QCOM: Gauge Analysis (updated March 2, 2021)

I have analyzed Qualcomm's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

Qualcomm makes chips and licenses mobile communications technologies that are used in many advanced wireless devices.  The transition to 5G mobile networks, which is picking up speed (groan), should benefit Qualcomm as the technology will motivate consumers to upgrade (again!) to newer, more capable phones.  Qualcomm's licensing business has been criticized on anti-trust grounds by government regulators in multiple countries and also by phone manufacturers.  This threat eased significantly when Qualcomm settled all litigation in April 2019 with Apple and Apple's contract manufacturers.  More progress was made in 2020 when Qualcomm and Huawei settled their disputes and reached a new long-term, global patent-license agreement.  Antitrust concerns did end up scuttling the company's planned $44 billion acquisition of NXP Semiconductors. 

Qualcomm recorded profits of $7 billion, $5.82 per share, on revenue of $27 billion during the last 12 months.  In the quarter that ended on December 27, 2020, Qualcomm earned $2.12 per share on a GAAP basis, and it gained $2.17 per share after non-GAAP adjustments and exclusions.  See Qualcomm's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of Qualcomm now trade for about $137 each, giving the company a market value of $158 billion. These shares can be found in the Standard and Poors 500, Standard and Poors 100, NASDAQ 100, and Russell 1000 stock indices.

Analysis Results:

Qualcomm's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments.

1. The Company's Size is Substantial: GREEN

    Market Value: $158.4 billion (mega-cap)

2. The Company is Conservatively Financed: YELLOW

    Current ratio = 2.1 (>2.0 is conservative)

    Long-term debt/Working Capital = 144% (<150% is conservative)

3. The Company Generates Stable Earnings: RED

    Eighteen positive quarterly earnings reports in last 5 years (not too bad)

    Earnings variability = 159% (very high)

4. The Company Exhibits Earnings Growth: YELLOW

    Owner Earnings growth rate (trailing year) = -7% (poor)

    Owner Earnings growth rate (five-year average) = 17% (good)

    Free Cash Flow growth rate (trailing year) = -10% (poor)

    Free Cash Flow growth rate (five-year average) = 7% (modest)

5. The Company is Efficiently Profitable: GREEN

    Cash Flow Return On Invested Capital = 36% (excellent)

    Operating Profit/Sales = 28.9% (excellent)

6. The Company Pays a Healthy Dividend: GREEN

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 5% (fair)

    Dividend = 47% of last year's FCF (sustainable)

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = 25.7 (high)

    Price/GAAP Earnings (five-year average) = 60.5 (expensive)

    Free Cash Flow/Market Value = 4.0% (low, less than the five-year average of 5.6%)

    Acquirer's Multiple = 21.0 (expensive)

    Price/Book Value = 21.5 (more expensive than the five-year average of 16.2)

    Price/Sales = 5.9 (more expensive than the five-year average of 4.0)

In summary, the analysis assigned Qualcomm three GREEN, two YELLOW, and two RED grades.  The resulting Overall Score is 39 of the 100 possible points, which is low.  The score is below the 60-point GCFR threshold, and, therefore, Qualcomm does not satisfy the GCFR criteria for investment consideration at this time.

The share price would theoretically have to fall by 45.5 percent, from $137.04 to $74.72, all else being equal, to lift the Overall Score to the 60-point threshold. It is also possible that Qualcomm's future results will push the score up (or pull it down).  Revisit GCFR2 (https://gcfr2.com) occasionally for updates on Qualcomm's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

---------------

 #qualcomm    #qcom    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis

PSX: Gauge Analysis (updated March 1, 2021)

I have analyzed Phillips 66's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

Phillips 66 is an energy company with refining, midstream, downstream, and chemical operations. The company's roots go back to the merger between the independent Phillips Petroleum company and Conoco in 2002.  Ten years later, ConocoPhillips decided it would focus on exploration and production, and it spun off the rest of its businesses as a separate company, which it named after the iconic "Phillips 66" brand.  Phillips 66 operates refineries for converting crude oil (and, eventually, more eco-friendly oils) into gasoline and other fuels, which are sold at branded gas stations and other outlets.  The company's chemicals business is a 50 percent share of Chevron Phillips Chemicals Company.  Phillips 66 also has a significant interest in the pipelines and terminals that bring energy products to the company's refineries by owning 76 percent of Phillips 66 Partners (a master limited partnership). The environmental impact of one of the partnership's assets, its 25-percent stake in the Dakota Access pipeline, is being scrutinized carefully and could be shut down.  Phillips 66 (the corporation) is now considering options for Phillips 66 Partners, which could include "a merger, reorganization, consolidation or other take-private transaction ... or other material changes to the Partnership’s business or capital or governance structure."

