Checking in on some valuation rankings, Microsoft Corporation (NasdaqGS:MSFT) has a Value Composite score of 64. Developed by James O’Shaughnessy, the VC score uses five valuation ratios. These ratios are price to earnings, price to cash flow, EBITDA to EV, price to book value, and price to sales. The VC is displayed as a number between 1 and 100. In general, a company with a score closer to 0 would be seen as undervalued, and a score closer to 100 would indicate an overvalued company. Adding a sixth ratio, shareholder yield, we can view the Value Composite 2 score which is currently sitting at 56.
When conducting stock research, some investors will choose to start from the top-down while others may choose to begin from the bottom-up. Starting from the top-down typically includes studying the overall economy, industries, and multiple markets. Stocks tend to perform differently at certain points in economic cycles. Figuring out where the economy is can help find the sectors that will outperform. Once specific sectors are identified, investors might be able to then select certain stocks within those sectors. Investors who start with from the bottom-up may start by analyzing individual stocks first. This may include looking for stocks that are undervalued in relation to the perceived value of the company. Many investors will use a combination of both styles when undertaking detailed stock research.
Technicals at a Glance
In taking a look at some other notable technicals, Microsoft Corporation (NasdaqGS:MSFT)’s ROIC is 0.380306. The ROIC 5 year average is 0.333291 and the ROIC Quality ratio is 9.308984. ROIC is a profitability ratio that measures the return that an investment generates for those providing capital. ROIC helps show how efficient a firm is at turning capital into profits.
There are many different tools to determine whether a company is profitable or not. One of the most popular ratios is the “Return on Assets” (aka ROA). This score indicates how profitable a company is relative to its total assets. The Return on Assets for Microsoft Corporation (NasdaqGS:MSFT) is 0.131018. This number is calculated by dividing net income after tax by the company’s total assets. A company that manages their assets well will have a higher return, while a company that manages their assets poorly will have a lower return.
Shareholder Yield
We also note that Microsoft Corporation (NasdaqGS:MSFT) has a Shareholder Yield of 0.020097 and a Shareholder Yield (Mebane Faber) of 0.04185. The first value is calculated by adding the dividend yield to the percentage of repurchased shares. The second value adds in the net debt repaid yield to the calculation. Shareholder yield has the ability to show how much money the firm is giving back to shareholders via a few different avenues. Companies may issue new shares and buy back their own shares. This may occur at the same time. Investors may also use shareholder yield to gauge a baseline rate of return.
Microsoft Corporation (NasdaqGS:MSFT) has a current MF Rank of 4938. Developed by hedge fund manager Joel Greenblatt, the intention of the formula is to spot high quality companies that are trading at an attractive price. The formula uses ROIC and earnings yield ratios to find quality, undervalued stocks. In general, companies with the lowest combined rank may be the higher quality picks.
Price Index
We can now take aquick look at some historical stock price index data. Microsoft Corporation (NasdaqGS:MSFT) presently has a 10 month price index of 1.21259. The price index is calculated by dividing the current share price by the share price ten months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 1.31833, the 24 month is 1.91424, and the 36 month is 2.27335. Narrowing in a bit closer, the 5 month price index is 1.13961, the 3 month is 1.18971, and the 1 month is currently 1.05633.
The Piotroski F-Score is a scoring system between 1-9 that determines a firm’s financial strength. The score helps determine if a company’s stock is valuable or not. The Piotroski F-Score of Microsoft Corporation (NasdaqGS:MSFT) is 8. A score of nine indicates a high value stock, while a score of one indicates a low value stock. The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings. It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue. The score is also determined by change in gross margin and change in asset turnover.
Investors are often faced with difficult decisions when trading the equity market. Sometimes, the decision to sell a certain stock may be just as important as the decision to buy the stock in the first place. Individual investors may have done the research, had some good fortune, and are now dealing with a big winner in the portfolio. Even though a stock has had a big run, it may be time to unload and take some profits. Holding on to a winner too long can eat into profits that may have been better spent getting into another promising name. On the flip side, investors may have trouble letting go of an underperforming portfolio loser. The emotional attachment to a stock can cause the investor to hold onto a stock for way too long. Maybe the stock was thoroughly researched, but it just keeps going lower. Being able to cut the ties instead of waiting for a bounce back may be beneficial for portfolio health in the long run.
