The Applied Finance Group (AFG), known for providing quality institutional equity research to its clients in the United States, has recently developed a global research site to expand its research coverage to over 15 countries around the world, and begin serving investors internationally. AFG’s measure of corporate performance, the Economic Margin (EM), has proven to be effective at understanding a company’s true economic profitability not only across different sizes, styles, and sector universes, but also across different countries.
AFG’s insights into understanding what a company is really earning above or below its cost of capital (beyond traditional accounting distortions), its ability to understand the expectations embedded in current stock prices, and unique valuation techniques are what sets AFG apart. High quality research with a consistent methodology that provides measurable results no matter where your universe of stocks comes from is what has lead AFG to grow its client base across the US and now all across the globe.
Since a company’s EMs and expected changes in EMs have proven to have high correlation with market performance, we have decided to analyze the companies within Germany’s HDAX index to identify the companies expected to improve their EMs at a higher rate than their sector peers.
The 10 companies listed in the table below are projected to have a better EM improvement over the next year than their sector peers as well as have an attractive valuation according to AFG's valuation model. In addition, these companies appear attractive based on AFG's default investment opportunity signal and have a Management Quality Score that reflects a management team that understands how to create wealth for its shareholders. Based on this relative analysis and AFG's assessment of corporate performance, the 10 companies below appear as most attractive in the HDAX index and look like they will be the most likely to outperform.
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