Phillips incurred a loss of $4 billion, $9.05 per share, on revenue of $64 billion during the last 12 months.  In the quarter that ended on December 31, 2020, Phillips lost $1.23 per share on a GAAP basis, and it lost $1.15 per share after non-GAAP adjustments and exclusions.  See Phillips's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of Phillips now trade for about $83 each, giving the company a market value of $36 billion. These shares can be found in the Standard and Poors 500, New York Stock Exchange Composite, and Russell 1000 stock indices.

Analysis Results:

Phillips's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments.

1. The Company's Size is Substantial: GREEN

    Market Value: $36.5 billion (large cap)

2. The Company is Conservatively Financed: RED

    Current ratio = 1.4 (>2.0 is conservative)

    Long-term debt/Working Capital = 397% (<150% is conservative)

3. The Company Generates Stable Earnings: RED

    Sixteen positive quarterly earnings reports in last 5 years (worrisome)

    Earnings variability = 123% (very high)

4. The Company Exhibits Earnings Growth: RED

    Owner Earnings growth rate (trailing year) = N/A 

    Owner Earnings growth rate (five-year average) = N/A 

    Free Cash Flow growth rate (trailing year) = N/A 

    Free Cash Flow growth rate (five-year average) =  N/A

5. The Company is Efficiently Profitable: RED

    Cash Flow Return On Invested Capital = 6% (so-so)

    Operating Profit/Sales = N/A (excellent)

6. The Company Pays a Healthy Dividend: YELLOW

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 11% (good)

    Dividend = N/A of last year's FCF 

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = N/A 

    Price/GAAP Earnings (five-year average) = 18.4 (moderate to pricey)

    Free Cash Flow/Market Value = -2.2% (not acceptable, less than the five-year average of 2.9%)

    Acquirer's Multiple = 999.0 (very expensive)

    Price/Book Value = 1.7 (about the same as its five-year average)

    Price/Sales = 0.6 (about the same as its five-year average)

In summary, the analysis assigned Phillips 66 one GREEN, one YELLOW, and five RED grades.  The resulting Overall Score is 13 of the 100 possible points, which is low.  The score is below the 60-point GCFR threshold, and, therefore, Phillips does not satisfy the GCFR criteria for investment consideration at this time.

The Overall Score would only increase to 21 points if the share price were to fall by 50 percent, from $83.05 to $41.38, all else being equal. It is also possible that Phillips's future results will push the score up (or pull it down).  Revisit GCFR2 (https://gcfr2.com) occasionally for updates on Phillips's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

---------------

 #phillips    #psx    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis

CSCO: Gauge Analysis (updated February 28, 2021)

I have analyzed Cisco Systems's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

Founded in 1984, Cisco sells products and services for connecting devices via the Internet.  The company's products are categorized as infrastructure platforms (switches, routers, wireless items, and the data center products); applications (teleconferencing and communications), and security.  Services are a separate category makes products related to the following technologies: software-defined wide area networks, cloud computing, 5G and WiFi-6, optical networking, next generation silicon, and artificial intelligence.  A frequent acquirer of other companies, Cisco expects it will soon complete the $4.5 billion acquisition of Acacia Communications, Inc., a company that sells high-speed coherent optical interconnect products.

Cisco recorded profits of $10 billion, $2.39 per share, on revenue of $48 billion during the last four quarters.  In the quarter that ended on January 23, 2021, Cisco earned $0.60 per share on a GAAP basis and $0.79 after non-GAAP adjustments and exclusions.  See Cisco's most recent quarterly report (https://tinyurl.com/y53k9r4x) and my review of their results relative to expectations (https://tinyurl.com/y87amk4d) for additional information.

Shares of Cisco now trade for about $45 each, giving the company a market value of $190 billion. These shares can be found in the Dow Jones Industrial Average, Standard and Poors 500, Standard and Poors 100, NASDAQ 100, and Russell 1000 stock indices.

