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G Stock Study (8-14-23)

Posted by on September 22, 2023 at 06:46 | Last modified: August 14, 2023 15:09

I recently did a stock study on Genpact Ltd. (G) with a closing price of $37.18. The original study is here.

M* writes:

     > Genpact Ltd is a provider of business process management
     > services. Clients are industry verticals and operate in banking and
     > financial services, insurance, capital markets, consumer product
     > goods, life sciences, infrastructure, manufacturing and services,
     > healthcare, and high-tech. Genpact’s services include aftermarket,
     > procurement, risk and compliance, human resources, IT, industrial
     > direct solutions, collections, finance and accounting, and media
     > services. Genpact’s end market by revenue is India. The company
     > is a General Electric spin-off, which is still a large source of
     > revenue for Genpact.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 8.5% and 8.9%, respectively. Lines are most up, straight, and parallel except for EPS dips in ’14 and ’22. PTPM leads peer and industry averages despite falling from 14.4% in ’13 to 10.6% in ’22 with a last-5-year mean of 11.4%.

Also over the past decade, ROE slightly trails the industry while beating peer averages by ranging from 14.9% in ’14 to 21.4% in ’18 with a last-5-year mean of 18.9%. Debt-to-Capital is lower than industry averages and about even with peers despite climbing from 33.4% in ’13 to 48.2% in ’22 with a last-5-year mean of 50.3%.

Quick Ratio is 1.6 and Interest Coverage is 9.5. Value Line rates the company B++ for Financial Strength and CFRA describes the balance sheet as “clean, with a low net debt-to-EBITDA ratio of 1.4x on a TTM basis.”

With regard to sales growth:

I am forecasting just below the long-term estimate at 7.0% per year.

With regard to EPS growth:

I am forecasting below the long-term-estimate range (mean of five: 10.1%) at 8.0% per year. My initial value is ’22 EPS of $1.88/share rather than 2023 Q2 EPS of $2.19 (annualized).

My Forecast High P/E is 22.0. Over the past decade, high P/E has trended up from 22.0 in ’13 to 28.8 in ’20 with a last-5-year mean of 27.7. The last-5-year-mean average P/E is 23.1. I am forecasting conservatively at the bottom of the range.

My Forecast Low P/E is 15.0. Over the past decade, low P/E has trended up from 15.8 in ’13 to 20.0 in ’21/’22 with a last-5-year average of 18.6 (downside outlier 12.4 in ’20 excluded). I am forecasting conservatively below the range.

My Low Stock Price Forecast (LSPF) of $28.20 is default based on $1.88/share initial value. This is 24.2% less than the previous closing price and 20.1% less than the 52-week low.

Since dividend payment was instituted, Payout Ratio has increased from 17.9% in ’17 to 26.6% in ’22 with a last-5-year average of 23.3%. I am forecasting near the bottom of the range at 18.0%.

These inputs land G in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 11.1%.

PAR (using Forecast Average—not High—P/E) is 7.5%, which is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the total annualized return (TAR) of 11.1% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 48 studies (my study and 15 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 Payout Ratio are 8.1%, 9.8%, 25.0, 16.8, and 22.2%. I am lower across the board. Value Line’s projected average annual P/E of 17.0 is lower than MS (20.9) and mine (18.5).

MS high / low EPS are $3.07 / $1.89 vs. my $2.76 / $1.88 (per share). My high EPS is lower due to a lower EPS growth rate.

MS LSPF of $31.30 implies a Forecast Low P/E of 16.6, which is very close to the above-stated 16.8. Being 11.0% greater than mine, this is relatively aggressive zoning.

My TAR (over 15.0% preferred) is less than the 16.8% from MS.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG is 1.3 and 2.0 per Zacks and my projected P/E, respectively; the latter is overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.74. Kim Butcher’s “quick and dirty DCF” prices the stock at 14.0 * [$6.00 – ($0.95 + $0.85)] = $58.80, which suggests the stock as undervalued by 37.0%.

Although the stock is a BUY under $36/share, I would look to re-evaluate closer to $30/share in hopes of qualifying TAR.

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TGT Stock Study (7-18-23)

Posted by on September 21, 2023 at 07:06 | Last modified: July 18, 2023 14:45

I recently did a stock study on Target Corp. (TGT) with a closing price of $130.01. Previous studies are here and here.

CFRA writes:

     > Incorporated in 1902 and headquartered in Minneapolis, Target
     > Corporation is one of the largest retailers in the U.S. As of
     > January 29, 2022, the company operated 1,926 Target locations
     > in the U.S. with 243.3 million square feet of floor space, up
     > from 1,897 stores with 241.6 million square feet of floor
     > space twelve months earlier. Target currently has stores in
     > all 50 states and the District of Columbia. Its stores
     > generally cater to middle- and upper-income consumers,
     > carrying a broad assortment of fashion apparel, electronics,
     > home furnishings, household products, and other general
     > merchandise. Target.com offers a more extensive selection of
     > merchandise than the company’s physical stores, including
     > exclusive online products.

Over the past decade, this mega-sized company (revenue > $50B) has grown sales and earnings at annualized rates of 4.9% and 11.9%, respectively. Lines are mostly up except for dips in sales (’16) and EPS (’16 and ’22). PTPM leads peer and industry averages throughout the decade despite a disappointing ’22 contributing to a last-5-year mean of 5.5%.

Also over the past decade, ROE leads peer and industry averages by increasing from 12.0% (’13) to 25.0% (’22) and posting a last 5-year mean of 31.9%. Debt-to-Capital is higher than peer and industry averages, increasing from 45.9% (’13) to 62.9% (’22) with a last-5-year mean of 55.7%. Quick Ratio is chronically low (0.07 in the last quarter), but Interest Coverage is 7.6. Value Line gives a B++ rating for Financial Strength while M* assigns an Exemplary rating for Capital Allocation.

