade, Payout Ratio ranges from 3.8% in ’22 to 45.1% in ’16 with a last-5-year mean 9.8%. I am forecasting below the range at 3.0%.

These inputs land ARCB in the HOLD zone with a U/D ratio of 0.5. Total Annualized Return (TAR) is 3.0%.

PAR (using Forecast Average—not High—P/E) of 0.1% is unacceptable for any size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead although even that is less than the current yield on T-bills.

To assess MOS, I usually start by comparing my inputs with those of Member Sentiment. I will skip this because only one other study has been done over the past 90 days.

Value Line projects an average annual P/E of 15.0 that is greater than mine (13.0). Value Line projects high EPS of $13.00/share versus my $8.11.

My LSPF exceeds the rule-of-thumb [which really isn’t] 20% discount to previous closing price.

MOS is robust because my inputs (and most-recent-quarter initial value) are near/below respective analyst/historical ranges.

With regard to valuation, PEG is 1.1 and 2.1 per Zacks and my projected P/E, respectively: mostly reasonable. Relative Value [(current P/E) / 5-year-mean average P/E] is much higher than I like to see at 1.47 (due to low P/E from ’20-’22).

Projected EPS growth is what drew my attention to this stock, but the hype doesn’t live up to the numbers. Visual inspection is mediocre. Projected sales growth is nowhere near double digits. The company is not an industry leader with regard to management metrics. PTPM is less than the 5-year average. Relative Value is an issue as just discussed. Last but not least, only one other person has given this stock time of day.

Per U/D, ARCB is a BUY under $85/share. BI TAR criterion is met ~ $61/share given a forecast high price ~ $121.

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