Analysis Results:

Cisco's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments.

1. The Company's Size is Substantial: GREEN

    Market Value: $190.0 billion (mega-cap)

2. The Company is Conservatively Financed: GREEN

    Current ratio = 1.6 (>2.0 is conservative)

    Long-term debt/Working Capital = 57% (<150% is conservative)

3. The Company Generates Stable Earnings: YELLOW

    Nineteen positive quarterly earnings reports in last 5 years (almost perfect)

    Earnings variability = 55% (very high)

4. The Company Exhibits Earnings Growth: YELLOW

    Owner Earnings growth rate (trailing year) = -10% (poor)

    Owner Earnings growth rate (five-year average) = 33% (very good)

    Free Cash Flow growth rate (trailing year) = -3% (poor)

    Free Cash Flow growth rate (five-year average) = 4% (weak)

5. The Company is Efficiently Profitable: GREEN

    Cash Flow Return On Invested Capital = 29% (very good)

    Operating Profit/Sales = 28.5% (excellent)

6. The Company Pays a Healthy Dividend: GREEN

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 9% (fair)

    Dividend = 42% of last year's FCF (sustainable)

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = 17.5 (moderate to pricey)

    Price/GAAP Earnings (five-year average) = 24.1 (high)

    Free Cash Flow/Market Value = 7.6% (appealing, more than the five-year average of 7.4%)

    Acquirer's Multiple = 12.7 (reasonable)

    Price/Book Value = 4.9 (more expensive than the five-year average of 4.3)

    Price/Sales = 4.0 (about the same as its five-year average)

In summary, the analysis assigned Cisco Systems four GREEN, two YELLOW, and one RED grades.  The resulting Overall Score is 54 of the 100 possible points, which is not high enough.  The score is below the 60-point GCFR threshold, and, therefore, Cisco does not satisfy the GCFR criteria for investment consideration at this time.

The share price would theoretically have to fall by 9.5 percent, from $44.87 to $40.59, all else being equal, to lift the Overall Score to the 60-point threshold. It is also possible that Cisco's future results will push the score up (or pull it down).  Revisit GCFR2 (https://gcfr2.com) occasionally for updates on Cisco's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

---------------

 #cisco    #csco    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis

COP: Gauge Analysis (updated February 28, 2021)

I have analyzed ConocoPhillips's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

ConocoPhillips produced more than 1.1 million barrels of oil equivalent per day (BOE/D) in 2020 making it one the largest independent producers of oil and gas.  In January 2021, ConocoPhillips completed the acquisition of Concho Resources, a top producer in the Permian basin, in an all-stock transaction.  ConocoPhillips got its current name when Conoco merged with Phillips Petroleum in 2002.  A decade later, the company spun off its midstream and downstream assets as a new firm with the moniker, "Phillips 66."  ConocoPhillips manages its operations and reports financial results for the following six geographical regions: Alaska; Lower 48; Canada; Europe, Mideast, and North Africa; Asia Pacific, and Other International.   Earnings at ConocoPhillips (and most other energy companies) fell sharply in 2020 because actions to limit the spread of COVID-19 also suppressed the demand for energy.  Prices for energy products are recovering in 2021 as the economy begins to improve.

ConocoPhillips incurred a loss of $3 billion, $2.52 per share, on revenue of $19 billion during the last 12 months.  In the quarter that ended on December 31, 2020, ConocoPhillips lost $0.72 per share on a GAAP basis, and it lost $0.19 per share after non-GAAP adjustments and exclusions.  See ConocoPhillips's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of ConocoPhillips now trade for about $52 each, giving the company a market value of $56 billion. These shares can be found in the Standard and Poors 500, Standard and Poors 100, New York Stock Exchange Composite, and Russell 1000 stock indices.

