Tag archive for "revenue"

Barron's 400 Diary

New B400 Looks Ready to Uphold ‘Growth’ Tradition

No Comments 24 March 2014

There is a lot of interest in the newly reconstituted Barron’s 400 Index, and the question underlying much of it is: Are the companies in it starting today as “growthy” as the old bunch?

It sure looks like they are. Positive growth and value characteristics are among the 24 factors used by MarketGrader to evaluate some 6,000 U.S. stocks daily and to choose this set of components for the index. It is the combination of these factors with the overall financial strength of the selected companies that puts the Barron’s 400 in the category of “growth at a reasonable price.”

One way to check out growth prospects is to see how the new 400 have performed in the recent past. We did that by sorting the companies into their sectors, adding up their net income and revenue for the most recent trailing 12 months and comparing those totals with the same period a year earlier. Here are the results:

Net Income

Revenue

Consumer Discretionary

29.76%

5.99%

Consumer Staples

33.89%

3.09%

Energy

73.85%

-0.21%

Financials

29.17%

5.84%

Health Care

16.34%

10.23%

Industrials

50.86%

6.45%

Materials

24.87%

3.33%

Technology

7.42%

6.90%

Racking up double-digit profit gains on mostly moderate revenue increases shows that these companies know how to grow efficiently. Six of the sectors surpassed the average five-year annual growth rate in per-share earnings for the index’s former components of 22.2%, a figure inflated a bit by share buybacks.

The laggard, technology, is in position now to reap the benefits of greater capital spending to boost productivity as the economy moves to a new level and jobs must be added to increase output. Energy looks like the winner with its ballooning profit and slight revenue decline, but it’s really an anomaly. Sales are down because of the increasing supply of fuels, which caused a pullback in exploration and development of new sources. It is that temporary retreat which caused the profit spike. In time, the industry will get back to normal.

Here are two more data points that buttress the expectation that the refreshed Barron’s 400 will uphold the growth tradition. First, the index’s forward price-earnings ratio—based on security analysts’ forecasts for this year—is 17.6, a full point below the last reading on the former component set. Second, the return on equity for the new components averages 50.5%, compared to 27.5% for the old set. In short, the valuation of the Barron’s 400 has some room to grow and history suggests this new set of companies is experienced in growing their stock prices.

Mr. Market will have a lot to say about how these numbers will look down the road. But here at the starting line of a six-month run for these companies and stocks, the Barron’s 400 appears to be in great shape to take advantage of every break that comes our way.

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Barron's 400 Diary

In Early Reports, Large B400 Stocks Miss Profit Forecasts

No Comments 30 October 2013

The bigger they are, the harder they fall.

At least, that’s the story with 28% of the Barron’s 400 Index components that have reported third-quarter financial results. Large stocks on average were the only size segment that fell short of securities analysts’ earnings forecasts and surprised the least on revenue.

The story is mixed for the other size segments, too. Mid-sized stocks had the smaller of the two average positive earnings surprises, but excelled in exceeding revenue expectations. Small stocks had the reverse situation, topping mid-sized stocks in average earnings surprises but trailing in revenue.

Here is the summary of surprises by size segment in the Barron’s 400, once again using the market-capitalization divisions of the Dow Jones U.S. Total Stock Market Index:

Average Surprise
EPS Revenue
Large (~> $14 billion -0.46% 1.61%
Mid (~$3.9 to $14 billion 2.33% 4.75%
Small (~<$3.9 billion 2.60% 1.75%

This data is presented with a major caveat. These averages are based on early reports, with the majority of companies yet to announce results. That means the average surprises could change a lot as more reports roll in.

It also means that outsized results can have an extraordinary effect on averages. For example, J.P. Morgan Chase & Co. reported a third-quarter loss of 17 cents a share rather than the expected profit of $1.19. This “disappointment” undoubtedly dragged down the large-stock segment average on earnings.

Just as a reminder, the equally weighted Barron’s 400 Index is comprised of 94 large stocks (23.5%), 100 mid-sized stocks (25%) and 206 small stocks (51.5%).

We’ll see what happens as the earnings-reporting season moves along. At least we have a baseline for the growing accumulation of Barron’s 400 component results.

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Barron's 400 Diary

Sales and Earnings Increases Underscore B400’s Growth Tilt

No Comments 31 May 2013

For many investors, “growth” means how much and how consistently a company can increase its sales and earnings.