With regard to the EPS dip [crash: down 57.6% YOY] in ’22, Value Line wrote:

     > Followers of this story will recall that the bottom line last year
     > was torpedoed when management announced a serious inventory
     > bloat would be worked down by across-the-board discounting.
     > Shortly thereafter, a clearance run event was held to get
     > shoppers to spend at the tail end of the holiday season, thus
     > again clearing inventory space for items geared toward warmer
     > weather. The end result was a sharp drop in profitability and
     > a full-year earnings figure of just $5.98 a share.

With regard to sales growth:

I am forecasting conservatively at 1.0% per year.

With regard to EPS growth:

I get suspicious when I see a big YOY change accompanied by diametrically-opposed estimates. The opposing long-term estimates here are -7.5% and -0.6% vs. 24.5% and 21.1%. I assume the time frames to be identical, but what if they’re not? I go into detail about this at the second link above.

Given the high degree of uncertainty (two negative long-term estimates), I am forecasting conservatively by more than halving the 6-long-term-estimate mean to 4.0% per year. I will use the 2022 trendline of $9.52/share as the initial value since ’22 EPS is unusually low (see discussion above).

My Forecast High P/E is 15.0. Over the past decade, high P/E has ranged from 14.8 (’17) to 42.6 (upside outlier in ’22) with a last-5-year mean (excluding the outlier) of 19.8. The last-5-year-mean average P/E is 15.4. I am forecasting near the bottom of the range (only ’17 is lower).

My Forecast Low P/E is 10.5. Over the past decade, low P/E has ranged from 9.1 (’17) to 22.9 (’22). Low P/E has been less than 14.2 in every year since ’14, which makes the 22.9 somewhat of an upside outlier. Excluding that, the last-5-year mean is 11.0. I am forecasting near the low end of the range [only ’17 and ’20 (10.4) are lower].

My Low Stock Price Forecast (LSPF) is the default based on $9.52/share initial value. This is 23.1% less than the previous close and 20.1% less than the 52-week low.

Over the last 10 years, Payout Ratio has ranged from 22.4% (’21) to 66.2% (’22). The last-5-year mean is 41.3%. I am forecasting conservatively at 22.0%.

These inputs land TGT in the HOLD zone with a U/D ratio of 1.5. Total Annualized Return (TAR) is 7.4%.

PAR (using Forecast Average—not High—P/E) of 4.3% 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 131 studies over the past 90 days (my study and 48 other outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 3.9%, 10.1%, 19.5, 11.5, and 41.3%, respectively. I am lower across the board. Value Line projects an average annual P/E of 15.0, which is lower than MS (15.5) and higher than mine (12.8).

MS high/low EPS is $10.32/$5.87 vs. my $11.58/$9.52 (per share). Many MS studies use ’22 for low EPS, which I think is unreasonable since the well-documented inventory issues color this as a nonrecurring event. This skews the entire MS EPS range lower (e.g. Value Line and M* have projected high EPS of $17.90/share and $15.57/share).

MS LSPF of $82.20 implies a Forecast Low P/E of 14.0 vs. the above-stated 11.5. MS LSPF is 21.8% greater than the default value of $5.87/share * 11.5 = $67.51, which results in much more aggressive zoning. MS LSPF is 17.8% less than mine, however. MS LSPF is a level not seen since 2019 while the default value has not been seen since 2018. The 21.8% discrepancy is much larger than usual. Further evidence of chaos?

Although tempting, I can’t quite reject MS outright and call MOS healthy in the current study. I would call it moderate.

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two metrics I have recently begun to monitor. PEG is 1.03 (Zacks) while Relative Value is 1.44 (M*). The latter is suggestive of an overvalued stock, but I would argue 1.44 to be artificially high due to ’22 EPS.

I am also starting to familiarize myself with Kim Butcher’s “quick and dirty DCF.” According to this method, the stock should be valued at 10 * [$24.55 – ($0.00 + $6.40)] = $181.50 (i.e. stock undervalued by 28.0%).

I would look to re-evaluate TGT under $118/share.

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ULTA Stock Study (7-18-23)

Posted by on September 19, 2023 at 06:21 | Last modified: July 18, 2023 14:03

I recently did a stock study on Ulta Beauty, Inc. (ULTA) with a closing price of $472.72. The original study is here.

M* writes:

     > With roughly 1,350 stores and a partnership with narrow-moat
     > Target, Ulta Beauty is the largest specialized beauty retailer
     > in the U.S. The firm offers makeup (43% of 2021 sales),
     > fragrances, skin care, and hair care products (20% of 2021
     > sales), and bath and body items. Ulta offers private-label
     > products and merchandise from more than 500 vendors. It also
     > offers salon services, including hair, makeup, skin, and brow
     > services, in all stores. Most Ulta stores are approximately
     > 10,000 square feet and are in suburban strip centers.

Over the past decade, this large-size company has grown sales and earnings at annualized rates of 14.7% and 18.9%, respectively. Lines are mostly up, straight, and parallel except for a sales/EPS dip in ’20. PTPM leads peer and industry averages by increasing from 12.3% to 16.1% with a last-5-year mean (excluding ’20, which was a downside outlier) of 14.0%.

Also over the past decade, ROE leads peer and industry averages by increasing from 21.8% to 62.9% with a last-5-year mean (excluding ’20, which was a downside outlier) of 45.8%. Debt-to-Capital is less than peer and industry averages. The company has no long-term debt, but the last-5-year mean is 40.6% (uncapitalized leases).

Current Ratio is 1.64 and Quick Ratio is 0.51. M* rates the company Exemplary for Capital Allocation, and Value Line gives an A rating for Financial Strength.

With regard to sales growth:

I am forecasting conservatively below the range at 5.0%.

With regard to EPS growth:

I am forecasting near the bottom of the long-term-estimate range (mean of six: 10.2%) at 6.0%. I will use ’23 EPS of $24.01/share as the initial value rather than ’24 Q1 EPS of $24.60 (annualized).