Analysis Results:

ConocoPhillips's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments

1. The Company's Size is Substantial: GREEN

    Market Value: $55.8 billion (large cap)

2. The Company is Conservatively Financed: YELLOW

    Current ratio = 2.2 (>2.0 is conservative)

    Long-term debt/Working Capital = 220% (<150% is conservative)

3. The Company Generates Stable Earnings: RED

    Twelve positive quarterly earnings reports in last 5 years (scary)

    Earnings variability = N/A (not available)

4. The Company Exhibits Earnings Growth: GREEN

    Owner Earnings growth rate (trailing year) = -92% (poor)

    Owner Earnings growth rate (five-year average) = 1328% (terrific)

    Free Cash Flow growth rate (trailing year) = -98% (poor)

    Free Cash Flow growth rate (five-year average) = 931% (terrific)

5. The Company is Efficiently Profitable: RED

    Cash Flow Return On Invested Capital = 10% (decent)

    Operating Profit/Sales = N/A (excellent)

6. The Company Pays a Healthy Dividend: YELLOW

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 14% (good)

    Dividend = 2094% of last year's FCF (sustainability is a significant concern)

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = 135.1 (very expensive)

    Price/GAAP Earnings (five-year average) = 45.8 (expensive)

    Free Cash Flow/Market Value = 0.2% (low, less than the five-year average of 3.7%)

    Acquirer's Multiple = 999.0 (very expensive)

    Price/Book Value = 1.9 (about the same as its five-year average)

    Price/Sales = 3.0 (more expensive than the five-year average of 2.2)

In summary, the analysis assigned ConocoPhillips two GREEN, two YELLOW, and three RED grades.  The resulting Overall Score is 24 of the 100 possible points, which is low.  The score is below the 60-point GCFR threshold, and, therefore, ConocoPhillips does not satisfy the GCFR criteria for investment consideration at this time.

The Overall Score would only increase to 34 points if the share price were to fall by 50 percent, from $51.97 to $25.89, all else being equal. It is also possible that ConocoPhillips's future results will push the score up (or pull it down).  Revisit GCFR2 (https://gcfr2.com) occasionally for updates on ConocoPhillips's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

---------------

 #conocophillips    #cop    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis

BR: Gauge Analysis (updated February 28, 2021)

I have analyzed Broadridge Financial Solutions's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

Broadridge provides investor communications, securities processing and other financial services. Broadridge performs proxy voting services for more than half of all public companies and mutual funds globally, and in an average day it processes $8 trillion in fixed income and equity trades.  Broadridge was spun off from Automatic Data Processing in 2007.  In 2019, Broadridge completed four acquisitions: Rockall, a provider of securities-based lending and collateral management solutions; RPM, a provider of enterprise wealth management software solutions and services; retirement plan custody and trust assets from TD Ameritrade; and, Shadow Financial Systems, which had cryptocurrency and Exchange Traded Derivatives capabilities.  On December 31, 2019, Broadridge and IBM agreed that IBM will operate, manage and support the Broadridge Private Cloud for the next 10 years.

Broadridge recorded profits of $519 million, $4.40 per share, on revenue of $5 billion during the last 12 months.  In the quarter that ended on December 31, 2020, Broadridge earned $0.48 per share on a GAAP basis, and it gained $0.73 per share after non-GAAP adjustments and exclusions.  See Broadridge's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of Broadridge now trade for about $142 each, giving the company a market value of $17 billion. These shares can be found in the Standard and Poors 500, New York Stock Exchange Composite, and Russell 1000 stock indices.

Analysis Results:

Broadridge's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments

1. The Company's Size is Substantial: GREEN

    Market Value: $16.8 billion (large cap)

2. The Company is Conservatively Financed: RED

    Current ratio = 1.4 (>2.0 is conservative)

    Long-term debt/Working Capital = 570% (<150% is conservative)

3. The Company Generates Stable Earnings: GREEN

    Twenty positive quarterly earnings reports in last 5 years (perfect)

    Earnings variability = 0% (negligible)

4. The Company Exhibits Earnings Growth: GREEN

    Owner Earnings growth rate (trailing year) = 20% (very good)

    Owner Earnings growth rate (five-year average) = 20% (very good)

    Free Cash Flow growth rate (trailing year) = 22% (very good)

    Free Cash Flow growth rate (five-year average) = 11% (good)

5. The Company is Efficiently Profitable: GREEN

    Cash Flow Return On Invested Capital = 22% (good)

    Operating Profit/Sales = 14.6% (good)

6. The Company Pays a Healthy Dividend: GREEN

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 17% (very good)

    Dividend = 46% of last year's FCF (sustainable)

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = 22.7 (moderate to pricey)

    Price/GAAP Earnings (five-year average) = 41.3 (expensive)

    Free Cash Flow/Market Value = 3.4% (low, less than the five-year average of 4.0%)

    Acquirer's Multiple = 26.6 (very expensive)

    Price/Book Value = 11.7 (more expensive than the five-year average of 10.4)

    Price/Sales = 3.6 (more expensive than the five-year average of 2.9)

In summary, the analysis assigned Broadridge Financial Solutions five GREEN, zero YELLOW, and two RED grades.  The resulting Overall Score is 46 of the 100 possible points, which is low.  The score is below the 60-point GCFR threshold, and, therefore, Broadridge does not satisfy the GCFR criteria for investment consideration at this time.

