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Do not trade Cisco Systems Inc. (NASDAQ: CSCO) until you read this technical report

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It’s time to take an in-depth technical look at Cisco Systems Inc. (NASDAQ: CSCO) . Our goal here today is to examine how the stock is behaving so we can use that examination as a lens through which to evaluate the stock as a possible investment opportunity.

Technical analysis is predicated on the idea that all important information is already interpolated by buyers and sellers of a security, so the only thing left to really interpret and predict the action is that behavior itself.

For market timers, one of the most important tools we have at hand is the key indicators that show whether the stock is stretched in one direction or the other too much, too far, or too fast. In other words, is the stock overbought, oversold, or somewhere in the middle?

For that, we first turn to the RSI measure. The 14-day RSI is the standard flag-bearer for this type of analysis. Right now, for Cisco Systems Inc., the measure stands at 60.05%. That shows where the stock is as far as the degree to which it is becoming overbought or oversold relative to its price history.

If we look at other overbought/oversold oscillators, we can get even more perspective. The stochastic measure is a good example.

Right now, the stock over the past month of action shows a score of 92.30% on the 20-day fast stochastic.

In an even broader sense, NASDAQ: CSCO has recently been showing trading action that suggests an overall bearish posture on the chart according to trend-related measures such as a major moving averages. In this case, we are looking at the relative positions of the 50-day and 200-day simple moving averages.

The implication, of course, is that money is generally treating this stock in a negative manner in terms of capital flows.

Next, we want to look at participation levels. Our conviction on a stock in terms of its technicals is almost entirely subject in the end to the type of volume of trade we see going on in the stock. Patterns of action gain meaning strictly through volume levels.

In other words, you need plenty of people playing the game for the score to matter.

At this point, relative volume measures have been weak, indicating lack of interest among traders, investors, and money managers for the stock over the past month.

As it stands at present, the stock might find important action around key levels on the chart, which is something else we like to take a close look at.

One of the best ways to define key levels is through derivations built off of the Fibonacci series. This is widely used by professional firms in the market. The Fibonacci series is a set of numbers derived from adding the prior number to the next one: 0,1,1,2,3,5,8,13,21,34, etc. You will note that each number is the sum of the prior two numbers. The series has been found to exemplify the mathematics underlying many growth systems. The ratio of one number to the next in the series approaches 61.8% (or 38.2%, depending on which direction you move) as a limit.

In markets, the key levels are often played at retracements defined by this ratio and its associated connections.

In this case, the critical 38.2% level drawn off the 52-week low of $29.12 sits at $31.21. NASDAQ: CSCO also has additional resistance above at the stock’s 200-day simple moving average, which sits at N/A.

So far, we have looked at oscillators, moving average trends, and participation levels. However, sometimes, there is information carried in simply the degree of movement in a stock.

For example, over the past trading month, NASDAQ: CSCO has made a move of +1.33. By comparison, over the trailing 100 days, the stock is underperforming the S&P 500 by 9.34, and it’s gotten there by action that has been more volatile on a day-to-day basis than most other stocks on the exchange.

Obviously, that tells us a ton about this name. To even drill down deeper into the movement, we can see that the stock’s recent action has come on a historical volatility score of 14.98%. That number is derived from the standard deviation of returns of some hypothetical trader buying the stock at a given average price during the specified period.

If we want to look at range of action in a simplistic sense, the best way is to use the average true range over the most common reference time period, so we are staying on the same page with the market. In this case, the 20-day ATR as a percentage of its 20-day moving average comes in at 7259.09.

We plan to update our take on this stock as its pattern of behavior progresses from here.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Could this be a game changer for Telefonaktiebolaget LM Ericsson (publ) (ERIC)

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In the ever-evolving process of understanding what a stock is truly worth, we are going to look at Telefonaktiebolaget LM Ericsson (publ) (ERIC) today from the standpoint of its EV/Rev ratio to see just what the company’s current market valuation implies about its worth as a take-out candidate. The EV/Rev ratio is also known as the Enterprise Value-to-Revenue ratio. It’s an alternative to price-to-sales that offers advantages by accounting for cash and debt.