My Forecast High P/E is 21.0. Over the past decade, high P/E has trended down from 42.1 in ’13 to 21.4 in ’22 with a last-5-year mean of 26.2 (excluding 99.8 upside outlier in ’20). The last-5-year-mean average P/E is 21.3. I am forecasting below the entire range.

My Forecast Low P/E is 14.0. Over the past decade, low P/E has trended down from 23.0 in ’13 to 13.8 in ’22. The last-5-year mean (excluding 39.9 upside outlier in ’20) is 16.3. I am forecasting near the bottom of the range (only ’22 is lower).

My Low Stock Price Forecast (LSPF) is the default $336.10 based on $24.01/share initial value. This is 28.9% less than the last closing price and 6.8% less than the 52-week low.

These inputs land ULTA in the HOLD zone with a U/D ratio of 1.5. Total Annualized Return (TAR) is 7.4%.

PAR (using Forecast Average—not High—P/E) of 3.5% 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 451 studies over the past 90 days (my study and 75 outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 9.0%, 9.7%, 26.2, and 18.1, respectively. I am lower across the board. Value Line projects a future average annual P/E of 21.0, which is lower than MS (22.2) and higher than mine (17.5).

MS high/low EPS is $38.14/$18.93 vs. my $32.13/$24.01 (per share). 91 studies used low EPS under $10.00/share. Except for ’20 at $3.11, the company hasn’t seen earnings that low since 2017 (at $8.96/share, and 70 studies used a number less than that). I would argue these to be unreasonably low. As for high EPS, mine is lower due to a lower EPS growth rate.

MS LSPF of $304.90 implies a Forecast Low P/E of 16.1 vs. the above-stated 18.1. MS LSPF is 12.4% less than the default value of $18.93/share * 18.1 = $342.63, which results in more conservative zoning. MS LSPF is also 9.3% less than mine.

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two metrics I have recently begun to monitor. PEG is 1.54 (Zacks) while Relative Value is 0.90 (M*). These suggest the stock to be overvalued and undervalued, respectively.

I am also starting to familiarize myself with Kim Butcher’s “quick and dirty DCF.” According to this method, the stock should be priced at 17 * [$38.50 – ($0.00 + $0.00)] = $654.50 (i.e. stock undervalued by 28.0%).

I would look to re-evaluate ULTA under $420/share.

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RMD Stock Study (8-9-23)

Posted by on September 16, 2023 at 06:17 | Last modified: August 9, 2023 15:42

I recently did a stock study on ResMed Inc. (RMD) with a closing price of $179.27.

M* writes:

     > ResMed is one of the largest respiratory care device companies
     > globally, primarily developing and supplying flow generators,
     > masks and accessories for the treatment of sleep apnea.
     > Increasing diagnosis of sleep apnea combined with ageing
     > populations and increasing prevalence of obesity is resulting
     > in a structurally growing market. The company earns roughly
     > two thirds of its revenue in the Americas and the balance
     > across other regions dominated by Europe, Japan and Australia.
     > Recent developments and acquisitions have focused on digital
     > health as ResMed is aiming to differentiate itself through
     > the provision of clinical data for use by the patient,
     > medical care advisor and payer in the out-of-hospital setting.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 11.7% and 10.9%, respectively. Lines are mostly up, straight, and parallel except for rockiness in EPS (dips in ’17, ’18, and ’21). PTPM leads peer and industry averages while ranging from 19.9% in ’19 to 27.7% in ’14 with a last-5-year mean of 25.0%.

Also over the past decade, ROE leads peer and industry averages while ranging from 15.1% in ’18 to 27.4% in ’20 with a last-5-year mean of 22.2%. Debt-to-Capital is lower than the industry and roughly even with peers while increasing from 14.6% in ’14 to 27.7% in ’23 with a last-5-year mean of 28.6%.

Value Line rates the company A for Financial Strength and M* rates them “Exemplary” for Capital Allocation. Quick Ratio is 1.2.

With regard to sales growth:

I am forecasting near the bottom of the range at 7.0% per year.

With regard to EPS growth:

FY ends Jun 30, which creates some labeling conflict between data sources.

I am forecasting below the long-term estimate range [mean of six: 12.2%] at 9.0% per year. I will use ’23 EPS of $6.09/share as the initial value.

My Forecast High P/E is 30.0. Over the past decade, high P/E has trended up from 24.0 in ’14 to 40.7 in ’23 with a last-5-year mean of 52.7. The last-5-year-mean average P/E is 44.1. I am forecasting near the bottom of the range [only ’14 and ’16 (25.8) are lower].

My Forecast Low P/E is 23.0. Over the past decade, low P/E has trended up from 17.4 in ’14 to 33.2 in ’23 with a last-5-year mean of 35.6. My forecast would be the lowest value since 2016.

My Low Stock Price Forecast (LSPF) of $140.10 is default based on $6.09/share initial value. This is 21.8% less than the previous closing price and 21.4% less than the 52-week low.

Over the past decade, Payout Ratio decreases from 41.8% in ’14 to 28.9% in ’23 with a last-5-year mean of 39.6%. I am forecasting below the range at 28.0%.

These inputs land RMD in the HOLD zone with a U/D ratio of 2.0. Total Annualized Return (TAR) is 9.5%.

PAR (using Forecast Average—not High—P/E) is 6.9%, which is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 159 studies done in the past 90 days (my study along with 48 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 10.0%, 10.0%, 40.0, 28.7, and 44.4%. I am lower across the board. Value Line’s future average annual P/E of 36.0 is higher than both MS (34.4) and mine (26.5).

MS high / low EPS are $9.30 / $4.90 vs. my $9.37 / $6.09 (per share). $4.90/share is less than both ’23 and ’22 EPS, which seems unreasonable to me. The median is $5.87, though. At $4.90/share, my EPS range is decisively higher, which somewhat offsets my lower P/E range. At $5.87, my EPS range is just a tinge higher and hardly worth mentioning.

