MNST Stock Study (7-8-24)

I recently did a stock study on Monster Beverage Corp. (MNST) with a closing price of $49.75. The previous study is here.

M* writes:

     > Monster Beverage is a leader in the energy drink subsegment
     > of the nonalcoholic beverage market, generating two thirds
     > of revenue in the US and Canada. The well-known Monster
     > trademark includes brands such as Monster Energy, Monster
     > Ultra, Java Monster, and Juice Monster. The firm also owns
     > other energy drink brands, such as Reign, NOS, Burn, and
     > Mother, and brews and distributes beers and flavored malt
     > beverages following the acquisition of a craft brewer in 2022.
     > Monster controls branding and innovation but outsources
     > beverage manufacturing and packaging to copackers and
     > finished goods distribution to bottlers in the global Coca-
     > Cola system (pursuant to a 20-year agreement inked in 2015).
     > Coke is the largest shareholder of Monster with a 19.5% stake.

Over the last 10 years, this medium-size company has grown sales and EPS at annualized rates of 12.5% and 14.7%, respectively. Lines are mostly up, straight, and parallel except for EPS declines in ’21 and ’22. Value Line scores the company 90 for Earnings Predictability.

Over the past decade, PTPM leads peer and industry averages while ranging from 24.9% in ’22 to 35.7% in ’17 with a last-5-year mean of 31.1%. ROE trails the industry and is just lower than peer averages while ranging from 12.4% in ’15 to 33.5% in ’14 with a last-5-year mean of 23.2%. Debt-to-Capital is much lower than peer and industry averages as the company has no long-term debt.

Quick Ratio is 4.0 per M* who gives the company a “Standard” rating for Capital Allocation. Value Line grades the company A+ for Financial Strength.

With regard to sales growth:

• YF projects YOY 9.8% and 10.1% for ’24 and ’25, respectively (based on 22 analysts).
• Zacks projects YOY 9.6% and 9.7% for ’24 and ’25, respectively (9 analysts).
• Value Line projects 5.0% annualized growth from ’23-’28.
• CFRA projects 11.3% YOY and 10.5% per year for ’24 and ’23-’25, respectively.
• M* gives a 2-year ACE of 10.9% annualized growth while projecting 8.0% for the next 10 years in its analyst note.

My 5.0% per year forecast is at the lower end of the range.

With regard to EPS growth:

• MarketWatch projects annualized growth of 13.7% and 13.9% for ’23-’25 and ’23-’26 (based on 28 analysts).
• Nasdaq.com projects 14.3% and 14.0% per year for ’24-’26 and ’24-’27 [11/4/1 analyst(s) for ’24/’26/’27].
• Seeking Alpha projects 4-year annualized growth of 13.2%.
• YF projects YOY 13.5% and 14.7% for ’24 and ’25, respectively (22), along with 5-year annualized growth of 14.3%.
• Zacks projects YOY 13.5% and 14.7% for ’24 and ’25 (11) along with 5-year annualized growth of 14.3%.
• Value Line projects 11.0% annualized growth from ’23-’28.
• CFRA projects 23.4% YOY, 16.8% per year, and 23.0% for ’24, ’23-’25, and a 3-year estimated CAGR, respectively.
• M* projects long-term annualized growth of 15.8%.

My 10.0% per year forecast is below the long-term-estimate range (mean of five: 13.7%). Initial value is ’23 EPS of $1.54/share rather than 2024 Q1 EPS of $1.59 (annualized).

My Forecast High P/E is 33.0. Over the past decade, high P/E ranges from 32.7 in ’19 to 56.6 in ’15 with a last-5-year mean of 38.6 and a last-5-year-mean average P/E of 33.0. I am near the bottom of the range (only ’19 is lower).

My Forecast Low P/E is 23.0. Over the past decade, low P/E ranges from 19.0 in ’20 to 37.6 in ’15 with a last-5-year average of 27.4. I am forecasting near the bottom of the range [only ’20 and ’14 (22.7) are lower].

My Low Stock Price Forecast (LSPF) of $35.40 is default based on initial value given above. This is 28.8% less than the previous closing price and 24.8% less than the 52-week low.

These inputs land MNST in the HOLD zone with a U/D ratio of 2.2. The Total Annualized Return (TAR) is 10.5%.

PAR (using Forecast Average–not High–P/E) is less than I seek for a medium-size company at 6.9%. 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 205 studies done in the past 90 days (my study along with 84 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 10.7%, 13.0%, 36.1, and 26.8. I am lower across the board. Value Line projects a future average annual P/E of 40.0 that is higher than MS (31.0) and much higher than mine (28.0).