In fact, one might suggest that the best way to achieve this is through taking a look at the company’s price-to-sales ratio (in this case, we are talking about 1.05). However, the problem with this measure, as noted above, is that it doesn’t consider the balance sheet as a tangible item.

For example, if you were to walk into company headquarters tomorrow and negotiate a deal to outright purchase Telefonaktiebolaget LM Ericsson (publ) (ERIC), you would know you were going to own the company’s cash, and also take on its liabilities as your own. So, the balance sheet is part of the value of the company, and there’s no getting around it.

That’s why we might consider the company’s enterprise-value-to-revenue ratio as a superior means of valuing its current operational flows than price-to-sales. And in today’s innovation-driven market, operational flows seem to rule the day.

In this case, Telefonaktiebolaget LM Ericsson (publ) (ERIC) is currently in possession of an enterprise value of 19.78B. That number is derived from the company’s market cap (which is currently at 25.104B) minus its cash and equivalents (which currently sit at roughly 5.07B) plus its outstanding debt (now at 3.96B). Occasionally, you will see this number include minority interest and preferreds. However, let’s keep it simple today.

That gives us one half of the equation. The other half is the trailing-year revenues. For Telefonaktiebolaget LM Ericsson (publ) (ERIC), we are talking about 23.98B. We use the trailing revenues to avoid having to consider potential inflections in the environment or flaws in company or analyst outlooks. 

When we put them together, we get an EV/Rev ratio of 0.82.

It has been suggested that this method of valuing stocks struggles with unproven names such as penny stocks because they often have a checkered history in terms of operational success, and therefore, can end up with negative enterprise value. In other words, they have such small market caps that the balance sheet becomes the principal factor in the equation. And balance sheets can be highly variable from stock to stock in ways that may be misleading when trying to chase down the concept of “intrinsic value”.

Otherwise, investors may prefer other means of attempting to nail down the value of Telefonaktiebolaget LM Ericsson (publ) (ERIC), including standard forward P/E (which comes in at 24.03), trailing P/E (which comes in at N/A), price-to-sales, as we noted above (coming in at 1.05, price-to-book (which currently sits at 2.13), and enterprise value-to-EBITDA (-27.08) — which represents the ratio of the EV to the company’s earnings before interest, taxes, depreciation, and amortization.

In any case, however you choose to nail down the valuation of a company, you are probably first going to need to admit that there is no one perfect answer.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Sirius XM Holdings Inc. (SIRI) A Bull’s Tale of the Day

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In the ever-evolving process of understanding what a stock is truly worth, we are going to look at Sirius XM Holdings Inc. (SIRI) today from the standpoint of its EV/Rev ratio to see just what the company’s current market valuation implies about its worth as a take-out candidate. The EV/Rev ratio is also known as the Enterprise Value-to-Revenue ratio. It’s an alternative to price-to-sales that offers advantages by accounting for cash and debt.

In fact, one might suggest that the best way to achieve this is through taking a look at the company’s price-to-sales ratio (in this case, we are talking about 5.17). However, the problem with this measure, as noted above, is that it doesn’t consider the balance sheet as a tangible item.

For example, if you were to walk into company headquarters tomorrow and negotiate a deal to outright purchase Sirius XM Holdings Inc, you would know you were going to own the company’s cash, and also take on its liabilities as your own. So, the balance sheet is part of the value of the company, and there’s no getting around it.

That’s why we might consider the company’s enterprise-value-to-revenue ratio as a superior means of valuing its current operational flows than price-to-sales. And in today’s innovation-driven market, operational flows seem to rule the day.

In this case, Sirius XM Holdings Inc is currently in possession of an enterprise value of 34.66B. That number is derived from the company’s market cap (which is currently at 28.074B) minus its cash and equivalents (which currently sit at roughly 69.02M) plus its outstanding debt (now at 6.75B). Occasionally, you will see this number include minority interest and preferreds. However, let’s keep it simple today.