MS LSPF of $152.80 implies a Forecast Low P/E of 31.2 vs. the above-stated 28.7. MS LSPF is 8.7% greater than the default $4.90/share * 28.7 = $140.63, which results in more aggressive zoning [at $5.87/share, MS LSPF is less than default thereby making for less aggressive zoning]. MS LSPF remains 9.1% greater than mine.

My TAR (over 15.0% preferred) is less than the 13.3% from MS.

MOS backing the current study seems robust.

I track a few different valuation metrics. PEG is 2.8 and 3.1 per Zacks and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is undervalued at 0.69. Kim Butcher’s “quick and dirty DCF” prices the stock at 30.0 * [$11.15 – ($2.40 + $1.00)] = $232.50 thereby suggesting the stock to be undervalued by 23.0%

I would look to re-evaluate RMD under $175/share to see if TAR qualifies.

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AL Stock Study (7-17-23)

Posted by on September 15, 2023 at 06:24 | Last modified: July 17, 2023 13:20

I recently did a stock study on Air Lease Corp. (AL) with a closing price of $42.45. The original study is here.

Value Line writes:

     > Air Lease Corp. engages in the purchase and leasing of
     > commercial jet transport aircraft to airlines worldwide.
     > It sells aircraft from its operating lease portfolio to
     > third parties, including other leasing companies,
     > financial services companies, and airlines.

Over the past decade, this medium-size company has grown sales 11.1% per year. Earnings have grown 11.3% per year from ’13-’21. The company posts a loss of $1.24/share in ’22 due to aircraft in Russia. From the 2022 10-K:

     > In response to the sanctions, in March 2022 we terminated
     > all of our leasing activities in Russia, consisting of 24
     > aircraft in our owned fleet, eight aircraft in our managed
     > fleet and the leasing activity relating to 29 aircraft that
     > that had not yet delivered from our orderbook, all of which
     > have been subsequently placed. In the first quarter of
     > 2022, we also canceled five aircraft in our orderbook that
     > were slated for delivery in Russia.
     >
     > While we or the respective managed platform maintain title
     > to the aircraft, we determined that it is unlikely we or
     > they will regain possession of the aircraft that are
     > detained in Russia. As a result, we recorded a write-off of
     > our interests in our owned and managed aircraft that are
     > detained in Russia, totaling approximately $802.4 million
     > for the three months ended March 31, 2022. The 21 aircraft
     > that remained in Russia were removed from our fleet as of
     > March 31, 2022.

Sans write-off, I calculate ’22 earnings at $5.67/share rather than -$1.24. For purposes of 5-year projections below, I will lean conservatively and discount by just over 20% to get $4.50/share as my initial value.

Excluding ’22, sales are up and mostly straight while earnings peak in ’19 (excluding ’17 when EPS spikes ~100% due to TCJA). PTPM is higher than peer and industry averages by increasing from 34.2% in ’13 to 40.9% in ’16 before heading down to 25.9% in ’21 for a last-5-year mean (excluding ’22) of 33.2%.

ROE goes from 7.5% in ’13 to 11.4% in ’18 (’17 excluded due to TCJA) before falling to 6.2% in ’21 for a last-5-year mean (excluding ’22) of 9.1%. This is slightly better than peer averages and mostly lower than the industry.

Debt-to-Capital averages 71.8% over the last five years, which is lower than peer and industry averages but still uncomfortably high. M* lists Interest Coverage as 12.7 and Quick Ratio as 0.83. FCF has been negative since at least ’20.

Despite the red flags, M Ramirez writes in this SA article:

     > The main negative point for the market is that Air Lease is
     > a finance company and as such needs a lot of debt to operate
     > on a large scale with the assets it holds. Leverage is
     > currently high (about 2.5 debt/equity), although in no case
     > is the amount of debt greater than the total value of the
     > company’s assets… although a priori the debt seems exorbitant,
     > the company finances more than 95% of the debt at a fixed rate
     > (…close to 3%), which, together with the high predictability
     > of its cash flows, makes it practically impossible for the
     > company to go bankrupt. The company could stop aircraft
     > purchases for 5 years and with the cash flows repay half of
     > the debt without increasing rents to the lessees.

With regard to sales growth:

I am extrapolating out to five years with a forecast lower than the entire range at 12.0%.

With regard to EPS growth:

I am forecasting 14.0% growth—below the long-term-estimate range (mean of four: 17.2%)—and using $4.50/share in ’22 as mentioned above. This results in high EPS of $8.66/share.

In order to project from ’22 on the website, I need to override to the trendline at $0.30 with a 96.0% growth rate to end up at $8.63/share.

My Forecast High P/E is 8.0. From ’13-’21, high P/E ranges from 7.2 (’17) to 18.6 (’13) with a last-5-year mean of 11.7. The last-5-year-mean average P/E is 9.5. I am forecasting near the bottom of the range (only ’17 is lower).

My Forecast Low P/E is 6.0. From ’13-’21, low P/E ranges from 5.0 in ’17 to 14.6 in ’14 with a last-5-year mean of 7.4. I am forecasting near the bottom of the range.

My Low Stock Price Forecast (LSPF) is the default $27.00 based on $4.50/share initial value. This is 36.4% less than the previous close and 9.4% less than the 2022 low.

Over the past decade, Payout Ratio has ranged from 4.8% (’17) to 18.6% (’21) with a last-5-year mean of 13.1% (2022 NMF excluded). I am forecasting conservatively at 5.0%.

These inputs land AL in the HOLD zone with a U/D ratio of 1.7. Total Annualized Return (TAR) is 10.8%.

PAR (using Forecast Average—not High—P/E) of 8.0% 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 185 studies over the past 90 days (my study and 80 outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 11.1%, 11.1%, 11.0, 6.0, and 9.0%, respectively. I am only lower on Forecast High P/E, but I’m using the EPS workaround as described above.

MS high/low EPS is $6.96/$3.96 vs. my $8.63/$4.50 (per share). As evidenced by MS mean EPS growth of 32.3%, others have also dealt with significant confusion in figuring out how to deal with negative EPS in ’22. This obscures my ability to determine MOS because MS data are highly scattered.