MS high / low EPS are $2.89 / $1.58 versus my $2.48 / $1.54 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $2.60 is in the middle.

MS LSPF of $41.80 implies a Forecast Low P/E of 26.5: slightly less than the above-stated 26.8. MS LSPF is 1.3% less than default $1.58/share * 26.8 = $42.34 resulting in more conservative zoning. MS LSPF is 18.1% greater than mine, however.

With regard to valuation, PEG is 2.0 and 2.8 per Zacks and my projected P/E, respectively: a bit overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 0.95.

MOS is robust in the current study because my inputs are at or below MS and near the bottom of or below respective analyst/historical ranges. MS TAR of 15.1% is 4.6% per year greater than mine as a result.

Per U/D, MNST is a BUY under $47/share. Stock must fall to ~$41 to meet the BI TAR criterion (forecast high price ~$82).

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IPAR Stock Study (7-5-24)

I recently studied Inter Parfums Inc. (IPAR) with a closing price of $114.28.

M* writes:

     > Inter Parfums Inc operates in the fragrance business and manufactures,
     > markets, and distributes fragrances and fragrance-related products.
     > It sells its product under the brand names called JIMMY CHOO, bebe,
     > Paul Smith, Abercrombie and Fitch, COACH, and others. The company
     > operates in two operating segments namely European based operations,
     > and United-States operations. The group sells its products to
     > department stores, perfumeries, specialty stores, and domestic and
     > international wholesalers and distributors.

Over the past 10 years, this medium-size company has grown sales and EPS at annualized rates of 10.9% and 18.8%, respectively. Lines are mostly up, straight, and parallel except for a sales decline in ’15 and sales/EPS decline in ’20. I won’t exclude ’20 to avoid artificial inflation of growth rates, but 5- and 10-year R^2 of 0.74 and 0.83 could justify it.

Over the past decade, PTPM leads peer averages but trails the industry while increasing from 11.4% (’14) to 18.9% (’23) with a last-5-year mean of 16.3%. ROE trails peer and industry averages despite increasing from 7.5% (’14) to 22.0% (’23) with a last-5-year mean of 15.7%. Debt-to-Capital is much lower than peer and industry averages despite increasing from 0.1% (’14) to 21.6% (’23) with a last-5-year mean of 18.0%.

Quick Ratio is 1.3 per M* and Interest Coverage is 22.2. Value Line grades the company “A” for Financial Strength.

With regard to sales growth:

• YF projects YOY 10.3% and 8.8% for ’24 and ’25, respectively (based on 3 analysts).
• Zacks projects YOY 10.3% and 8.3% for ’24 and ’25, respectively (3 analysts).
• Value Line projects 8.2% annualized growth from ’23-’28.
• CFRA gives ACE of 10.3% YOY and 9.6% per year for ’24 and ’23-’25, respectively (3).

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

With regard to EPS growth:

• MarketWatch projects 9.7% and 9.9% per year for ’23-’25 and ’23-’26, respectively (based on 5 analysts).
• Nasdaq.com projects 11.1% YOY and 11.7% per year for ’25 and ’24-’26 [5/4/2 analyst(s) for ’24/’25/’26].
• YF projects YOY 8.4% and 11.3% for ’24 and ’25, respectively (3), along with 5-year annualized growth of 12.0%.
• Zacks projects YOY 8.4% and 11.0% for ’24 and ’25, respectively (4).
• Value Line projects 10.0% annualized growth from ’23-’28.
• CFRA gives ACE of 8.4% YOY and 9.8% per year for ’24 and ’23-’25, respectively (3).

My 7.0% per year forecast is below the long-term estimate range (average of two: 11.0%). Initial value is 2024 Q1 EPS of $4.35 (annualized) rather than ’23 EPS of $4.75/share.

My Forecast High P/E is 28.0. Over the past decade, high P/E falls from 39.7 (’14) to 33.9 (’23) with a last-5-year mean of 36.1 (excluding outlier 62.0 in ’20) and a last-5-year-mean average P/E of 29.2. I am below the entire range.

My Forecast Low P/E is 20.0. Over the past decade, low P/E falls from 26.1 (’14) to 20.2 (’23) with a last-5-year mean of 23.5 (no outlier in ’20). I am forecasting near the bottom of the range [only ’22 (17.1) and ’16 (19.0) are less].