The share price would theoretically have to fall by 38.2 percent, from $142.49 to $88.06, all else being equal, to lift the Overall Score to the 60-point threshold. It is also possible that Broadridge's future results will push the score up (or pull it down).  Revisit GCFR2 (https://gcfr2.com) occasionally for updates on Broadridge's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

---------------

 #broadridge    #br    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis 

PEP: Gauge Analysis (updated February 27, 2021)

I have analyzed PepsiCo's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

PepsiCo is a global food and beverage company. In addition to the eponymous soft drinks, PepsiCo also sells bottled water, juices, coffee, and teas.  In April 2020, PepsiCo acquired energy drink maker Rockstar for $3.85 billion.  PepsiCo also owns the Frito-Lay snack food business, which is a significant contributor to the company's overall profits, and Quaker Foods. 

PepsiCo recorded profits of $7 billion, $5.13 per share, on revenue of $70 billion during the last 12 months.  In the quarter that ended on December 26, 2020, PepsiCo earned $1.33 per share on a GAAP basis, and it gained $1.47 per share after non-GAAP adjustments and exclusions.  See PepsiCo's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of PepsiCo now trade for about $129 each, giving the company a market value of $179 billion. These shares can be found in the Standard and Poors 500, Standard and Poors 100, Standard and Poors Dividend Aristocrats, NASDAQ 100, and Russell 1000 stock indices.

Analysis Results:

PepsiCo's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments

1. The Company's Size is Substantial: GREEN

    Market Value: $179.3 billion (mega-cap)

2. The Company is Conservatively Financed: RED

    Current ratio = 1.0 (>2.0 is conservative)

    Long-term debt/Equity = 298% (<100% is conservative)

3. The Company Generates Stable Earnings: YELLOW

    Nineteen positive quarterly earnings reports in last 5 years (almost perfect)

    Earnings variability = 28% (high)

4. The Company Exhibits Earnings Growth: YELLOW

    Owner Earnings growth rate (trailing year) = 14% (good)

    Owner Earnings growth rate (five-year average) = -3% (poor)

    Free Cash Flow growth rate (trailing year) = 18% (good)

    Free Cash Flow growth rate (five-year average) = -6% (poor)

5. The Company is Efficiently Profitable: GREEN

    Cash Flow Return On Invested Capital = 20% (good)

    Operating Profit/Sales = 14.3% (good)

6. The Company Pays a Healthy Dividend: YELLOW

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 8% (fair)

    Dividend = 88% of last year's FCF (sustainability is a significant concern)

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = 28.2 (high)

    Price/GAAP Earnings (five-year average) = 24.1 (high)

    Free Cash Flow/Market Value = 3.6% (low, less than the five-year average of 4.0%)

    Acquirer's Multiple = 21.2 (expensive)

    Price/Book Value = 13.2 (about the same as its five-year average)

    Price/Sales = 2.5 (about the same as its five-year average)

In summary, the analysis assigned PepsiCo two GREEN, three YELLOW, and two RED grades.  The resulting Overall Score is 29 of the 100 possible points, which is low.  The score is below the 60-point GCFR threshold, and, therefore, PepsiCo does not satisfy the GCFR criteria for investment consideration at this time.

