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Steve Hach is the Senior Editor at ValuEngine.com, a Melbourne, Florida-based stock valuation and forecast service. ValuEngine utilizes Ivy League financial research as the basis for its coverage of more than 8000 US, Canadian, and other foreign stocks. Hach utilizes ValuEngine's complex... More
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  • Airlines Face Challenging Environment

    VALUATION WATCH: Overvalued stocks now make up 62.35% of our stocks assigned a valuation and 24.55% of those equities are calculated to be overvalued by 20% or more. ALL sectors are calculated to be overvalued--with eight at or near double digits.

    --Losing Altitude? Airlines Face Challenging Environment

    This week is proving to be a bad one for airline stocks as negative earnings forecasts and slowed expansion plans have seen investors dumping shares of major carriers. So far this week, we have seen most of the major US carriers provide guidance that predicts weaker demand, excess capacity, and lower profits for the rest of 2015.

    Gary C. Kelly, Southwest (NYSE:LUV) Chairman of the Board, President, and Chief Executive Officer, noted that despite "Solid traffic and revenue trends [in May] . . . and [strong growth in] markets under development . . . with weaker than expected economic growth, we continue to evaluate our 2016 capacity plans with a current intent to cap our [Available Seat Miles (NYSEMKT:ASM)] growth to approximately six percent, year-over-year."

    American Airlines (NASDAQ:AAL) cut its forecast for Q2 unit revenue and pretax margins and forecast a decrease in revenue-per seat-mile of 6%-8%.

    United Continental Holdings (NYSE:UAL) noted this week that it also expects unit revenue for this quarter to decline--at a rate of 5%-6%

    Delta Airlines (NYSE:DAL) made similar statements to the media and President Ed Bastian noted that the company sees several routes where there is excess capacity present and noted that, like Southwest, the airline is re-evaluating expansion places for later in the year.

    Airlines had been on a roll for the past few years, with hedging strategies--and then lower prices--for fuel, added fees for--and profits from-- everything from blankets and pillows to carry on bags, and better labor relations leading to good profits and filled aircraft. Even if passengers found that the new conditions destroyed much of the romance associated with flying, share holders were reaping the benefits.

    But, now it appears as though many carriers may be in need of some new gimmicks and revenue sources. Fuel costs remain relatively low, but they are running out of new ways to boost the bottom line. Planes are often @80% full. Investors have noticed the situation, and a sell off has been underway since last month, when shares of Southwest, American, Delta, and United lost @ $10 billion as executives began to sound the alarm about the weakening outlook. Shares in the majors took a beating yesterday as well, with double-digit losses now the case across the board when compared to just one -month ago.

    Below is our valuation data and some other metrics for the largest US carriers. As you can see, our models still find the companies relatively undervalued, but it will take some time for adjusted earnings estimates to make their way through our systems. Many of these companies remain ranked a "BUY" or "STRONG BUY" at the moment, as the system still ranks them as better investment targets that other stocks in our data base. They still have decent one-year forecast return estimates--for the most part.

     

     

     

     

     

     

    TickerCompany NameMarket PriceValuationLast 12-M RetrnAvg 5-Yr Retn (%)P/E Ratio
    AALAMERICAN AIRLINES39.86-9.85%-0.75%36.54%5.29
    ALKALASKA AIR GROUP62.53-9.45%27.02%34.23%12.61
    DALDELTA AIR LINES40.75-7.45%2.10%23.01%11.21
    LUVSOUTHWEST AIRLINES36.11-25.05%36.52%21.83%13.05
    UALUNITED CONTINENTAL HOLDINGS51.73-17.83%16.59%20.07%6.03

    As a bonus to our Newsletter readers,
    we are offering a FREE DOWNLOAD of one of our Stock Reports

    Read our Complete Detailed Valuation Report on Southwest Airlines HERE.