My Low Stock Price Forecast (LSPF) of $87.00 is default based on initial value given above. This is 23.9% less than the previous low and 19.7% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 27.3% in ’20 to 60.8% in ’19 with a last-5-year mean of 46.0%. I am forecasting below the range at 27.0%.

These inputs land IPAR in the HOLD zone with a U/D ratio of 2.1. Total Annualized Return (TAR) is 9.3%.

PAR (using Forecast Average—not High—P/E) of 6.2% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 57 studies in the past 90 days (my study along with 22 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 9.5%, 11.0%, 30.0, 20.0, and 46.0%, respectively. I am lower on all but the fourth (20.0). Value Line projects a future average annual P/E of 25.0 that is equal to MS and higher than mine (24.0).

MS high / low EPS are $7.58 / $4.35 versus my $6.10 / $4.35 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $7.65 is greater than both.

MS LSPF of $93.00 implies a Forecast Low P/E of 21.4: greater than the above-stated 20.0. MS LSPF is 6.9% greater than the default $4.35/share * 20.0 = $87.00 (identical to mine) resulting in more aggressive zoning.

With regard to valuation, PEG is 3.5 (overvalued) per my projected P/E. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.88.

MOS is robust in the current study because my inputs—especially EPS growth—are at or below MS and near the bottom of or below respective analyst/historical ranges. MS TAR of 15.3% is six percentage points greater than mine.

Per U/D, IPAR is a BUY under ~$107/share. The stock needs to fall under $86 to meet the BI TAR criterion given a forecast high price ~$171.

MKTX Stock Study (7-3-24)

I recently studied MarketAxess Holdings, Inc. (MKTX) with a closing price of $193.80. Previous studies are here and here.

M* writes:

     > Founded in 2000, MarketAxess is a leading electronic fixed-income
     > trading platform that connects broker/dealers and institutional
     > investors. The company is primarily focused on credit based fixed
     > income securities with its main trading products being U.S.
     > investment-grade and high-yield bonds, Eurobonds, and Emerging
     > Market corporate debt. Recently the company has expanded more
     > aggressively into Treasuries and municipal bonds with the
     > acquisitions of LiquidityEdge and MuniBrokers in 2019 and 2021,
     > respectively. The company also provides pre- and post-trade
     > services with its acquisition of Regulatory Reporting Hub from
     > Deutsche Börse Group in 2020 adding to its product offerings.

Over the past 10 years, this small-size company has grown sales and EPS at annualized rates of 13.2% and 15.5%, respectively. Lines are mostly up, parallel, and flattening except for EPS dips in ’21 and ’22.

Over the past decade, PTPM leads peer and industry averages while recently trending lower from 45.1% in ’14 to 51.8% in ’16 to 44.2% in ’23 with a last-5-year mean of 48.7%. ROE leads peer and industry averages going from 22.5% in ’14 to 29.5% in ’19 then decreasing to 21.8% in ’23 with a last-5-year mean of 26.7%. Debt-to-Capital is much lower than peer and industry averages as the company has no debt (uncapitalized leases only): last-5-year mean is 8.2%.

Quick Ratio is 2.2 and Interest Coverage is 153. M* assigns the company a “Wide” economic moat and gives an “Exemplary” rating for Capital Allocation. Value Line gives a Financial Strength grade of A.

With regard to sales growth:

• YF projects YOY 8.6% and 10.6% for ’24 and ’25, respectively (based on 14 analysts).
• Zacks projects YOY 9.4% and 11.5% for ’24 and ’25, respectively (7 analysts).
• Value Line projects 11.3% annualized growth from ’23-’28.
• CFRA provides ACE of 8.1% YOY and 9.3% per year for ’24 and ’23-’25, respectively (13).
• M* gives a 2-year ACE of 8.3% per year and projects in analyst note “just under 9%” through ’28.

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

With regard to EPS growth:

• MarketWatch projects 11.4% and 11.6% per year for ’23-’25 and ’23-’26, respectively (based on 16 analysts).
• Nasdaq.com projects 12.7% and 11.4% per year for ’24-’26 and ’24-’27, respectively [8/3/1 analyst(s) for ’24/’26/’27].
• Seeking Alpha (SA) projects 4-year annualized growth of 3.1%.
• YF projects YOY 1.3% contraction and 13.1% growth for ’24 and ’25 along with 5-year annualized growth of 7.7% (15).
• Zacks projects YOY growth of 4.7% and 11.7% for ’24 and ’25 along with 5-year annualized growth of 5.6% (8).
• Value Line projects 10.4% annualized growth from ’23-’28.
• CFRA provides ACE growth of 2.6% YOY and 7.7% per year for ’24 and ’23-’25, respectively (11).
• M* projects long-term annualized growth of 10.1%.