That gives us one half of the equation. The other half is the trailing-year revenues. For Sirius XM Holdings Inc, we are talking about 5.43B. We use the trailing revenues to avoid having to consider potential inflections in the environment or flaws in company or analyst outlooks. 

When we put them together, we get an EV/Rev ratio of 6.39.

It has been suggested that this method of valuing stocks struggles with unproven names such as penny stocks because they often have a checkered history in terms of operational success, and therefore, can end up with negative enterprise value. In other words, they have such small market caps that the balance sheet becomes the principal factor in the equation. And balance sheets can be highly variable from stock to stock in ways that may be misleading when trying to chase down the concept of “intrinsic value”.

Otherwise, investors may prefer other means of attempting to nail down the value of Sirius XM Holdings Inc, including standard forward P/E (which comes in at 22.32), trailing P/E (which comes in at 44.64), price-to-sales, as we noted above (coming in at 5.17, price-to-book (which currently sits at N/A), and enterprise value-to-EBITDA (17.46) — which represents the ratio of the EV to the company’s earnings before interest, taxes, depreciation, and amortization.

In any case, however you choose to nail down the valuation of a company, you are probably first going to need to admit that there is no one perfect answer.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Why are Investors Eyeing Netflix, Inc. (NFLX) Before the Earnings ?

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The Klein Law Firm Reminds Shareholders of a Class Action Filed on Behalf of Netflix, Inc. Shareholders and a Lead Plaintiff Deadline of May 1, 2017 (NFLX)

In the previous trading session, stock of Netflix, Inc. (NFLX) opened at $306.37 and last traded at $310.50 x 400. More than 14,360,568 shares exchanged hands compared to an average daily volume of 11,946,866 shares. At the current pps, the market capitalization stands at 132.901B. Analyst are currently predicting a target of $286.62 for Netflix, Inc.

Investors try to use stocks with high beta values to quickly recoup their investments after sharp market losses. Netflix, Inc. (NFLX) currently has a Beta value of 1.38 . Beta is a measurement of a stock’s price fluctuations, which is often called volatility and is used by investors to gauge how quickly a stock’s price will rise or fall. A stock with a beta of greater than 1.0 is riskier and has greater price fluctuations, while stocks with beta values of less than 1.0 are steadier and generally larger companies. Beta is often measured against the S&P; 500 index. An S&P; 500 stock with a beta of 2.0 produced a 20 percent increase in returns during a period of time when the S&P; 500 Index grew only 10 percent. This same measurement also means the stock would lose 20 percent when the market dropped by only 10 percent.

Next, let’s take a look at Netflix, Inc current P/E ratio. Netflix, Inc. (NFLX) currently has a PE ratio of 205.21 . PE ratio is an important parameter to look at when trading a stock mostly because it is easy to calculate. There are a couple of ways to calculate PE ratio either by dividing share price by earnings per share or dividing the market cap by net income. It is important to note that the earnings are usually taken from the trailing twelve months (TTM). Nevertheless, P/E tells us how much an investor is willing to pay for $1 of a company’s earnings. The long-term average P/E is around 15, so on average, investors are willing to pay $15 for every dollar of earnings. Another useful way to look at this: Turn the P/E ratio around to look at the E/P ratio, which when expressed as a percentage gives us the earnings yield. For instance: 1/15 gives us an earnings yield of 6.67%.

While we have already looked at Netflix, Inc beta and P/E ratio, the EPS cannot be ignored. Netflix, Inc EPS for the trailing twelve months was 1.25. Traders and investors often use earnings per share (TTM) to determine a company’s profitability for the past year. So in essence, EPS is the amount of a company’s net income per share of common stock. Earnings per share equal the company’s net income less any dividends paid on preferred stock divided by the weighted average number of common stock shares outstanding during the year. Netflix, Inc is estimated to release its next earnings report on Jul 16, 2018 – Jul 20, 2018. It would be interesting to see how the earnings fair out considering the recent developments.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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