MS LSPF of $26.20 implies a Forecast Low P/E of 6.6 vs. the above-stated 6.0. MS LSPF is 10.3% greater than the default value of $3.96/share * 6.0 = $23.76, which results in more aggressive zoning. MS LSPF is 3.0% less than mine, however [a rare occurrence].

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two valuation metrics I have recently begun to monitor. PEG is 0.64 per Zacks while Relative Value is 1.08 per M* data. These suggest the stock to be undervalued and overvalued, respectively.

I would look to re-evaluate AL under $37/share.

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NICE Stock Study (7-13-23)

Posted by on September 13, 2023 at 07:04 | Last modified: July 13, 2023 10:48

I recently did a stock study on Nice Ltd. ADR (NICE) with a closing price of $206.28.

M* writes:

     > Nice is an enterprise software company that serves the customer
     > engagement and financial crime and compliance markets. The company
     > provides data analytics-based solutions through both a cloud
     > platform and on-premises infrastructure. Within customer
     > engagement, Nice’s CXone platform delivers solutions focused on
     > contact center software and workforce engagement management,
     > or WEM. Contact center offerings include solutions for digital
     > self-service, customer journey and experience optimization, and
     > compliance. WEM products optimize call center efficiency,
     > leveraging data and AI analytics for call volume forecasting and
     > agent scheduling. Within financial crime and compliance, Nice
     > offers risk and investigation management, fraud prevention,
     > anti-money laundering, and compliance solutions.

Over the past decade, this medium-size company has grown sales and EPS at 10.3% and 12.9% per year, respectively. Lines are mostly up, straight, and parallel except for sales dip in ’15 and EPS dip in ’16. PTPM leads peer and industry averages while trending up from 8.8% in ’13 to 15.8% in ’22 with a last-5-year mean of 14.1%.

Also over the past decade, ROE leads peer and industry averages while trending up from 4.4% in ’13 to 8.7% in ’22 with a last-5-year mean of 7.9%. Debt-to-Capital is much lower than peer and industry averages with a last-5-year mean of 21.6%.

Quick Ratio is 1.8 and Interest Coverage is 21.8. Value Line assigns an A rating for Financial Strength while M* rates the company Exemplary for Capital Allocation.

With regard to sales growth:

I am forecasting conservatively below the range at 8.0%.

With regard to EPS growth:

I am forecasting conservatively below the long-term-estimate range (mean of six: 13.0%) at 11.0% and using 2022 EPS of $3.96/share as the initial value rather than ’23 Q1 $4.28 (annualized).

My Forecast High P/E is 40.0. Over the past decade, high P/E has ranged from 29.9 in ’15 to 107.3 in ’21 with a last-5-year mean of 76.8 (last-10-year median is 47.5). The last-5-year-mean average P/E is 60.3. The most recent three years all seem extreme (96.9, 107.3, 76.5). The last-10-year mean excluding these is 40.8. I am forecasting just below the latter.

My Forecast Low P/E is 34.0. Over the past decade, low P/E has ranged from 20.9 in ’15 to 41.2 in ’22 (excluding 70.9 in ’21). The last-5-year mean (outlier excluded) is 36.9 and the last-10-year median is 34.6. I am forecasting below the latter.

My Low Stock Price Forecast (LSPF) is the default $134.60 based on $3.96/share initial value. This is 34.7% less than the previous close and 18.3% less than the 52-week (and 2022) low.

Payout Ratio decreases from 53.9% in ’13 to zero in ’18 where it has remained ever since. I will not forecast a dividend until reason is given to do otherwise [interesting that while MS (see below) has a median value of zero, the mean is 6.2% as 18 studies have values of 6.2% or greater].

These inputs land NICE in the HOLD zone with a U/D ratio of 1.1. Total Annualized Return (TAR) is 6.3%.

PAR (using Forecast Average—not High—P/E) of 4.7% is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 46 studies over the past 90 days (my study and 18 outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 10.2%, 11.9%, 50.0, and 33.5, respectively. I am lower on all except the latter (34.0). Value Line projects an average annual P/E of 23.5, which is much lower than MS (41.8) and mine (37.0).

MS high/low EPS is $7.25/$4.05 vs. my $6.74/$3.96 (per share). My high EPS is lower due to a lower growth rate. Value Line has a projected high EPS of $15.25, which is almost double that of MS. This more than offsets the lower average annual P/E.

MS LSPF of $141.90 implies a Forecast Low P/E of 35.0 vs. the above-stated 33.5. MS LSPF is 4.6% greater than the default value of $4.05/share * 33.5 = $135.68, which results in more aggressive zoning. MS LSPF remains 5.4% greater than mine.

Despite the small MS sample size, I think MOS in the current study is moderate.

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two valuation metrics I have recently begun to monitor. PEG is 1.90 per Zacks while Relative Value is 0.77 per M* data. These suggest the stock to be overvalued and undervalued, respectively.

I am also starting to familiarize myself with Kim Butcher’s “quick and dirty DCF.” According to this method, the stock should be valued at 21 * [$18.65 – ($0.00 + $0.95)] = $371.70 (i.e. stock overvalued by 45.0%).

I would look to re-evaluate NICE under $168/share.

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NAPA Stock Study (7-12-23)

Posted by on September 11, 2023 at 06:28 | Last modified: July 12, 2023 09:59

I recently did a stock study on Duckhorn Portfolio Inc. (NAPA) with a closing price of $12.59.

Value Line writes:

     > The Duckhorn Portfolio, Inc. produces and sells wines in North America.
     > It offers wines under a portfolio of brands, including Duckhorn
     > Vineyards, Decoy, Goldeneye, Paraduxx, Migration, Canvasback, Calera,
     > Kosta Browne, Greenwing, and Postmark. The company sells wines to
     > distributors, and directly to retail accounts and consumers. The
     > company was formerly known as Mallard Intermediate, Inc. and changed
     > its name to The Duckhorn Portfolio, Inc. in February 2021. The Duckhorn
     > Portfolio, Inc. was founded in 1976 and is headquartered in Saint
     > Helena, California. The Duckhorn Portfolio, Inc. operates as a
     > subsidiary of Mallard Holding Company, Llc.