These investors care little about the academic designations of “growth” and “value” based on the ratio of stock prices to net assets, aka “book value.” (See “B400 Index Tilts Strongly to Growth Based on P/B Ratios”.) They know that companies report sales and earnings every quarter, and those numbers had better top those of a year earlier or. . . well, disappointments can be rudely received.

MarketGrader measures both the short-term and long-term growth of the company’s top line (revenue) and bottom line (net income) using quarterly and trailing twelve-month data. Of course, higher growth rates get better scores than lower ones, which helps explain why the Barron’s 400 Index has more stocks of smaller companies than of larger, mature, slower-growing corporations.

The following table compares median quarter-over-quarter sales growth, in percent, of Barron’s 400 Index components against those of the 6,000-stock universe from which MarketGrader selects them. The medians vary considerably by sector.

Median Sales Growth, in %,
Quarter Over Quarter
Sector B400 Universe
Consumer Discretionary 10.57 4.80
Consumer Staples 5.86 3.23
Energy 8.87 4.56
Financials 8.48 1.56
Health Care 9.81 4.30
Industrials 4.22 1.75
Materials 5.26 −2.02
Technology 9.59 3.56
Utilities 12.03 6.53

While quarterly results get their due, long-term growth is more significant. Changes in net income are measured, naturally, and so is the growth in earnings per share. EPS growth is affected by fluctuations in both profits and outstanding shares, which in turn reflect the issuance of additional stock and share buybacks.

The following table compares median EPS growth, in percent, of the Barron’s 400 components with those of the broader universe. Again, sector variations are important.

Annualized Median EPS
Growth Over 3 Years
Sector B400 Universe
Consumer Discretionary 24.54 4.46
Consumer Staples 15.44 8.68
Energy 30.78 8.36
Financials 23.95 11.84
Health Care 14.65 8.41
Industrials 30.82 13.57
Materials 15.89 7.22
Technology 26.48 6.65
Utilities −24.11 4.46

The Barron’s 400 has only one utility, Questar Corp. It has been struggling with fast-falling natural gas prices over the past three years. While its EPS growth is negative, it has continued to post profits during this period.

Though the robust growth of Barron’s 400 components is impressive, there are some that fall below the median EPS growth of the universe. The total is 48, or 12% of all components.

The largest number is found in the health care sector, where they total 14. That’s 3.5% of all components but 30% of the sector. Second largest is industrials with 11. That amounts to 2.7% overall, though just 14% of the sector because it has many more components.

Obviously, these companies flunked MarketGrader’s three-year EPS growth test. But to be in the index they had to make up the difference with high grades in the 23 other measurement categories. Evaluating financial strength requires a comprehensive assessment.

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About MG

New Feature: Expanded Company Profile Page

No Comments 01 October 2011

Those of you who subscribe to our web research service may have noticed this morning a few new and expanded sections of the web site. For those who have not seen them we encourage you to have a look and send us your feedback.

The first new page, or, actually, enhanced page, is the ‘Company Profile.’ We redesigned the existing ‘Profile’ page, reorganized some of its existing content and incorporated quite a few new elements. The ‘Company Profile’ page, available for every company covered by MarketGrader.com, can be reached by selecting the first option from the drop-down menu off the ‘Company’ link in the ‘Stock Analysis’ section of ‘StockGrader.’ At the top of the page you will find a complete description of the company’s business describing what it does, its products and, in some cases, some of the market segments in which it competes, among other general facts and company background information. Below it we have added a new information grid with items such as the stock’s 52-week range, the 50 and 200-day moving average values and the number of rating changes since we initiated coverage. To the right of the grid you’ll see the company’s address, web site and key executives.

On the page’s third tier we have added two brand new charts (long overdue, we know) that show the company’s revenue and net income per employee alongside the top five companies in the industry and the group’s average. This will provide you with additional context about each company’s operating efficiency and profitability in addition to our wealth of indicators, metrics and analyses available throughout our site. To the right of these two charts you may see the largest and smallest company in the industry as well as the group’s overall rating breakdown.

Finally, at the bottom of the page you will find an enhanced and expanded ‘Industry Ranking’ table that shows the top ten graded companies in the group along with a few other indicators and fundamental metrics such as revenue, net income, free cash flow and price to earnings ratio.

We hope our new ‘Company Profile’ page becomes a good starting point in your research process when evaluating new investment candidates. We’ll discuss our new ‘Stock Ideas’ pages, also launched this morning, in upcoming posts.

Intel Corp INTC Profile

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