My 4.0% per year forecast is near bottom of the 5-long-term-estimate range (mean 7.4%). Initial value is ’23 EPS of $6.85/share rather than 2024 Q1 EPS of $6.81 (annualized).

My Forecast High P/E is 35.0. Over the past decade, high P/E ranges from 37.4 in ’14 to 87.0 in ’21 with a last-5-year mean of 72.6. The last-5-year-mean average P/E is 54.9. I am forecasting below the range and closer to the current P/E of 28.5.

My Forecast Low P/E is 23.0. Over the past decade, low P/E ranges from 24.0 in ’14 to 50.4 in ’21 with a last-5-year mean of 37.1. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $155.00 is default based on initial value given above. This is 20.0% less than the previous closing price and 19.4% less than the 52-week low.

Over the past decade, Payout Ratio (PR) ranges from 30.6% in ’20 to 42.1% in ’22 with a last-5-year mean of 38.3%. I am forecasting below the range at 30.0%.

These inputs land MKTX in the HOLD zone with a U/D ratio of 2.7. Total Annualized Return (TAR) is 9.4%.

PAR (using Forecast Average—not High—P/E) of 5.5% 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 15 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 8.6%, 10.1%, 41.5, 29.8, and 37.7%, respectively. I am lower across the board. Value Line’s projected average P/E of 40.0 is higher than MS (35.7) and much higher than mine (29.0).

MS high / low EPS are $11.08 / $6.80 versus my $8.33 / $6.85 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS exceeds both at $11.25.

MS LSPF of $163.40 implies a Forecast Low P/E of 24.0: less than the above-stated 29.8. MS LSPF is 19.4% less than the default $6.80/share * 29.8 = $202.64 resulting in more conservative zoning. MS LSPF is 5.4% higher than mine, though.

With regard to valuation, PEG is 4.9 and 6.8 per Zacks and my projected P/E, respectively: substantially overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is substantially undervalued at 0.52.

MOS is robust in the current study. I am much lower than MS TAR of 18.9% although the small MS sample size limits importance of the comparison. My inputs are also near the bottom of or below respective analyst/historical ranges.

The SA estimate hurts stock prospects by lowering my forecast. Despite SA being so low, I don’t think my forecast is outlandish being less than 4% less than the analyst mean (and still above SA).

Per U/D, MKTX is a BUY under $191/share. The stock needs to fall to ~$146 to meet the BI TAR criterion given a forecast high price ~$292.

AKAM Stock Study (7-2-24)

I recently did a stock study on Akamai Technologies, Inc. (AKAM) with a closing price of $89.53. The previous study is here.

M* writes:

     > Akamai operates a content delivery network, or CDN, which entails
     > locating servers at the edges of networks so its customers, which
     > store content on Akamai servers, can reach their own customers
     > faster, more securely, and with better quality. Akamai has over
     > 325,000 servers distributed over 4,100 points of presence in more
     > than 1,000 cities worldwide. The firm also offers security and
     > cloud computing for its customers, and those businesses have
     > grown to be bigger than the legacy CDN.

Over the past 10 years, this medium-size company has grown sales and EPS at annualized rates of 7.7% and 11.2%, respectively. While sales have been up and straight, EPS declines in ’15, ’17, and ’22 somewhat dent the “up, straight, and parallel” appearance we all like to see.

Over the past decade, PTPM leads peers and trails the industry as it trends down from 24.4% (’14) to 17.1% (’23) with a last-5-year mean of 18.8%. ROE leads peers and trails the industry while ranging from 6.5% in ’17 to 13.8% in ’21 with a last-5-year mean of 13.0%. Debt-to-Capital is lower than peer and industry averages despite trending higher from 0% (’14) to 49.7% (’23) with a last-5-year mean of 42.4%.

Quick Ratio is 2.9 and Interest Coverage is 33.7. M* gives an Exemplary rating for Capital Allocation and Value Line gives an A grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 4.7% and 7.4% for ’24 and ’25, respectively (based on 22 analysts).
• Zacks projects YOY 4.6% and 7.5% for ’24 and ’25, respectively (7 analysts).
• Value Line projects 3.4% annualized growth from ’23-’28.
• CFRA projects 4.5% YOY and 6.5% per year for ’24 and ’23-’25, respectively.
• M* gives a 2-year ACE of 6.6% per year along with a 5-year annualized projection of 8.0% (analyst note).

