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This info on PRA Health Sciences, Inc. (PRAH) could trigger a massive change in trading

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Our task today will be to comprehensively evaluate recent data for PRA Health Sciences, Inc. (PRAH) to determine whether or not we have something approaching a “value” in the market.

In the most basic sense, the “value investing” methodology really has its roots in the college textbook “Security Analysis”, which was published six decades ago by Graham and Dodd. But today, the term “value investing” is generally applied to any approach that focuses first and foremost on the concept of valuation, seeking out viable companies that are “cheap” based on various measures.

In this case, the company’s forward price-to-earnings ratio — perhaps the most common default measure of valuation — is currently at 20.53. That’s based on estimates looking for earnings of 0.87 coming up the pike in the company’s next financial report card.

That said, we all know that the forward data on a stock like this requires faith in those making projections: the analysts. Currently, the forward projections are driven by a group of 10 analysts. And, naturally, no one knows if those 10 folks are way off base for some reason. It’s happened before. That’s why some investing legends only trust the trailing earnings data.

In this case, that valuation ration is sitting right at 52.87.

However, to get a real sense of how this measures up, we will need to dig deeper. Benjamin Graham, the legendary value investor and one of the authors of the seminal text mentioned above, commonly relied on a simple formula for more aggressive investments: Current assets should be at least 1½ times current liabilities, debt should not be more than 110% of net current assets, there should be some level of dividend payments, and the Price-to-book-value ratio should be less than 120% of net tangible assets.

With that in mind, let’s see how PRA Health Sciences, Inc stacks up to this challenge.

First off, the company’s current ratio (the ration of current assets to current liabilities) is sitting at 1.17. Remember, according to Graham, that should be at least 1.5. Next, we can see debt-to-equity at 98.28. How about price-to-book ratio? Right now, it clocks in at 6.09.

That should speak to what Graham might say if he came across this stock at its current price. But there are certainly other factors involved in the concept of value in today’s market that should be appreciated.

For example, PRA Health Sciences, Inc. (PRAH) has managed to generate a return on its assets of 4.99%. That has been achieved through operating margins of 10.87%. Naturally, in the most basic sense, the concept of value is rooted in an ability to generate returns on invested capital. It is fundamentally about gaining access to the machine that has demonstrated its capability to generate those returns, and to do so for a price that is beneath what it is truly worth.

Perhaps the final measure that speaks to this idea is what investors currently have to pay for the company’s sales. In this case, the company’s price-to-sales ratio currently clocks in at 3.06.

 

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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