    Below is today's data on LUV:

    Southwest Airlines is a major domestic airline that provides primarily shorthaul, high-frequency, point-to-point, low-fare service. Southwest operates over Boeing 737 aircraft in numerous cities. Southwest has the lowest operating cost structure in the domestic airline industry and consistently offers the lowest and simplest fares. Southwest also has one of the best overall Customer Service records.

    VALUENGINE RECOMMENDATION: ValuEngine continues its STRONG BUY recommendation on SOUTHWEST AIR for 2015-06-08. Based on the information we have gathered and our resulting research, we feel that SOUTHWEST AIR has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE Company Size and Momentum.


     

     

     

     

     

     

    ValuEngine Forecast
     Target
    Price*
    Expected
    Return
    1-Month36.591.33%
    3-Month36.00-0.30%
    6-Month36.200.24%
    1-Year41.9016.03%
    2-Year32.46-10.10%
    3-Year22.57-37.51%

     















    Valuation & Rankings
    Valuation25.05% undervaluedValuation Rank(?) 90
    1-M Forecast Return1.33%1-M Forecast Return Rank 100
    12-M Return36.52%Momentum Rank(?) 88
    Sharpe Ratio0.80Sharpe Ratio Rank(?) 87
    5-Y Avg Annual Return21.83%5-Y Avg Annual Rtn Rank 89
    Volatility27.18%Volatility Rank(?) 64
    Expected EPS Growth21.69%EPSGrowth Rank(?) 61
    Market Cap (billions)24.51Size Rank 95
    Trailing P/E Ratio13.05Trailing P/E Rank(?) 85
    Forward P/E Ratio10.73Forward P/E Ratio Rank 85
    PEG Ratio0.60PEG Ratio Rank 60
    Price/Sales1.30Price/Sales Rank(?) 60
    Market/Book4.13Market/Book Rank(?) 31
    Beta0.92Beta Rank 53
    Alpha0.25Alpha Rank 88

    Tags: UAL, DAL, AAL, LUV, ALK, airlines
    Jun 09 12:51 PM | Link | Comment!
  • Business Services Stocks And The Latest On Wal-Mart From ValuEngine

    VALUATION WATCH: Overvalued stocks now make up 61.88% of our stocks assigned a valuation and 23.93% of those equities are calculated to be overvalued by 20% or more. ALL sectors are calculated to be overvalued--with eight at or near double digits.

    ValuEngine Index Overview

     

     

     

     

     

    IndexWeek OpenFriday AMChange% ChangeYTD
    DJIA18017.8217901.2-116.62-0.65%0.44%
    NASDAQ5094.945058.11-36.83-0.72%7.01%
    RUSSELL 20001252.021244.29-7.73-0.62%3.29%
    S&P 5002108.642094.07-14.57-0.69%1.71%

     

    ValuEngine Market Overview

     

     


     

    Summary of VE Stock Universe
    Stocks Undervalued38.12%
    Stocks Overvalued61.88%
    Stocks Undervalued by 20%12.74%
    Stocks Overvalued by 20%23.93%
    ValuEngine Sector Overview

     
















    SectorChangeMTDYTDValuationLast 12-MReturnP/E Ratio
    Medical-0.72%0.49%13.20%19.34% overvalued14.75%30.47
    Aerospace-1.47%0.03%5.37%16.48% overvalued-4.22%21.37
    Computer and Technology-0.90%0.33%7.87%13.49% overvalued6.29%31.27
    Consumer Staples-0.82%0.44%4.26%12.11% overvalued5.17%24.16
    Consumer Discretionary-1.13%-0.51%3.13%11.65% overvalued1.95%22.31
    Retail-Wholesale-1.12%0.04%1.15%11.60% overvalued7.20%25.54
    Business Services-0.54%0.06%3.92%10.32% overvalued1.10%24.52
    Multi-Sector Conglomerates-0.26%0.53%8.70%9.27% overvalued0.60%27.44
    Oils-Energy-1.74%-1.03%0.60%5.96% overvalued-32.94%24.40
    Finance-0.57%0.08%3.40%5.55% overvalued2.62%17.60
    Construction-0.93%0.30%5.00%4.61% overvalued-5.81%16.77
    Utilities-0.88%0.23%1.41%3.86% overvalued1.55%19.01
    Auto-Tires-Trucks-0.73%0.18%3.63%3.02% overvalued-4.90%20.14
    Industrial Products-1.43%-0.69%1.54%2.52% overvalued-4.95%21.91
    Transportation-1.19%-0.01%1.89%2.38% overvalued-13.85%24.70
    Basic Materials-1.01%0.85%3.21%0.91% overvalued0.53%24.25

