Mid-Day Update

Productive morning. Analysis of historical trends is complete. Built the following today:

  • Examined change in margins and NWC over 5, 3, 2 and 1 year periods
  • Calculated trends using least-squared regressions
  • Simulated forecast values based on regressions to arrive at “theoretical” margin today
  • The value closest to the actual value is the trend with the greatest confidence interval
  • Resultant output examines trends for the aforementioned (see screen below for output)

Next, planned build includes our analysis of wall street changes in estimates. We’ll focus on the following for revenue, gross profit, EBIT, EBITDA, Net Income (new variable) and UFCF (also new variable)

  • Look at aggregate change in forecasts
  • Look at % change in forecast
  • Relate % change in forecast vs. change in price vs. the associated time period
  • Examine if and when change in price reaches “parity” with change in estimate; (eg, if EPS declines by 5%, price declines by 10%, observe if and when price “rebounds” to only a 5% implied decline since date of revised estimate

Once we have the aforementioned values, we can continue on to the planned analysis of implied perpetuity operating figures based on current P/E

  • Growth rate implied (in order to “sanity” check at what price growth makes sense)
  • Profitability implied (in order to “sanity” check whether the company can grow in to that profitability profile)

Build notes: consider analyzing the following:

  • Multivariate regression for price signals
  • Drive probability model utilizing statistics derived from historical and projection analysis