This small-size company went public in 2021 and has financials available since 2019. Over that time, Duckhorn has grown sales and EPS at 16.4% and 42.6% per year, respectively. Lines are somewhat up, straight, and parallel.

Over the past four years, PTPM trails the industry but leads peer averages while increasing from 12.4% in ’19 to 22.2% in ’22 (last-4-year mean: 18.3%). Debt-to-Capital has fallen from 40.1% in ’19 to 22.2% in ’22 (last-4-year mean: 30.6%).

ROE averages a mediocre 7.3% over the last two years. I almost feel the limited track record of data for this company is enough to relegate it to a speculative [smaller] position size at best.

Quick Ratio is 1.0, Interest Coverage is 9.1, and Value Line assigns a B+ rating for Financial Strength.

With regard to sales growth:

I am forecasting conservatively below the range at 6.0%.

With regard to EPS growth:

I am forecasting conservatively below the long-term-estimate range (mean of five: 7.1%) at 6.0% and using 2023 Q3 EPS of $0.50/share (annualized) as the initial value rather than ’22 EPS of $0.52.

My Forecast High P/E is 35.0. High P/E over the last two years (only data available) is 47.2 and 48.6. The last-two-year-mean average P/E is 40.0. I am forecasting below the range.

My Forecast Low P/E is 17.0. Low P/E over the last two years (only data available) is 31.1 and 33.1. I am forecasting below.

My Low Stock Price Forecast (LSPF) is the default $8.50 based on $0.50/share initial value. This is 32.5% less than the previous close, which is also the 52-week low.

These inputs land NAPA in the HOLD zone with a U/D ratio of 2.5. Total Annualized Return (TAR) is 12.9%.

PAR (using Forecast Average—not High—P/E) of 6.4% 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 6 studies over the past 90 days (my study and 2 outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 7.7%, 5.8%, 42.5, and 27.1, respectively. I am lower on all except EPS growth (6.0%), but I can’t read too much into such a small sample size. Value Line projects an average annual P/E of 25.0, which is lower than MS (34.8) and just lower than mine (26.0).

MS high/low EPS is $0.67/$0.49 vs. my $0.67/$0.50 (per share). This may be the closest agreement I have seen thus far.

MS LSPF of $12.10 implies a Forecast Low P/E of 24.7 vs. the above-stated 27.1. MS LSPF is 8.9% less than the default value of $0.49/share * 27.1 = $13.28, which results in more conservative zoning. MS LSPF remains 42.4% greater than mine.

Once again, I can’t draw conclusions from the small MS sample size.

Based on future annual average P/E and Value Line’s high EPS of $0.85, MOS in the current study seems to be moderate.

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two valuation metrics I have recently begun to monitor. PEG is 2.97 per Zacks while Relative Value is 0.64 per M* data. These suggest the stock to be overvalued and undervalued, respectively.

I would look to re-evaluate NAPA under $11.50/share.

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ETSY Stock Study (8-4-23)

Posted by on September 8, 2023 at 06:58 | Last modified: August 4, 2023 14:45

I recently did a stock study on Etsy, Inc. (ETSY) with a closing price of $82.92. The previous study is here.

M* writes:

     > Etsy operates a top-10 e-commerce marketplace operator in the U.S.
     > and the U.K., with sizable operations in Germany, France, Australia,
     > and Canada. The firm dominates an interesting niche, connecting
     > buyers and sellers through its online market to exchange vintage
     > and craft goods. With $13.3 billion in 2022 consolidated gross
     > merchandise volume, the firm has cemented itself as one of the
     > largest players in a quickly growing space, generating revenue
     > from listing fees, commissions on sold items, advertising services,
     > payment processing, and shipping labels. As of the end of 2022, the
     > firm connected more than 95 million buyers and 7.5 million sellers
     > on its marketplace properties: Etsy, Reverb (musical equipment),
     > Elo7 (crafts in Brazil), and Depop (clothing resale).

This medium-size company has grown sales at an annualized rate of 40.8% over the past decade.

EPS is a bit more complicated. 2015 is the first year as a publicly-traded company. I am excluding negative/fractional EPS in ’13-’16 [otherwise resulting in an inflated growth rate] to start with $0.68/share in ’17. The company takes a goodwill impairment charge of $1.0 billion in ’22 due to Depop and Elo7 acquisitions. This slashes EPS from $4.61/share (“normalized” per CFRA) to -$5.48, which precludes future growth rate projections. Effective immediately, I am overwriting the data point rather than excluding it. I consider this to be fair especially because CFRA seems neutral (at best) on the stock. The result is a 57.9% EPS growth rate since ’17.

For ’17-’22, [sales and EPS] lines are mostly up and narrowing despite an EPS dip in ’18.

PTPM is above the industry but below peer averages while increasing from 7.3% in ’17 to 20.3% in ’21 with a last-5-year mean (excluding ’22) of 15.1%. ROE is above peer and industry averages while increasing from 23.8% in ’17 to 80.9% in ’22 with a last-5-year mean (excluding ’22) of 43.3%.

Debt-to-Capital has been above peer and industry averages since ’19 with a last-5-year mean of 76.5%. While the number exceeds 100% in ’22, Value Line (giving a B+ rating for Financial Strength) is not concerned:

     > Although debt represented over 100% of capital at the end of 2022,
     > cash and short-term investments totaled $1.2 billion and the
     > company has only modest debt due over the next five years.
     > Additional funds can be sourced from the company’s $200 million
     > undrawn revolver and $29.1 million in long-term investments that
     > can be liquidated on short notice.