     

    Sector Talk--Business Services

    Below, we present the latest data on Business Services stocks from our Professional Stock Analysis Service Top five lists are provided for each category. We applied some basic liquidity criteria--share price greater than $3 and average daily volume in excess of 100k shares.

    Please Click Here to See ALL of Our Investment Tools and Newsletters

    Top-Five Business Services Stocks--Short-Term Forecast Returns

     

     

     

     

     

     

    TickerNameMkt PriceValuation(%)Last 12-M Retn(%)
    CBZCBIZ INC9.08-5.51%6.45%
    CATMCARDTRONICS INC36.77-12.14%26.88%
    WUWESTERN UNION21.8919.87%35.37%
    CVGCONVERGYS CORP2513.69%14.57%
    WNSWNS HLDGS-ADR26.516.72%47.55%

    Top-Five Business Services Stocks--Long-Term Forecast Returns

     

     

     

     

     

     

    TickerNameMkt PriceValuation(%)Last 12-M Retn(%)
    CBZCBIZ INC9.08-5.51%6.45%
    CATMCARDTRONICS INC36.77-12.14%26.88%
    WUWESTERN UNION21.8919.87%35.37%
    CVGCONVERGYS CORP2513.69%14.57%
    WNSWNS HLDGS-ADR26.516.72%47.55%

    Top-Five Business Services Stocks--Composite Score

     

     

     

     

     

     

    TickerNameMkt PriceValuation(%)Last 12-M Retn(%)
    CATMCARDTRONICS INC36.77-12.14%26.88%
    WUWESTERN UNION21.8919.87%35.37%
    CBZCBIZ INC9.08-5.51%6.45%
    LAMRLAMAR ADVER CO59.89-6.18%21.38%
    GDOTGREEN DOT CP-A14.92-36.41%-18.78%

    Top-Five Business Services Stocks--Most Overvalued

     

     

     

     

     

     

    TickerNameMkt PriceValuation(%)Last 12-M Retn(%)
    NESNUVERRA ENV SOL5.26164.75%-69.10%
    NSPINSPERITY INC53.1851.32%66.08%
    HCKTHACKETT GROUP12.0240.76%97.05%
    CORECORE-MARK HLDG55.1139.15%33.31%
    HILHILL INTL INC5.3534.56%-15.75%

     

    Free Download for Readers

    As a bonus to our Free Weekly Newsletter subscribers,
    we are offering a FREE DOWNLOAD of one of our Stock Reports

    Wal-Mart Stores, Inc. (NYSE:WMT) is the world's largest retailer. They are engaged in the operation of mass merchandising stores, which serve their customers primarily through the operation of three segments, which are the Wal-Mart Stores segment, the SAM'S Club segment and the International segment.

    ValuEngine continues its HOLD recommendation on WAL-MART STORES for 2015-06-04. Based on the information we have gathered and our resulting research, we feel that WAL-MART STORES has the probability to ROUGHLY MATCH average market performance for the next year. The company exhibits ATTRACTIVE Company Size but UNATTRACTIVE Earnings Growth Rate.


