August 25, 2015

VALUATION WATCH: Overvalued stocks now make up 30.68% of our stocks assigned a valuation and 8.9% of those equities are calculated to be overvalued by 20% or more. Two sectors are calculated to be overvalued.

Slow Boats to China

--ValuEngine: Market Declines Lead to "Cheap" Equities, Bulk Shippers Dominate Bargain List

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.

With the big sell off yesterday, we now calculate that 30.68% of stocks are overvalued and 8.9% of those stocks are overvalued by 20% or more. This is a huge reversal of where we have been for much of the year. In fact, to find stocks calculated to be this "cheap," you would have to go all the way back to November, 2012. Given the state of the US economy, and the fact that this slide in prices makes the potential for a Fed rate-hike next month less likely in our view, we believe this dip represents a buying opportunity for investors.

We also use trading data to provide forecast estimates for a variety of time horizons for almost ever equity in our database. Our Buy/Sell/Hold recommendations are based upon the 1-year forecast return figure. Using valuation and forecast figures, you can rank and rate our covered stocks against each other, to find out, in an objective and systematic way, the most attractive investment targets based on your own risk/reward parameters. We re-calculate the entire database every trading day, so you are assured that every proprietary valuation and forecast datapoint is as up-to-date as possible.

So, for today's bulletin we used our website's advanced screening functions to search for top-rated stocks that were significantly undervalued despite having strong forecast figures. These stocks are shown below, and presented in alphabetical order.

The list is heavy with transportation firms of the bulk shipping variety. These can present a mixed bag for the investor. On the one hand, one could argue that a poor prognosis for China will hurt shippers, since they often carry commodities to or from that nation. A poor outlook for steel, copper, coal, oil, etc. can hurt these firms. On the other hand, speculators may use giant cargo ships to hold commodities in the hopes of securing more favorable pricing for their goods.

Additional research is essential to discern how a particular shipper is positioned to deal with these sorts of issues. Many professional investors use indices such as the Baltic Dry Bulk Shipper Index (BDIY) as a leading indicator for the world economy--much as the DOW Transports are used for making calls about the future of the US economy and the overall DOW. It is worthwhile to note that the BDIY has been declining steeply over the past few weeks as shipping rates have declined significantly.

Members can always screen for stocks using a variety of criteria and data points with our advanced screening page HERE or our 5-Engine Stock page HERE.

Below is today's data on AVID:

Avid Technology, Inc. (AVID) develops, markets, sells and supports a wide range of software and systems for creating and manipulating digital media content. Digital media are media elements, whether video or audio or graphics, in which the image, sound or picture is recorded and stored as digital values, as opposed to analog signals. The company's systems are designed to improve the productivity of video and film editors by enabling them to edit moving pictures and sound in a faster, easier, and more cost-effective manner than traditional analog tape-based systems.

VALUENGINE RECOMMENDATION: ValuEngine continues its STRONG BUY recommendation on AVID TECH INC for 2015-08-24. Based on the information we have gathered and our resulting research, we feel that AVID TECH INC has the probability to OUTPERFORM average market performance for the next year. The company exhibits ATTRACTIVE Earnings Growth Rate and P/E Ratio.

ValuEngine Forecast
	Target Price*	Expected Return
1-Month	7.70	1.03%
3-Month	7.66	0.48%
6-Month	7.64	0.30%
1-Year	8.56	12.39%
2-Year	6.29	-17.50%
3-Year	6.52	-14.47%

Valuation & Rankings
Valuation	43.36% undervalued	Valuation Rank(?)	89
1-M Forecast Return	1.03%	1-M Forecast Return Rank	98
12-M Return	-2.81%	Momentum Rank(?)	66
Sharpe Ratio	-0.02	Sharpe Ratio Rank(?)	46
5-Y Avg Annual Return	-1.06%	5-Y Avg Annual Rtn Rank	45
Volatility	55.79%	Volatility Rank(?)	31
Expected EPS Growth	209.82%	EPS Growth Rank(?)	94
Market Cap (billions)	0.30	Size Rank	51
Trailing P/E Ratio	10.21	Trailing P/E Rank(?)	88
Forward P/E Ratio	3.29	Forward P/E Ratio Rank	99
PEG Ratio	0.05	PEG Ratio Rank	88
Price/Sales	0.60	Price/Sales Rank(?)	77
Market/Book	n/a	Market/Book Rank(?)	n/a
Beta	2.01	Beta Rank	12
Alpha	0.33	Alpha Rank	92

ValuEngine.com is an independent research provider, producing buy/hold/sell recommendations, target price, and valuations on over 5,000 US and Canadian equities every trading day. 
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