M* gives a “Standard” rating for Capital Allocation and is not concerned about debt either:

     > With our forecast for just 0.8 times average net leverage over the next
     > five years (net debt/adjusted EBITDA), a paucity of near-term debt
     > maturities, and a highly cash generative mode… balance sheet risk
     > appears minimal for the marketplace operator. We believe that Etsy
     > should encounter no difficulties in funding its investments in headcount
     > and platform development with internally generated funds, while
     > retaining substantial flexibility to invest in brand marketing and
     > strategic acquisitions. With no principal maturities until 2026, we
     > view Etsy’s balance sheet health as strong, despite the firm carrying
     > $2.3 billion in gross debt as of the end of the first quarter of 2023.

Quick Ratio is 2.6 and—nota bene—M* rates the company “Wide” for Economic Moat.

With regard to sales growth:

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

With regard to EPS growth:

How YF comes up with 144% for ’23 with ’22 being a negative number is [unknown to me and] a moot point.

I am forecasting below the long-term-estimate range (mean of six: 12.5%) at 6.0% per year. My initial value will be CFRA’s ’22 normalized EPS of $4.61/share.

My Forecast High P/E is 26.0. Since ’17, high P/E ranges from 32.1 in ’17 to 96.5 in ’19 with a last-5-year mean (’22 is NMF) of 89.1. The last-5-year-mean average P/E is 59.6. I am forecasting below the range.

My Forecast Low P/E is 14.0. Since ’17, low P/E ranges from 11.1 in ’20 to 52.3 in ’19 with a last-5-year mean (’22 is NMF) of 30.1. The 5-year median is 27.4 (’18). I am forecasting toward the bottom of the range [’20 and ’17 (13.8) are lower].

My Low Stock Price Forecast (LSPF) of $64.50 is default based on $4.61/share initial value. This is 22.2% less than the previous closing price, 19.8% less than the 52-week low, and 3.7% less than the ’22 low.

These inputs land ETSY in the BUY zone with a U/D ratio of 4.2. Total Annualized Return (TAR) is 14.1%.

PAR (using Forecast Average—not High—P/E) is 8.3%, which is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 60 studies over the past 90 days (my study and 20 outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 16.0%, 13.5%, 50.0, and 25.8, respectively. I am lower across the board. Value Line projects an average annual P/E of 35.0, which is lower than MS (37.9) and much higher than mine (20.0).

MS high / low EPS are $9.95 / -$5.40 vs. my $6.17 / $4.61 (per share). My high EPS is lower due to a lower growth rate. I think MS low EPS is unreasonably based on a one-time impairment charge. Furthermore, how are they calculating [percentage] projections off a negative base?

MS mean LSPF of -$10.50 is an invalid consequence of that negative base. The median of $35.00 is 45.7% less than mine.

Despite this apparent craziness, MS TAR of 39.3% is much higher than mine, which falls short of my 15.0% target.

MOS in the current study seems to be robust.

I track different valuation metrics. PEG is significantly overvalued at 5.5 per Zacks and 2.2 per my projected [forward] P/E. Relative Value [(current P/E) / 5-year-mean average P/E] is significantly undervalued at 0.30. Kim Butcher’s “quick and dirty DCF” prices the stock at 30.0 * [$5.75 – ($0.00 + $0.10)] = $169.50 thereby implying the stock to be 51.0% undervalued.

Despite being a BUY under $91/share, I would look to acquire shares under $85 to qualify TAR. The stock been quite volatile, which suggests likeliness to trade up and down and hit this level. It’s also there right now with last night’s close.

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QLYS Stock Study (7-10-23)

Posted by on September 7, 2023 at 06:43 | Last modified: July 10, 2023 20:09

I recently did a stock study on Qualys Inc. (QLYS) with a closing price of $129.20. The original study is here.

M* writes:

     > Qualys Inc. is a cloud security and compliance solutions
     > provider that helps businesses identify and manage their
     > security risks and compliance requirements. The California-
     > based company has more than 10,000 customers worldwide,
     > the majority of which are small- and medium-sized businesses.

Over the past decade, this small-size company has grown sales and EPS at 17.8% and 16.3% per year [fractional EPS years of ’13, ’15, and ’16 excluded that would otherwise inflate rate to 38.6%], respectively. Lines are mostly up, straight, and parallel except for EPS spike in ’14 along with EPS dips in ’15 and ’21. PTPM generally trails the industry and leads peer averages by rallying from 2.0% in ’13 to 27.3% in ’22 with a last-5-year mean of 24.4%.

Also over the past decade, ROE trails the industry and leads peer averages by rallying from 1.6% in ’13 to 28.8% in ’22 with a last-5-year mean of 20.2%. Having no long-term debt, Debt-to-Capital has been much lower than peer and industry averages with a last-5-year mean of 9.5% (uncapitalized leases).

Quick Ratio is 1.23. M* gives a Standard rating for Capital Allocation while Value Line assigns a B+ for Financial Strength.

With regard to sales growth:

I am forecasting conservatively below the range at 9.0%.

With regard to EPS growth:

I am forecasting near the bottom of the long-term-estimate range (mean of four: 10.1%) at 6.0%. I will use ’22 EPS of $2.74/share as the initial value rather than ’23 Q1 $2.89 (annualized).

I don’t give much weight to the shorter-term estimates but I do find CFRA’s upside outliers to be notable especially since they report 19 analysts. This is a big spike that would probably command an outsized P/E.

My Forecast High P/E is 50.0. The lowest high P/E over the last decade is 50.3 in ’14. The last-5-year mean is 65.9, and the last-5-year-mean average P/E is 53.1. I am forecasting just under the latter, which is below the entire last-decade range.

The top of my comfort zone is around 35, but that results in a future high price only a few points higher than the previous close. Being a small company, perhaps Qualys still has years of “outlandish” P/E remaining. I will have to watch this closely.

My Forecast Low P/E is 31.0. The lowest low P/E over the past decade is 22.2 in ’14. The last-5-year average and last-10-year median is 40.3. I am forecasting near the bottom of the range [only ’14 and ’20 (28.3) are lower].