     

     

     

     

     

     

    ValuEngine Forecast
     Target
    Price*
    Expected
    Return
    1-Month74.390.33%
    3-Month75.151.34%
    6-Month75.892.35%
    1-Year77.053.92%
    2-Year73.12-1.39%
    3-Year76.322.93%

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Valuation & Rankings
    Valuation1.01% overvaluedValuation Rank(?) 60
    1-M Forecast Return0.33%1-M Forecast Return Rank 75
    12-M Return-3.41%Momentum Rank(?) 46
    Sharpe Ratio0.51Sharpe Ratio Rank(?) 75
    5-Y Avg Annual Return7.69%5-Y Avg Annual Rtn Rank 61
    Volatility15.17%Volatility Rank(?) 89
    Expected EPS Growth-2.01%EPSGrowth Rank(?) 23
    Market Cap (billions)239.00Size Rank 100
    Trailing P/E Ratio14.91Trailing P/E Rank(?) 78
    Forward P/E Ratio15.22Forward P/E Ratio Rank 60
    PEG Ration/aPEG Ratio Rank n/a
    Price/Sales0.49Price/Sales Rank(?) 84
    Market/Book3.83Market/Book Rank(?) 33
    Beta0.43Beta Rank 75
    Alpha-0.07Alpha Rank 50

    Jun 05 12:48 PM | Link | Comment!
  • ValuEngine.com: Valuations Remain Elevated But "Normal"

    Check Up
    Valuations Remain Elevated But "Normal"

    ValuEngine tracks more than 7000 US equities, ADRs, and foreign stock which trade on US exchanges as well as @1000 Canadian equities. When EPS estimates are available for a given equity, our model calculates a level of mispricing or valuation percentage for that equity based on earnings estimates and what the stock should be worth if the market were totally rational and efficient--an academic exercise to be sure, but one which allows for useful comparisons between equities, sectors, and industries. Using our Valuation Model, we can currently assign a VE valuation calculation to more than 2800 stocks in our US Universe.

    We combine all of the equities with a valuation calculation to track market valuation figures and use them as a metric for making calls about the overall state of the market. Two factors can lower these figures-- a market pullback, or a significant rise in EPS estimates. Vice-versa, a significant rally or reduction in EPS can raise the figure. Whenever we see overvaluation levels in excess of @ 65% for the overall universe and/or 27% for the overvalued by 20% or more categories, we issue a valuation warning.

    We now calculate that 60.99% of stocks are overvalued and 23.14% of those stocks are overvalued by 20% or more. These figures have been fluctuating with increasing volatility, but have pretty much been pinned in this range for much of the past few months. We did our last valuation study on February 26th, and at that time we were within the same narrow range. As was the case then, these figures are down significantly from where they were for much of 2014.

    As is always the case with this unprecedented rally, the market remains beholden to Janet Yellen and the Fed's rate raising schedule. Good news for the economy may paradoxically be bad bad for equities under these conditions. Bad news may provide a mini boom.

    Despite recent poor GDP figures, we still find an improving labor situation which should finally bolster the recovery. We have also seen a remarkable recovery in the oil markets as US producers have reacted to Saudi attempts to crush them via low prices with agility and speed. That was bad news for speculators counting on low oil prices, but could be more beneficial to employment in places like Pennsylvania, Ohio, Texas, Oklahoma, etc. The quick reduction in drilling activities hurt workers and local economies, but a price recovery will mean a faster return for that industry.

    We still find it more likely that the Fed will focus on employment rather than inflation (although that remains low as well) as it sets its rate increase schedule, and thus believe that equities may still remain the only game in town for a bit longer than many expected even a few months ago. Of course, the long hard winter for many areas of the US is now over. That brings to the forefront the long-held trader's maxim of "Sell in May and Go Away." Will that hold sway this year? Stay tuned.

    The chart below tracks the valuation metrics from January 2015. It shows levels in excess of 40%.

    (click to enlarge)

    This chart shows overall universe over valuation in excess of 40% vs the S&P 500 from January 2014

    This chart shows overall universe under and over valuation in excess of 40% vs the S&P 500 from March 2007*

    (click to enlarge)

    *NOTE: Time Scale Compressed Prior to 2011.

    Tags: valuations
    May 07 2:00 PM | Link | Comment!
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