The Value Composite One (VC1) is a method that investors use to determine a company’s value. The Value Composite score of iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) is 64. A company with a value of 0 is thought to be an undervalued company, while a company with a value of 100 is considered an overvalued company. The VC1 is calculated using the price to book value, price to sales, EBITDA to EV, price to cash flow, and price to earnings. Similarly, the Value Composite Two (VC2) is calculated with the same ratios, but adds the Shareholder Yield. The Value Composite Two of iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) is 50.
Investors are constantly searching for quality stocks to help provide a boost to the portfolio. Quality can come in various forms such as a company that is a sales leader in a market that is growing or a company that is a technological leader with a proven record of success. Finding quality stocks at a bargain price is typically on the agenda for most investors. Because the economy and the stock market do not always go hand in hand, it may be important to analyze individual stocks. Some investors may choose to buy when the market is going up and sell when the market is going down. Other investors will opt to do the exact opposite. Whether the investor is going with the trend or against it, it can be important to make sure that the right types of stocks are in the portfolio. Nobody can exactly predict the future, but staying on top of portfolio holdings may help when the necessary decisions need to be made.
In taking a look at some other notable technicals, iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM)’s ROIC is 0.021799. The ROIC 5 year average is 0.021169 and the ROIC Quality ratio is . ROIC is a profitability ratio that measures the return that an investment generates for those providing capital. ROIC helps show how efficient a firm is at turning capital into profits.
The Q.i. Value of iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) is 55.00000. The Q.i. Value is a helpful tool in determining if a company is undervalued or not. The Q.i. Value is calculated using the following ratios: EBITDA Yield, Earnings Yield, FCF Yield, and Liquidity. The lower the Q.i. value, the more undervalued the company is thought to be.
The FCF Yield 5yr Average is calculated by taking the five year average free cash flow of a company, and dividing it by the current enterprise value. Enterprise Value is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. The average FCF of a company is determined by looking at the cash generated by operations of the company. The Free Cash Flow Yield 5 Year Average of iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) is 0.000000.
Shareholder Yield
We also note that iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) has a Shareholder Yield of 0.123807 and a Shareholder Yield (Mebane Faber) of 0.12873. The first value is calculated by adding the dividend yield to the percentage of repurchased shares. The second value adds in the net debt repaid yield to the calculation. Shareholder yield has the ability to show how much money the firm is giving back to shareholders via a few different avenues. Companies may issue new shares and buy back their own shares. This may occur at the same time. Investors may also use shareholder yield to gauge a baseline rate of return.
MF Rank
iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) has a current MF Rank of 10730. Developed by hedge fund manager Joel Greenblatt, the intention of the formula is to spot high quality companies that are trading at an attractive price. The formula uses ROIC and earnings yield ratios to find quality, undervalued stocks. In general, companies with the lowest combined rank may be the higher quality picks.
PI
We can now take aquick look at some historical stock price index data. iShares, Inc. – iShares MSCI Emerging Markets ETF (ARCA:EEM) presently has a 10 month price index of 0.98548. The price index is calculated by dividing the current share price by the share price ten months ago. A ratio over one indicates an increase in share price over the period.
A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 0.95089, the 24 month is 1.17838, and the 36 month is 1.33898. Narrowing in a bit closer, the 5 month price index is 1.13237, the 3 month is 1.09829, and the 1 month is currently 1.03912.
As we move deeper into the year, investors will be paying attention to which companies are well-positioned for future growth. Even if the current earnings reports are a mixed bag, investors can study which industries look they are taking the top spot. Many active investors may be focusing on which way estimates are trending heading into the company earnings release. Analysts will often make updates to projections shortly before and after the earnings numbers are provided. Many active investors may enjoy the volatility that comes with trading around earnings, but others will choose to let the heavy action pass before deciding which stocks to buy or sell next.
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