My Low Stock Price Forecast (LSPF) is the default $84.90 based on $2.74/share initial value. This is 34.3% less than the previous close, 16.0% less than the 52-week low, and 6.0% less than the 2021 low.

These inputs land QLYS in the HOLD zone with a U/D ratio of 1.5. Total Annualized Return (TAR) is 8.0%.

PAR (using Forecast Average—not High—P/E) of 3.6% 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 188 studies over the past 90 days (39 outliers and my study excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, and Forecast Low P/E are 13.0%, 11.4%, 54.1, and 35.9, respectively. I am lower across the board.

MS high/low EPS is $4.94/$2.66 vs. my $3.67/$2.74 (per share). My high EPS is lower due to a lower forecast growth rate.

MS LSPF of $90.30 implies a Forecast Low P/E of 33.9 vs. the above-mentioned 35.9. MS LSPF is 5.4% lower than the default value of $2.66/share * 35.9 = $95.49, which results in more conservative zoning. MS LSPF remains 6.4% greater than mine.

Although Value Line does not provide a future average annual P/E projection, its high EPS of $4.50/share is much greater than mine. Based on this and MS comparisons, I deem MOS in the current study to be robust.

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two valuation metrics I have recently begun to monitor. The former is 41 / 6 = 6.8 (substantially overvalued) while the latter is 0.81 (undervalued).

I am also starting to familiarize myself with Kim Butcher’s “quick and dirty DCF.” According to this method, the stock should be valued at 35 * [$6.00 – ($0.00 + $0.75)] = $183.75 (i.e. stock undervalued by 30.0%).

I would look to re-evaluate QLYS under $109/share.

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LPLA Stock Study (7-10-23)

Posted by on September 5, 2023 at 06:12 | Last modified: July 10, 2023 13:50

I recently did a stock study on LPL Financial Holdings Inc. (LPLA) with a closing price of $224.82.

Value Line writes:

     > LPL Financial Holdings, Inc. is the nation’s largest independent
     > broker-dealer, a custodian for registered investment advisors,
     > and an independent consultant to retirement plans. It provides
     > an integrated platform of brokerage and investment advisory
     > services to nearly 20,000 independent financial advisors and
     > professionals at approximately 800 financial institutions and
     > approximately 500 registered investment advisers.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 10.7% and 23.2%. Lines are mostly up, straight, and narrowing except for sales dips in ’16 and ’20 and EPS dips in ’15, ’20, and ’21. PTPM leads peer and industry averages while trending higher in recent years from 25.0% in ’13 to 36.3% in ’22 with a last-5-year mean of 32.4%.

Over the past decade, ROE also leads peer and industry averages while going from 16.1% in ’13 to 41.2% in ’22 with a last-5-year mean of 40.4%. The trifecta cannot quite be completed as Debt-to-Capital is also higher than peer and industry averages despite trending down over the last five years with a mean of 66.5%.

Value Line reports Interest Coverage at 7.0, Current Ratio of 2.0, and a Financial Strength rating of B+. M* gives a Standard rating for Capital Allocation.

With regard to sales growth:

I am forecasting at the bottom of the range: 8.0%.

With regard to EPS growth:

I am forecasting below the long-term-estimate range (mean of six: 17.5%) at 13.0%. I will use ’22 EPS of $10.40/share as the initial value rather than ’23 Q1 EPS of $13.02 (annualized).

My Forecast High P/E is 16.0. Over the past decade, high P/E has ranged from 14.3 in ’19 to 32.3 in ’14 with a last-5-year mean of 21.0. The last-10-year median is 24.3 and the last-5-year-mean average P/E is 16.2. I am forecasting just below the latter [only ’19 and ’18 (15.1) are lower].

My Forecast Low P/E is 13.0. Over the past decade, low P/E has ranged from 5.5 in ’20 to 21.9 in ’14 with a last-5-year mean of 11.4. The last-10-year median is 13.6. I am forecasting just below the latter.

My Low Stock Price Forecast (LSPF) is the default $136.20 based on $10.40/share initial value. This is 39.9% less than the previous closing price and 18.0% less than the 52-week low.

Over the past decade, Payout Ratio has ranged from 9.6% in ’22 to 57.5% in ’15 with a last-5-year mean of 16.0%. I am forecasting below the range at 9.0%.

These inputs land LPLA in the HOLD zone with a U/D ratio of 0.9. Total Annualized Return (TAR) is 7.0%.

PAR (using Forecast Average—not High—P/E) of 4.9% 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 13 studies over the past 90 days (my study and eight outliers excluded), averages (lower of mean/median) for projected sales growth, EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 10.7%, 12.9%, 19.8, 11.4, and 16.0% respectively. My EPS growth rate and Forecast Low P/E are higher, but 13 studies is too small a sample size for a valid comparison. Value Line projects an average annual P/E of 20.0, which is higher than MS (15.6) and mine (14.5).

MS high/low EPS is $21.74/$9.67 vs. my $19.16/$10.40 (per share). My high EPS is lower due to a lower forecast growth rate.

MS LSPF of $118.60 implies a Forecast Low P/E of 12.3 vs. 11.4 (see above). Although MS LSPF is 7.6% higher than the default value of $9.67/share * 11.4 = $110.23, being ~50% lower than the previous close is quite sufficient. It’s also 12.3% lower than mine. This is unusual but again, I can’t draw valid conclusions from such a small sample size. MS LSPF includes five studies under $110—the lowest of which are $69.00 and $39.70. One could argue all five of these as unreasonably low.

Based on my conservative inputs and Value Line’s future average annual P/E, I think MOS in the current study is moderate.

PEG ratio and Relative Value [(current P/E) / 5-year-mean average P/E] are two valuation metrics I have recently begun to monitor. Zacks reports PEG of 0.66, which is the lowest I’ve seen so far (anything under 1.00 is generally regarded as undervalued). Relative Value (M* data), however, is just slightly overvalued at 1.08.

I would look to re-evaluate LPLA under $178/share.

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