The share price would theoretically have to fall by 49.7 percent, from $129.19 to $65.01, all else being equal, to lift the Overall Score to the 60-point threshold. It is also possible that PepsiCo's future results will push the score up (or pull it down).  Revisit GCFR2 (https://gcfr2.com) occasionally for updates on PepsiCo's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

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 #pepsico    #pep    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis

AAPL: Gauge Analysis (updated February 26, 2021)

I have analyzed Apple's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

Apple became one of the world's most valuable companies by designing and selling stylish, easy-to-use computers, tablets, smartphones, music players, and watches, as well as software and media.  Services for these devices are also a lucrative and growing business for Apple, but selling iPhones is, by far, the company's largest single revenue source. The transition to 5G mobile technology may serve to boost iPhone sales even higher.  Apple is now selling laptops with fast, power-efficient processors it designed, replacing chips made by Intel, and they expectation is that other Apple-designed chips will be included in future products.  Apple's shares split 4-for-1 on 28 August 2020; they had split 7-for-1 just six years earlier.

Apple recorded profits of $64 billion, $3.74 per share, on revenue of $294 billion during the last 12 months.  In the quarter that ended on December 26, 2020, Apple earned $1.68 per share on a GAAP basis.  See Apple's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of Apple now trade for about $121 each, giving the company a market value of $2.1 trillion. These shares can be found in the Dow Jones Industrial Average, Standard and Poors 500, Standard and Poors 100, NASDAQ 100, and Russell 1000 stock indices.

Analysis Results:

Apple's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments

1. The Company's Size is Substantial: GREEN

    Market Value: $2.1 trillion (mega-cap)

2. The Company is Conservatively Financed: RED

    Current ratio = 1.2 (>2.0 is conservative)

    Long-term debt/Working Capital = 460% (<150% is conservative)

3. The Company Generates Stable Earnings: GREEN

    Twenty positive quarterly earnings reports in last 5 years (perfect)

    Earnings variability = N/A (negligible)

4. The Company Exhibits Earnings Growth: GREEN

    Owner Earnings growth rate (trailing year) = 13% (good)

    Owner Earnings growth rate (five-year average) = 19% (good)

    Free Cash Flow growth rate (trailing year) = 25% (very good)

    Free Cash Flow growth rate (five-year average) = 11% (good)

5. The Company is Efficiently Profitable: GREEN

    Cash Flow Return On Invested Capital = 47% (excellent)

    Operating Profit/Sales = 25.2% (excellent)

6. The Company Pays a Healthy Dividend: GREEN

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 10% (fair)

    Dividend = 17% of last year's FCF (easily sustainable with room to grow)

7. The Company's Shares are Fairly Valued: RED

    Price/Owner Earnings (last year) = 31.3 (very expensive)

    Price/GAAP Earnings (five-year average) = 42.0 (expensive)

    Free Cash Flow/Market Value = 3.9% (low, less than the five-year average of 6.6%)

    Acquirer's Multiple = 28.4 (very expensive)

    Price/Book Value = 31.3 (more expensive than the five-year average of 10.6)

    Price/Sales = 7.1 (more expensive than the five-year average of 3.9)

In summary, the analysis assigned Apple five GREEN, zero YELLOW, and two RED grades.  The resulting Overall Score is 48 of the 100 possible points, which is low.  The score is below the 60-point GCFR threshold, and, therefore, Apple does not satisfy the GCFR criteria for investment consideration at this time.

The share price would theoretically have to fall by 47.9 percent, from $121.26 to $63.20, all else being equal, to lift the Overall Score to the 60-point threshold. It is also possible that Apple's future results will push the score up (or pull it down).  Revisit GCFR2 occasionally for updates on Apple's performance and the latest GCFR gauges and scores.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

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 #apple    #aapl    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis

VZ: Gauge Analysis (updated February 25, 2021)

I have analyzed Verizon Communications's financial statements to determine whether the company's shares can be considered a good value and reasonable risk for prudent investors. My analytical approach was inspired by Benjamin Graham's recommendations in "The Intelligent Investor," which was first published in 1949 and is still one of the best-known books about value investing. I modified Graham's specific suggestions to fit modern times; however, the goal is the same: find stocks that are inexpensive relative to the company's strengths and aren't excessively risky.

The analysis uses gauges to assess how well the company satisfies seven specific investment criteria.  GREEN, YELLOW, and RED grades indicate whether the criteria are fully satisfied, partially satisfied, or not satisfied.  An Overall Score between zero and 100, which takes all gauges into account, is also computed.  While the analysis includes both growth and value criteria, the Overall Score calculation by design favors companies with good value characteristics over fast-growing, but expensive firms.  An Overall Score above 60 signifies the company is worth examining in more detail; a score over 80 is a rare accomplishment.

