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Time for a Turnaround at Finish Line for EXFO Inc. (NASDAQ: EXFO)

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We turn our attention to the charts today. Technical analysis. It’s the artistic side of the analysis. Here, we deal with lines and angles and patterns. Here, we try to listen to the market; to hear its opinion of a stock, quite independent of the seeming facts of the business. Here, we look to paint a picture, as it were. Today’s subject in this exercise is EXFO Inc (EXFO).

Let’s start with a quick evaluation of relative volume measures. Here, we want to examine the degree to which traders, investors, and money managers are more or less interested over the past month in transacting in this security. At this point, this stock has been showing weak relative volume, which indicates lack of interest among those participating in the market for shares of EXFO over the past month. That sets us up to look at relative performance of the stock along with range and volatility measures. This boils down to the concept of what is known as “beta”.

First off, we can readily state the facts on relative performance. EXFO has moved -0.05 over the past month or so. Over the trailing 100 days, the stock is underperforming the S&P 500 by 19.77. As to the point of beta, we can see the stock has been generally moving less than the rest of the market on a day to day basis. That is according to the 36-month beta score. Another way to look at this is through taking the standard deviation of returns calculated as representing a hypothetical buyer of the stock at a random point at a given average price during the specified period. That gives us a historical volatility score of 39.99%. Finally, in this class of data, we can look at the 20-day ATR as a percentage of the 20-day moving average, which gives us a natural volatility score of 3.49%.

Now, it’s time to look at trend and extent of movement. From a certain point of view, these are the natural opposites in technical analysis. On the one hand, we know experienced traders and technical manuals teach us that “the trend is your friend.” However, at the same time, we know it’s wise to fade extreme, overdone movement. That posits a natural tension for analysts, and unfortunately, the best we can do is to look at the facts.

In the first place, the broad impact of money flows should be viewed through the tried-and-tested lens of moving average analysis. In this case, we look at the relative positioning of the 50-day and 200-day simple moving averages. In other words, if the 50-day moving average is trading above the 200-day, it is traditionally seen as a bullish chart trend. Conversely, if the 50-day moving average is trading below the 200-day, it is traditionally labeled a bearish trend or bearing. For EXFO, that adds up to a bearish designation, which suggests that flows have been working in an overall negative direction on the chart.

To counter that notion, we now turn to a look at mean reversion oscillators. Our key indicators of note attempt to score the action as to whether or not a security has pushed too far too fast, leading to a likelihood of some kind of reversion to the mean movement becoming highly probable.

There is a host of oscillating indicators that can offer up such an analytic perspective. We have learned to rely most on RSI and stochastics. Specifically, we look at the 14-day Relative Strength Indicator (RSI) and the 20-day “fast stochastic”. For both of these measures, if we see a score above 75 (overbought) or below 25 (oversold), history suggests one is wise to expect some reversion to the mean. For EXFO, the 14-day RSI shows a score of 50.54%, while the 20-day fast stochastic shows a score of 60.83%.

We close today’s analysis with a quick check of key levels. For our means, we like to quickly check the key Fibonacci retracement zone as well as the primary institutional long-term moving average (the 200-day simple average). In the case of is EXFO Inc (EXFO), the critical 38.2% level drawn off the 52-week low of $3.72 sits at $4.65. EXFO also has additional resistance above at the stock’s 200-day simple moving average, which sits at $ 4.76.

Hopefully, this analysis has offered up some useful perspective. We will catch up with this stock again soon.

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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Ford Motor Company (F) finding value is an unloved sector

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Our task today will be to comprehensively evaluate recent data for Ford Motor Company (F) 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 7.92. That’s based on estimates looking for earnings of 0.48 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 20 analysts. And, naturally, no one knows if those 20 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 12.67.

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 Ford Motor Company (F) stacks up to this challenge.

First off, the company’s current ratio (the ration of current assets to current liabilities) is sitting at 1.20. Remember, according to Graham, that should be at least 1.5. Next, we can see debt-to-equity at 451.22. In addition, if you search the company’s recent dividend rate, you will get 0.60. How about price-to-book ratio? Right now, it clocks in at 1.48.

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, Ford Motor Company (F) has managed to generate a return on its assets of 0.80%. That has been achieved through operating margins of 2.03%. 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 0.31.

 

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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Castle Brands Inc. (ROX) beta you simply cannot ignore

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Our task today will be to comprehensively evaluate recent data for Castle Brands Inc. (ROX) 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 61.00. That’s based on estimates looking for earnings of 0 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 1 analysts. And, naturally, no one knows if those 1 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 -203.33.

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 Castle Brands Inc stacks up to this challenge.

First off, the company’s current ratio (the ration of current assets to current liabilities) is sitting at 3.06. Remember, according to Graham, that should be at least 1.5. Next, we can see debt-to-equity at 822.46. In addition, if you search the company’s recent dividend rate, you will get N/A. How about price-to-book ratio? Right now, it clocks in at 110.91.

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, Castle Brands Inc. (ROX) has managed to generate a return on its assets of 2.48%. That has been achieved through operating margins of 2.87%. 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 2.72.

 

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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Tesla, Inc. (TSLA) beta you simply cannot ignore

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Our task today will be to comprehensively evaluate recent data for Tesla, Inc. (TSLA) 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 -171.95. That’s based on estimates looking for earnings of -1.7 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 19 analysts. And, naturally, no one knows if those 19 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 -69.46.

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 Tesla, Inc stacks up to this challenge.

First off, the company’s current ratio (the ration of current assets to current liabilities) is sitting at 0.97. Remember, according to Graham, that should be at least 1.5. Next, we can see debt-to-equity at 145.20. In addition, if you search the company’s recent dividend rate, you will get N/A. How about price-to-book ratio? Right now, it clocks in at 11.01.

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, Tesla, Inc. (TSLA) has managed to generate a return on its assets of -2.10%. That has been achieved through operating margins of -6.33%. 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 5.59.

 

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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