logo
  Join        Login             Stock Quote

Retail Trio Scores On Guru Screens

 November 27, 2012 03:00 PM
 


by John Reese, editor Validea

Our approach is buy stocks using investment models that are based on the strategies of long-standing experts.

Guess? Inc. (GES) earns a 100% score on our Benjamin Graham screen. Ross Stores (ROST) earns a 91% score on our Peter Lynch-based model. And The TJX Companies (TJX) earns a 90% score on our Kenneth Fisher model.

[Related -Ross Stores, Inc. (ROST): A Look At Multiple Long-Term Growth Catalysts]

Guess? designs, markets, distributes and licenses apparel and accessories for men, women and children.

To pass the Ben Graham value model, a stock's current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. GES's current ratio of 2.80 passes the test.

Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years.

Companies with this type of growth tend to be financially secure and have proven themselves over time. GES's EPS growth over that period of 2,964.3% passes the EPS growth test.

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15.

[Related -Guess?, Inc. (GES) Q3 Earnings Preview: November Is A Perfect Fit]

Stocks with moderate P/Es are more defensive by nature. GES's P/E of 9.55 (using the current PE) passes this test.+

The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. GES's Price/Book ratio is 1.97, while the P/E is 9.55. GES passes the Price/Book test.

As for Ross Stores, our Peter Lynch price-to-earnings growth model examines the P/E (18.84) relative to the growth rate (31.29%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company.

This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for ROST (0.60) makes it favorable.

This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years.

This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for ROST is 31.3%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is acceptable.

This methodology would consider the Debt/Equity ratio for ROST (9.01%) to be exceptionally low (equity is at least ten times debt). This ratio is one quick way to determine the financial strength of the company.

We assess the TJX Companies based on our Kenneth Fisher price to sales mode; using this approach, a prospective company should have a low Price/Sales ratio.

JX's P/S ratio of 1.25 based on trailing 12 month sales, falls within the "good values" range for non-cyclical companies and is considered attractive.

Less debt equals less risk according to this methodology. TJX's Debt/Equity of 23.19% is acceptable, thus passing the test.

This methodology looks for companies that have an inflation adjusted EPS growth rate greater than 15%. TJX's inflation adjusted EPS growth rate of 19.15% passes the test.

This methodology looks for companies that have a positive free cash per share. Companies should have enough free cash available to sustain three years of losses.

This is based on the premise that companies without cash will soon be out of business. TJX's free cash per share of 1.08 passes this criterion.

This methodology looks for companies that have an average net profit margin of 5% or greater over a three year period. TJX, whose three year net profit margin averages 6.18%, passes this evaluation.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageADP: Private-Sector Payrolls Rise 213k In September

Private-sector employment continued to rise at a moderate pace in September, according to this morning’s read on...

article imageSuspicions Over ADP Employment Make-up

he private payroll processor noted that the sixth continuous payroll gain above 200,000 was a “positive read on...

article imageLessons From the Golden Bear

How attractive is gold when it comes to investing over the long read on...

article imagePondering The Slide In US Inflation Expectations

The Treasury market’s inflation forecast via 10-year Notes continues to fall and the US stock market has read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.