Mettler-Toledo International Inc. (MTD) of the Healthcare sector has an ERP5 rank of 2730. The ERP5 Rank is an investment tool that analysts use to discover undervalued companies. The ERP5 looks at the Price to Book ratio, Earnings Yield, ROIC and 5 year average ROIC. The lower the ERP5 rank, the more undervalued a company is thought to be.
Investors looking to secure stock market profits may be tweaking an existing strategy or looking to devise a brand new one. As the stock market keeps charging higher, investors will have to figure out how they want to play the next few months. Identifying market tops and possible correction levels may be very tricky. With the markets trading at current levels, the situation for the average investor may be widely varied. Some investors will be trading with a shorter-term plan, while others may be focused on a longer-term investment time frame. There are many financial professionals who are predicting a sharp reversal in the stock market, but there are also those who believe that the upswing will keep pushing stocks higher over the coming months. Investors will need to decide for themselves which way they think the momentum is going to swing and prepare accordingly.
Benjamin Graham, professor and founder of value investing principles, was one of the first to consistently screen the market looking for bargain companies based on value factors. He didn’t have databases such as ValueSignals at his disposal, but used people like his apprentice Warren Buffet to fill out stock sheets with the most important data.
Graham was always on the watch for firms that were so discounted, that if the company went into liquidation, the proceeds of the assets would still return a profit.
The ratio he used to identify these companies was Net Current Asset Value or NCAV. This ratio is much more stringent compared to book value (total assets – total liabilities) and is calculated as follows:
NCAV = Current Assets − Total Liabilities
Current Assets = Cash & ST Investments + Inventories + Accounts Receivable
Graham was only happy if he could buy the company at 2/3 of the NCAV. That’s the sort of margin of safety he was looking for.
This strategy was very successful during the years after Graham published it in his book ‘Security analysis’ in 1934 and also in more recent studies it has proven to provide superior results. A study done by the State University of New York to prove the effectiveness of this strategy showed that from the period of 1970 to 1983 an investor could have earned an average return of 29.4%, by purchasing stocks that fulfilled Graham’s requirement and holding them for one year. Nowadays it’s very difficult to find companies that meet Graham’s criteria.
We calculate NCAV to Market as follows:
NCAV-to-Market Ratio = NCAV divided by Market Cap
Mettler-Toledo International Inc. (MTD) has an NCAV to Market value of -0.073456.
The EBITDA Yield is a great way to determine a company’s profitability. This number is calculated by dividing a company’s earnings before interest, taxes, depreciation and amortization by the company’s enterprise value. Enterprise Value is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. The EBITDA Yield for Mettler-Toledo International Inc. (MTD) is 580624.5511.
Earnings Yield is calculated by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the company. The Earnings Yield for Mettler-Toledo International Inc. (MTD) is 0.043639. Earnings Yield helps investors measure the return on investment for a given company. Similarly, the Earnings Yield Five Year Average is the five year average operating income or EBIT divided by the current enterprise value. The Earnings Yield Five Year average for Mettler-Toledo International Inc. is 0.033911.
The FCF Yield 5yr Average is calculated by taking the five year average free cash flow of a company, and dividing it by the current enterprise value. Enterprise Value is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents. The average FCF of a company is determined by looking at the cash generated by operations of the company. The Free Cash Flow Yield 5 Year Average of Mettler-Toledo International Inc. (MTD) is 0.021561.
Market watchers may also be following some quality ratios for Mettler-Toledo International Inc. (MTD). Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.The Gross profitability for (MTD) is 0.649088.
A ratio used to find the value of a company by comparing the book value of a firm to its market value. Book value is calculated by looking at the firm’s historical cost, or accounting value. Market value is determined in the stock market through its market capitalization.
Book-to-Market Ratio = Common Shareholders Equity Divided by Market Cap.
The book to market ratio for Mettler-Toledo International Inc. (MTD) is 0.03703.
Adding it All Up
The Piotroski F-Score is a scoring system between 1-9 that determines a firm’s financial strength. The score helps determine if a company’s stock is valuable or not. The Piotroski F-Score of Mettler-Toledo International Inc. (MTD) is 5. A score of nine indicates a high value stock, while a score of one indicates a low value stock. The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings. It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue. The score is also determined by change in gross margin and change in asset turnover.
Coming up with a viable and solid stock investment plan might be on the minds of many individual investors. A solid plan might entail defining the overall objective and recognizing tangible restraints. Figuring out these details may help the investor focus on the most important aspects of investing in the stock market. Following strategies set forth by others may work, but they may also leave the investor in a quandary. What worked in the past for one person may not work in the future for another. Investors may need to craft the plan keeping in mind the long-term goals. Although some investors and traders focus on the short-term, many investors are more interested in making the grade over a number of years, and not a number of days or months. Plans may need to be set up so that they are flexible and have the ability to withstand unforeseen shifts and rapidly changing stock market scenarios. Flexibility may end up being the key to a successful plan down the road. Investors may also want to do regular check-ins on portfolio performance in order to keep tabs on how well the plan is working.
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