This score-card analysis attributes an Overall Score to a company by analyzing several aspects that I consider to be among the most important.
In summary, a company to have an overall score close to 100% must have the following characteristics:
- Report high growth rates in the last 3 years (and in the last quarter) in terms of Revenue, Gross Profit, Operating Income and Net Income. Furthermore, it must operate with high and improving margins in recent years.
- Analysts expect Earnings Per Share (EPS) and revenues to grow in the short term (in the next quarter) and in the medium to long term (in the next 5 years). Moreover, they expect the company to be undervalued at current prices and in the last quarter their EPS expectations must have been beaten with a consequent rise in share prices.
- The stock price of the company must have outperformed the S&P 500 index and in the last 3 months the Hedge Funds and Insiders bought shares in the company.
The overall score ranges from 0% (if the characteristics listed above are all very negative) to +100% and it is unlikely that there will be a company with a +100% score because the requirements for achieving this score are very high, however a score higher than +70% can be considered good.
This analysis alone is not enough to decide whether or not to invest in a company because it does not provide indications on the timing of entry, but it is a good starting point.
Facebook Inc (FB)
- Overall Score: +71.3%
- Positive sides:
- High overall score
- Analysts believe FB is undervalued by 22% at current prices
- Analysts expect FB to continue to grow in the short, medium and long term. In particular, they expect an annual increase in EPS by 21.2% over the next 5 years
- In the last 3 years FB has increased revenue by 271.1% and net income by 391.1%. Net margin improved by 27.3%
- In the last quarter (September 2019) FB increased revenue by 28.6% and net income by 18.6%.
- Negative sides:
- FB has not been able to outperform the S&P500 in the last 6 months, despite it outperforming if we consider the performance since the beginning of 2019 (+41% FB vs. +23% S&P 500)
- Hedge funds reduced their positions on FB in the last quarter by 1.6 million shares in the last quarter
- Insiders have sold shares for a total of more than $ 1 billion in the last quarter
- Despite the very strong growth in operating income over the last few years, the operating margin has fallen slightly
- Reduction of the margin most marked if we consider the last quarter, where FB reduced the operating margin by -3.3% and the net margin by -7.8%
Facebook, Inc. is an American online social media and social networking service company based in Menlo Park, California.
The overall score of FB is 71,3% .
In the last 6 months, FB has underperformed the S&P500 index by -5,5% and analysts believe the company is undervalued by 22,4% .
In the last quarter, the company reported revenue of 17652 million, up by 28,6% compared to the same quarter 12 months earlier. Revenue TTM (Trailing-12-Months) are equal to 66529 million, up by 271,1% in the last 3 years.
FB reported an operating income of 7185 million in the last quarter, an improvement of 24,3% compared to the same quarter 12 months earlier, also reporting a reduction by -3,3% in the operating margin. Considering the sum of the last four quarters (TTM), FB reports an operating income of 22948,0 Million , a growth of 268,6% compared to three years ago and a reduction of -0,7% in the operating margin.
FB reported a net income of 6091 million in the last quarter, an improvement of 18,6% compared to the same quarter 12 months earlier, also reporting an improvement of -7,8% in the net margin. The TTM net income is 18018 million , a growth of 391,1% compared to three years ago and the net margin has improved by 32,3% .
In the next quarter, analysts expect growth in EPS (Earnings Per Share) of 5,9% and a growth in revenue of 23,4% . Furthermore, they expect an annual growth of FB EPS by 21,2% for the next 5 years.
In the last quarter, FB reported better EPS than analysts’ expectations and the stock price reacted by increasing by 1,8% .
Finally, in the last 3 months the Hedge Funds have decreased their positions by 1.6M shares. The Insiders have sold shares worth $1.1b .
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Sources & additional info
*The comparison with the S&P 500 index is visible inside the graph.
*Data updated to the last quarterly report available
*Data in Millions of Dollars
*Data from zacks.com, tipranks.com, reuters.com, finance.yahoo.com
*Company information from wikipedia.com
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DISCLAIMER: The information in this blog post represents my own analysis/opinions and does not contain a recommendation for any particular security or investment.