I am forecasting near the bottom of the range at 4.0%.

With regard to EPS growth:

• MarketWatch projects 9.7% and 9.2% per year for ’23-’25 and ’23-’26, respectively (based on 24 analysts).
• Nasdaq.com projects 3.1% YOY and 5.3% per year for ’25 and ’24-’26 (8, 8, and 3 analysts for ’24, ’25, and ’26).
• Seeking Alpha projects 4-year annualized growth of 7.8%.
• YF projects YOY 1.8% and 7.1% for ’24 and ’25, respectively, along with 5-year annualized growth of 6.6% (21).
• Zacks projects YOY 1.5% contraction for ’24 and 6.6% growth for ’25 along with 5-year annualized growth of 4.8% (8).
• Value Line projects 7.5% annualized growth from ’23-’28.
• CFRA projects growth of 2.9% YOY and 6.0% per year for ’24 and ’23-’25 along with a 3-year CAGR of 7.0%.
• M* projects long-term annualized growth of 12.1%.

My 5.0% forecast is near the bottom of the 5-long-term-estimate range (mean 7.8% per year). Initial value is ’23 EPS of $3.52 rather than 2024 Q1 EPS of $4.02/share (annualized).

My Forecast High P/E is 30.0. Over the past decade, high P/E ranges from 31.8 in ’21 to 56.9 in ’17 with a last-5-year mean of 34.3 and a last-5-year-mean average P/E of 28.1. I am forecasting below the high P/E range.

My Forecast Low P/E is 20.0. Over the past decade, low P/E ranges from 19.7 in ’19 to 35.4 in ’17 with a last-5-year mean of 21.8. I am forecasting near the bottom of the range (only ’19 is less).

My Low Stock Price Forecast (LSPF) of $70.40 is default based on initial value given above. This is 21.4% less than the previous closing price, 19.6% less than the 52-week low, and 0.4% less than the 2023 low.

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

PAR (using Forecast Average—not High—P/E) is less than I seek for a medium-size company at 4.6%. 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 27 studies (my study and 7 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 5.8%, 6.7%, 32.8, and 21.8, respectively. I am lower across the board. Value Line’s projected average annual P/E of 34.0 is greater than MS (27.3) and greater than mine (25.0).

MS high / low EPS are $5.25 / $3.53 versus my $4.49 / $3.52 (per share). My high EPS is less due to a lower growth rate. Value Line is in the middle at $5.05/share.

MS LSPF of $77.00 implies a Forecast Low P/E of 21.8: a perfect match. MS LSPF is 9.4% greater than mine resulting in more aggressive zoning.

With regard to valuation, PEG is 3.0 and 4.2 per Zacks and my projected P/E: both substantially overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is a bit low at 0.8.

MOS in this study is robust despite a small MS sample size for comparison. Not only is my TAR (over 15.0% preferred) much less than MS 13.2%, my forecast growth rates and P/E range are near or below analyst estimate ranges.

U/D has AKAM a BUY under $86/share. The stock needs to approach $68 in order to meet the BI TAR criterion given a forecast high price ~$135.

WAL Stock Study (7-1-24)

I recently did Western Alliance Bancorp (WAL) with a closing price of $62.82. Previous studies are here, here, and here.

M* writes:

     > Western Alliance Bancorporation is a Las Vegas-based holding company
     > with regional banks operating in Nevada, Arizona, and California. The bank
     > offers retail banking services and focuses on mortgages for retail
     > customers and commercial loans. The company’s reportable segments are
     > Commercial segment includes provides commercial banking and treasury
     > management products and services to small and middle-market businesses,
     > specialized banking services to sophisticated commercial institutions and
     > investors within niche industries, as well as financial services to the
     > real estate industry. Consumer Related segment offers both commercial
     > banking services to enterprises in consumer-related sectors and consumer
     > banking services, such as residential mortgage banking. Corporate & Other.

Over the past 10 years, this medium-size company has grown sales and EPS at annualized rates of 21.1% and 20.6%, respectively. Lines are mostly up, straight, and parallel except for ’23 declines in sales and total assets.

Over the past decade, PTPM leads peer and industry averages despite falling from 48.2% (’14) to 43.9% (’23) with a last-5-year mean of 53.9%. ROE leads peer and industry averages despite falling from 17.4% (’14) to 13.1% (’23) with a last-5-year mean of 17.8%. Debt-to-Capital is lower than peer and industry averages despite increasing from 30.1% (’14) to 57.2% (’23) with a last-5-year mean of 33.8%.

