Seeking Alpha
Profile| Send Message|
( followers)  

Evaluating stocks both and technical and fundamental metrics is considered a prudent way to invest. The following are the 7 stocks in a consistent downtrend making consecutive lower lows and lower highs, resulting in a price decline. Each relative low is below the preceding low, and each relative high is below the preceding high. The volumes in these securities are increasing suggesting reversal in the down trend. These 7 stocks are evaluated using the discounted earnings model and the sum of growth yield to price earnings.

Company earnings are very closely followed by many investors. Discounted earnings model is a popular model to estimate the worth of a company. The amount of future earnings from the business is estimated for each forecasted period and discounted at the appropriate discount rate to determine their present value. The present value of each period of estimated earnings for all future years are then added to determine the total present value. The last step determines the perpetual value. It's the residual value of the business at the end of the period of years being estimated. This value is discounted to its equivalent present value and added to the present value of the future earnings to determine total intrinsic value. Some investors like adding the book value to this number; we intentionally eliminated the book value as we are evaluating the companies based on earnings power. This model is commonly used to price IPO's and to evaluate company's worth in a M&A scenario.

A rule of thumb for stock valuation that is popular on Wall Street is to calculate the sum of the expected growth rate of a stock's earnings plus its dividend yield and divide this by its P-E ratio. The higher the ratio, the better, and the famed money manager Peter Lynch recommends investors select stocks with a ratio of 2 or higher and to avoid stocks with a ratio less than 1.

CSX Corp (NYSE:CSX): CSX Corporation and its subsidiaries provide rail-based transportation services. The company provides traditional rail service and the transport of intermodal containers and trailers. The stock has a Return on Assets (ROA) of 6% and a Return on Equity (ROE) of 18.8%. The company is trading with a Return on Invested Capital (ROIC) of 9.8%. The company is expected to grow at 13.58 % over the next 5 years. CSX is expected to earn $2.12 per share next year. The company is valued at $26.0 using the Discount Earnings Model (DEM). The company has a sum of growth and yield to PE ratio (GY2PE) of 1.50. CSX is currently trading at $21.01, falling $1 or 4.7% this year. The average volume in the last ten trading days increased by 9.5% compared to its 3 month average and the company is trading at 24% discount levels when evaluated based on earnings power.

Titanium Metals Corp (TIE): Titanium Metals Corporation is a leading manufacturer of titanium-based metals products, focusing primarily on the aerospace industry. TIE has titanium production facilities in both the United States and Europe. TIE has a ROA of 5.6% and a ROE of 7.0%. TIE is trading with a ROIC of 7.0%. TIE is expected to grow at 12.09 % over the next 5 years. The stock is expected to earn $0.94 per share next year. The company is valued at $11.1 using DEM. The company has a GY2PE of .79. TIE is currently trading at $14.66, falling $0.92 or 5.9% this year. The company is trading higher than its earnings power, but one has to understand the book value of $7.0 (50% of the current price) was not used in this calculation. Titanium Metals has zero debt.

Chubb Corp (NYSE:CB): The Chubb Corporation, through its subsidiaries, provides property and casualty insurance to businesses and individuals. The company distributes its products through independent insurance agents and brokers in the United States, Canada, Europe, Australia, Latin America, and Asia. The stock has a ROA of 4.3% and a ROE of 14.0%. CB is trading with a ROIC of 11.1%. CB is expected to earn $5.96 per share next year. The company is expected to grow at 7.65 % over the next 5 years. CB is valued at $65.2 using DEM. The company has a GY2PE of .86. CB is currently trading at $67.96, falling $2.2 or 3.1% this year. CB is near its DEM value and is trading near its fair value. Chubb has a book value of $56.24 which was not used in these calculations.

General Mills Inc (NYSE:GIS): General Mills, Inc., is a global manufacturer and marketer of consumer foods sold through retail stores. The Company is also a supplier of branded and unbranded food products to the foodservice and commercial baking industries. The company has a ROA of 9.3% and a ROE of 27.9%. The company is trading with a ROIC of 13.4%. The company is expected to grow at 7.10 % over the next 5 years. The company is expected to earn $2.78 per share next year. The company is valued at $29.9 using DEM. The company has a GY2PE of .71. GIS is currently trading at $38.31, falling $2 or 4.9% this year. The average volume in the last ten trading days increased by 62% compared to its 3 month average. GIS is trading near the combination of its book and DEM value at its fair price.

New York Times Co (NYSE:NYT): The New York Times Company is a diversified media company that includes newspapers, digital businesses, investments in paper mills and other investments.NYT publishes two national and 16 regional newspapers. The company has a ROA of 4.93% and a ROE of -6.86%. NYT is expected to earn $0.61 per share next year. The company is expected to grow at 1.81 % over the next 5 years. The company is valued at $6.0 using DEM. The company has a GY2PE of 0.17. NYT is currently trading at $6.59, falling $1.2 or 15% this year. NYT is fairly priced for its earning potential.

NICOR Inc (NYSE:GAS): Nicor, Inc. is an energy and shipping company. Its largest subsidiary, Nicor Gas, is a natural gas distribution company that serves more than two million customers in northern third of Illinois, excluding the city of Chicago. The company has a ROA of 3.1% and a ROE of 12.9%. The stock is trading with a ROIC of 6.8%. The company is expected to earn $3.11 per share next year. The company is expected to grow at 3.34 % over the next 5 years. The stock is valued at $31.0 using DEM. The company has a GY2PE of .49. GAS is currently trading at $39.87, falling $2.2 or 5.3% this year.

MBIA Inc (NYSE:MBI): MBIA Inc. and its subsidiaries provide financial guarantee insurance and related reinsurance, advisory, and portfolio services, as well as investment management services to public finance and structured finance markets. The company has a ROA of 0.2% and a ROE of 1.9%. The company is trading with a ROIC of .4%. MBI is expected to grow at 38.72 % over the next 5 years. The company is expected to earn $0.24 per share next year. MBI is valued at $5.5 using DEM. The company has a GY2PE of 2.10. MBI is currently trading at $10.78, falling $1.8 or 14% this year.

Source: Will These 7 Stocks Turn Around?