As defined in the Little Book that Beats the Market, the earnings yield compares the profit generated with the market’s valuation of the company. It is defined as operating profit divided by enterprise value.
Many refer to it as the EBIT/EV (Earnings before interest and tax / Enterprise Value). Golden Entertainment, Inc. (GDEN) has a EBITA/EV of 8.517857.
Enterprise value is used by Greenblatt rather than market capitaliation to reflect the competing claims of debt and equity holders on the business. This penalizes companies that carry a lot of debt and little cash, and rewards firms with a lot of cash – a useful distinction not reflected in the P/E ratio.
Investors might be looking at their stock holdings and trying to gauge which ones will break out to new highs. Many investors will keep a close eye on stocks that are trading near popular marks such as the 52-week high. Stocks trading near 52-week lows also tend to garner additional attention. When a stock is flirting with a new 52-week high, investors may have to decide whether to cash in to lock in profits or wait to see if a breakthrough is going to happen. Companies that are teetering near the 52-week low may be worth taking a look at. Studying the fundamentals may show that the stock should be performing better than it is. This might be the time to think about purchasing shares that for whatever reason may have fallen out of favor with investors. Crunching the numbers and doing full analysis of stocks that have been trending down may help lead to some discoveries that could turn out to be highly valuable if and when the momentum shifts to the upside.
Value Comp 1 / Value Comp 2
The Value Composite One (VC1) is a method that investors use to determine a company’s value. The VC1 of Golden Entertainment, Inc. (GDEN) is 14. A company with a value of 0 is thought to be an undervalued company, while a company with a value of 100 is considered an overvalued company. The VC1 is calculated using the price to book value, price to sales, EBITDA to EV, price to cash flow, and price to earnings. Similarly, the Value Composite Two (VC2) is calculated with the same ratios, but adds the Shareholder Yield. The Value Composite Two of Golden Entertainment, Inc. (GDEN) is 21.
The Piotroski F-Score is a scoring system between 1-9 that determines a firm’s financial strength. The score helps determine if a company’s stock is valuable or not. The Piotroski F-Score of Golden Entertainment, Inc. (GDEN) is 5. A score of nine indicates a high value stock, while a score of one indicates a low value stock. The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings. It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue. The score is also determined by change in gross margin and change in asset turnover.
After a recent scan, we can see that Golden Entertainment, Inc. (GDEN) has a Shareholder Yield of -0.013857. This is calculated by adding the dividend yield to the percentage of repurchased shares. Shareholder yield has the ability to show how much money the firm is giving back to shareholders via a few different avenues. Companies may issue new shares and buy back their own shares. This may occur at the same time. Investors may also use shareholder yield to gauge a baseline rate of return.
Benjamin Graham, professor and founder of value investing principles, was one of the first to consistently screen the market looking for bargain companies based on value factors. He didn’t have databases such as ValueSignals at his disposal, but used people like his apprentice Warren Buffet to fill out stock sheets with the most important data.
Graham was always on the watch for firms that were so discounted, that if the company went into liquidation, the proceeds of the assets would still return a profit.
The ratio he used to identify these companies was Net Current Asset Value or NCAV. This ratio is much more stringent compared to book value (total assets – total liabilities) and is calculated as follows:
NCAV = Current Assets – Total Liabilities
Current Assets = Cash & ST Investments + Inventories + Accounts Receivable
Graham was only happy if he could buy the company at 2/3 of the NCAV. That’s the sort of margin of safety he was looking for.
This strategy was very successful during the years after Graham published it in his book ‘Security analysis’ in 1934 and also in more recent studies it has proven to provide superior results. A study done by the State University of New York to prove the effectiveness of this strategy showed that from the period of 1970 to 1983 an investor could have earned an average return of 29.4%, by purchasing stocks that fulfilled Graham’s requirement and holding them for one year. Nowadays it’s very difficult to find companies that meet Graham’s criteria.
We calculate NCAV to Market as follows:
NCAV-to-Market Ratio = NCAV divided by Market Cap
Golden Entertainment, Inc. (GDEN) has an NCAV to Market value of -2.015028.
Watching some historical volatility numbers on shares of Golden Entertainment, Inc. (GDEN), we can see that the 12 month volatility is presently 72.2913. The 6 month volatility is 72.1853, and the 3 month is spotted at 68.2293. Following volatility data can help measure how much the stock price has fluctuated over the specified time period. Although past volatility action may help project future stock volatility, it may also be vastly different when taking into account other factors that may be driving price action during the measured time period.
Investing in the stock market can be highly unpredictable. Veteran investors may have spent many years studying the market. At some point along the way, many investors may have had to make some tough decisions. Making the tough stock portfolio decisions can seem like a daunting task, especially if some wrong calls have been made in the past. Investors who are able to quickly learn from previous mistakes may be much better situated if they are able to keep from repeating those mistakes. When just starting out, investors may want to go slow and steady in order to focus on the simpler investing ideas first.