First, a quick review of the company itself.

Verizon Communications is a major provider of wired and wireless voice and data communications services to U.S. businesses and consumers. The company took its current form in 2000 when Bell Atlantic merged with GTE.  In 2013, Verizon agreed to pay Vodafone $130 billion in order to assume complete ownership of Verizon Wireless, which had been a joint venture.  In February 2021, Verizon announced it would be paying $45 billion for C-band spectrum licenses it won at an auction run by the Federal Communications Commission (FCC).  Verizon plans to use this spectrum as part of its transition to the newest, fifth-generation ("5G") wireless technology.  Separately, Verizon announced plans in September 2020 to acquire Tracfone, the leading pre-paid and value mobile service provider.  

Verizon recorded profits of $18 billion, $4.30 per share, on revenue of $128 billion during the last 12 months.  In the quarter that ended on December 31, 2020, Verizon earned $1.11 per share on a GAAP basis, and it gained $1.21 per share after non-GAAP adjustments and exclusions.  See Verizon's most recent quarterly report and my review of their results relative to expectations for additional information.

Shares of Verizon now trade for about $57 each, giving the company a market value of $234 billion. These shares can be found in the Dow Jones Industrial Average, Standard and Poors 500, Standard and Poors 100, New York Stock Exchange Composite, and Russell 1000 stock indices.

Analysis Results:

Verizon's grades on the seven investment criteria are listed below, along with some of the financial figures that influenced these color assignments

1. The Company's Size is Substantial: GREEN

    Market Value: $234.2 billion (mega-cap)

2. The Company is Conservatively Financed: RED

    Current ratio = 1.4 (>2.0 is conservative)

    Long-term debt/Working Capital = 825% (<150% is conservative)

3. The Company Generates Stable Earnings: YELLOW

    Twenty positive quarterly earnings reports in last 5 years (perfect)

    Earnings variability = 32% (high)

4. The Company Exhibits Earnings Growth: GREEN

    Owner Earnings growth rate (trailing year) = -4% (poor)

    Owner Earnings growth rate (five-year average) = 24% (very good)

    Free Cash Flow growth rate (trailing year) = 32% (very good)

    Free Cash Flow growth rate (five-year average) = 45% (terrific)

5. The Company is Efficiently Profitable: GREEN

    Cash Flow Return On Invested Capital = 22% (good)

    Operating Profit/Sales = 22.4% (excellent)

6. The Company Pays a Healthy Dividend: GREEN

    Dividends paid for the last 7 years or longer

    Dividend 5-year average growth rate = 2.2% (weak)

    Dividend = 43% of last year's FCF (sustainable)

7. The Company's Shares are Fairly Valued: GREEN

    Price/Owner Earnings (last year) = 10.2 (appealing)

    Price/GAAP Earnings (five-year average) = 12.1 (appealing)

    Free Cash Flow/Market Value = 10.1% (very appealing), more than the five-year average of 6.2%)

    Acquirer's Multiple = 11.9 (inexpensive)

    Price/Book Value = 3.4 (less expensive than the five-year average of 5.7)

    Price/Sales = 1.8 (about the same as its five-year average)

In summary, the analysis assigned Verizon Communications five GREEN, one YELLOW, and one RED grades.  The resulting Overall Score is 71 of the 100 possible points, which is an excellent result.  The score is above the 60-point GCFR threshold, and, therefore, Verizon is worthy of deeper investment research.

Check GCFR2 occasionally to see how the Overall Score changes after the company releases a new earnings report or the share price rises or falls.

This analysis reported here is a limited evaluation of the subject company.  It does not consider all material facts about the company's operations, finances, or future prospects.  The analysis relies on publicly available financial data assumed, but not guaranteed, to be accurate and consistent.  Readers are strongly encouraged to verify all data and perform their own independent analyses.  Other analytical approaches and screening criteria will be more applicable to investors having different goals, circumstances, and tolerance for investment risk.  This post is not and should not be considered investment advice, nor does it constitute an offer or solicitation to buy or sell any security. The author might have a long or short position in the subject company and/or its competitors. The analytical approach, the criteria used, and all calculations are subject to change without notification.

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 #verizon    #vz    #gauges  #gcfr  #gcfr2 #valueinvesting   #nac_financialanalysis