As defined in the Little Book that Beats the Market, the earnings yield compares the profit generated with the market’s valuation of the company. It is defined as operating profit divided by enterprise value.
Many refer to it as the EBIT/EV (Earnings before interest and tax / Enterprise Value). Experian plc (EXPN.L) has a EBITA/EV of 19.027752.
Enterprise value is used by Greenblatt rather than market capitaliation to reflect the competing claims of debt and equity holders on the business. This penalizes companies that carry a lot of debt and little cash, and rewards firms with a lot of cash – a useful distinction not reflected in the P/E ratio.
Investors might be looking into the magic eight ball trying to project where the stock market will be heading over the next few months. Some analysts believe that the market is ready to take a bearish turn, but others believe that there is still room for stocks to shoot higher. When the markets do have a sell-off, investors may be tempted to sell winners before they give up previous profits. Sometimes this may be justified, but other times this type of panic selling can cause investors to just have to repurchase shares at a higher price after the recovery. Keeping tabs on the underlying company fundamental data can help provide the investor with a better idea of whether to hold on to a stock or let it go.
Value Comp 1 / Value Comp 2
The Value Composite One (VC1) is a method that investors use to determine a company’s value. The VC1 of Experian plc (EXPN.L) is 55. 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 Experian plc (EXPN.L) is 45.
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 Experian plc (EXPN.L) is 5. 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.
After a recent scan, we can see that Experian plc (EXPN.L) has a Shareholder Yield of 0.020102. This is calculated by adding the dividend yield to the percentage of repurchased shares. 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.
Benjamin Graham, professor and founder of value investing principles, was one of the first to consistently screen the market looking for bargain companies based on value factors. He didn’t have databases such as ValueSignals at his disposal, but used people like his apprentice Warren Buffet to fill out stock sheets with the most important data.
Graham was always on the watch for firms that were so discounted, that if the company went into liquidation, the proceeds of the assets would still return a profit.
The ratio he used to identify these companies was Net Current Asset Value or NCAV. This ratio is much more stringent compared to book value (total assets – total liabilities) and is calculated as follows:
NCAV = Current Assets – Total Liabilities
Current Assets = Cash & ST Investments + Inventories + Accounts Receivable
Graham was only happy if he could buy the company at 2/3 of the NCAV. That’s the sort of margin of safety he was looking for.
This strategy was very successful during the years after Graham published it in his book ‘Security analysis’ in 1934 and also in more recent studies it has proven to provide superior results. A study done by the State University of New York to prove the effectiveness of this strategy showed that from the period of 1970 to 1983 an investor could have earned an average return of 29.4%, by purchasing stocks that fulfilled Graham’s requirement and holding them for one year. Nowadays it’s very difficult to find companies that meet Graham’s criteria.
We calculate NCAV to Market as follows:
NCAV-to-Market Ratio = NCAV divided by Market Cap
Experian plc (EXPN.L) has an NCAV to Market value of -0.156031.
Watching some historical volatility numbers on shares of Experian plc (EXPN.L), we can see that the 12 month volatility is presently 16.4932. The 6 month volatility is 18.5657, and the 3 month is spotted at 17.6281. Following volatility data can help measure how much the stock price has fluctuated over the specified time period. Although past volatility action may help project future stock volatility, it may also be vastly different when taking into account other factors that may be driving price action during the measured time period.
Once the individual investor has done all the fundamental homework and found a few stocks that they think are poised to be future winners, they may want to figure out when to best get into the market. Many investors will turn towards technical analysis to accomplish this. Technical analysis can help identify entry and exit points by studying price trends and movements over time. Some technical indicators are very complex and others are very simple. One goal of focusing on technical indicators is to help make confusing price information easier to interpret and understand. Many investors will find signals that they like to follow, but focusing on just one indicator may not provide the full picture of what is really going on. Many investors will combine technical indicators to help round out the spectrum. Although technical analysis can be a very useful tool for the investor, it is important to remember that stock prices are inherently unpredictable. Even the most seasoned investors may have to adjust their charts occasionally if trades are not working out as planned.
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