Value Line rates the company B+ for Financial Strength.

ROAA increases from 1.36% in ’13 to 1.69% in ’22 before falling to 1.36% and 1.02% in the last two years (each a subsequent 10-year low). ROAA is one of several metrics that fall in ’23 as a series of bank failures rock the industry.

With regard to sales growth:

• YF projects YOY 16.2% and 10.4% for ’24 and ’25, respectively (based on 12 analysts).
• Zacks projects YOY 15.0% and 11.2% for ’24 and ’25, respectively (4 analysts).
• CFRA projects 16.2% YOY and 13.2% per year for ’24 and ’23-’25, respectively (12).
• M* gives an ACE of 26.0% per year for the next two years.

I am forecasting below the range at 10.0% per year.

With regard to EPS growth:

• MarketWatch projects 14.9% and 17.9% per year for ’23-’25 and ’23-’26, respectively (based on 18 analysts).
• Nasdaq.com projects 23.0% YOY and 15.4% per year for ’25 and ’24-’26 [9 / 9 / 1 analyst(s) for ’24 / ’25 / ’26].
• Seeking Alpha projects 4-year annualized growth of 9.6%.
• YF projects YOY 6.9% contraction and 22.1% growth for ’24 and ’25 (13) along with 5-year annualized growth of 7.1%.
• Zacks projects YOY growth of 4.2% and 22.6% for ’24 and ’25 (9) along with 5-year annualized growth of 7.1%.
• Value Line provides ACE of 7.1% annualized growth for the next 5 years (9).
• CFRA projects growth of 13.9% YOY and 18.2% per year for ’24 and ’23-’25, respectively (16).

My forecast of 5.0% per year is below the long-term estimate range. Mean of four estimates is 7.7% but I am skeptical of data duplication (lighter analyst coverage than four data sources suggest) because three are exact matches. Initial value is 2023 EPS of $6.54 (down 32.6% YOY) rather than 2024 Q1 EPS of $6.86/share (annualized).

My Forecast High P/E is 10.0. Over the past decade, high P/E ranges from 11.9 in ’19 to 20.3 in ’16 with a last-5-year mean of 12.7 and a last-5-year-mean average P/E of 8.9. I am below the entire 10-year high P/E range.

My Forecast Low P/E is 5.0. Over the past decade, low P/E falls from 12.2 (’14) to 1.1 (’23) with a last-5-year mean of 5.1. I am forecasting toward the lower end of the range [only ’23 (outlier) and ’20 (4.1) are lower].

My Low Stock Price Forecast (LSPF) is $43.00. Default based on initial value given above seems unreasonably low (47.9% less than previous close). My LSPF (arbitrary) is 31.6% less than the previous low and 20.5% greater than 52-week low.

WAL commences dividend in 2019 with a last-5-year mean Payout Ratio (PR) of 16.2%. My 9.0% forecast is below the range.

These inputs land WAL in the HOLD zone with a U/D ratio of 1.0. Total Annualized Return (TAR) is 6.7%.

PAR (using Forecast Average—not High—P/E) of 1.1% is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 75 studies done in the past 90 days (my study along with 38 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 13.4%, 11.9%, 11.4, 5.1, and 15.3%, respectively. I am lower across the board. Value Line projects a 2025 [versus 2028] average annual P/E of 6.7 that is less than MS (8.3) and myself (7.5).

MS high / low EPS are $12.09 / $6.86 versus my $8.35 / $6.54 (per share). My high EPS is less due to a lower growth rate. Value Line’s ACE high EPS ~$9.20 is in the middle.

MS LSPF of $35.00 implies a Forecast Low P/E of 5.1: a perfect match. MS LSPF is 18.6% less than mine resulting in more conservative zoning.

With regard to valuation, PEG is 1.2 and 1.7 per Zacks and my projected P/E, respectively: the latter slightly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly elevated at 1.02.

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 19.8% is much higher than mine.

Western Alliance has survived the 2023 industry turbulence and bounced back from fire sale stock valuations. Those [of us: full disclosure] who bought with “blood in the streets” may consider selling now that valuation has normalized. My hesitation is the forecast double-digit sales growth and my sub-trendline initial value. If the latter normalizes, then next year’s First Cut should make for a more interesting read.

Per U/D, WAL is a BUY under ~$53/share. The stock needs to fall under $42 to meet the BI TAR criterion given a forecast high price of $83.50.

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.