Quant Investors Are Taking a Look at What’s Behind The Numbers: SQLi (ENXTPA:SQI), Ituran Location and Control Ltd. (NasdaqGS:ITRN)

Earnings Yield is calculated by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the company.  The Earnings Yield for SQLi (ENXTPA:SQI) stands at 0.077154.  Earnings Yield helps investors measure the return on investment for a given company.  Similarly, the Earnings Yield Five Year Average is the five year average operating income or EBIT divided by the current enterprise value.  The Earnings Yield Five Year average for SQLi (ENXTPA:SQI) is 0.053386.  Further, the Earnings to Price yield of SQLi ENXTPA:SQI is 0.012197.  This is calculated by taking the earnings per share and dividing it by the last closing share price.  This is one of the most popular methods investors use to evaluate a company’s financial performance.

Investors might be taking a closer look at the portfolio after recent market action. Some financial insiders may be ready to usher in the bears and projecting the end of the bull run. While this may or may not be the case, investors need to be ready for any scenario. The time may have come to cash out some winners and cut the losers. A portfolio rebalance may be necessary in order to secure profits as we head into the latter half of the year. Keeping a diversified portfolio may entail adding some different sectors and even venturing into foreign markets. Investors will be tracking company earnings as we roll into the next round of reports. It may be a bit easier to make sense of future stock market prospects after seeing how many companies hit or miss their marks.

Quant Signals – Value Composite, C- Score, MF Rank, M-Score, ERP5

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The VC1 of SQLi (ENXTPA:SQI) is 20.  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 SQLi (ENXTPA:SQI) is 35.

SQLi (ENXTPA:SQI) currently has a Montier C-score of 1. This indicator was developed by James Montier in an attempt to identify firms that were altering financial numbers in order to appear better on paper. The score ranges from zero to six where a 0 would indicate no evidence of book cooking, and a 6 would indicate a high likelihood of something amiss. A C-score of -1 would indicate that there is not enough information available to calculate the score. Montier used six inputs in the calculation. These inputs included a growing difference between net income and cash flow from operations, increasing receivable days, growing day’s sales of inventory, increasing other current assets, decrease in depreciation relative to gross property plant and equipment, and high total asset growth.  

The MF Rank (aka the Magic Formula) is a formula that pinpoints a valuable company trading at a good price.  The formula is calculated by looking at companies that have a high earnings yield as well as a high return on invested capital.  The MF Rank of SQLi (ENXTPA:SQI) is 4218.  A company with a low rank is considered a good company to invest in.  The Magic Formula was introduced in a book written by Joel Greenblatt, entitled, “The Little Book that Beats the Market”.

SQLi (ENXTPA:SQI) has an M-score Beneish of -2.462433. This M-score model was developed by Messod Beneish in order to detect manipulation of financial statements. The score uses a combination of eight different variables. The specifics of the variables and formula can be found in the Beneish paper “The Detection of Earnings Manipulation”.

The last signal we’ll look at is the ERP5 Rank.  The ERP5 Rank is an investment tool that analysts use to discover undervalued companies.  The ERP5 looks at the Price to Book ratio, Earnings Yield, ROIC and 5 year average ROIC.  The ERP5 of SQLi (ENXTPA:SQI) is 2089.  The lower the ERP5 rank, the more undervalued a company is thought to be.

Volatility/PI

Stock volatility is a percentage that indicates whether a stock is a desirable purchase.  Investors look at the Volatility 12m to determine if a company has a low volatility percentage or not over the course of a year.  The Volatility 12m of SQLi (ENXTPA:SQI) is 32.4312.  This is calculated by taking weekly log normal returns and standard deviation of the share price over one year annualized.  The lower the number, a company is thought to have low volatility.  The Volatility 3m is a similar percentage determined by the daily log normal returns and standard deviation of the share price over 3 months.  The Volatility 3m of SQLi (ENXTPA:SQI) is 32.7153.  The Volatility 6m is the same, except measured over the course of six months.  The Volatility 6m is 30.7832.

We can now take a quick look at some historical stock price index data. SQLi (ENXTPA:SQI) presently has a 10 month price index of 0.72184. The price index is calculated by dividing the current share price by the share price ten months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 0.65723, the 24 month is 0.72479, and the 36 month is 1.10694. Narrowing in a bit closer, the 5 month price index is 0.66907, the 3 month is 0.89287, and the 1 month is currently 0.9058.

ROIC

The Return on Invested Capital (aka ROIC) for SQLi (ENXTPA:SQI) is 0.153402.  The Return on Invested Capital is a ratio that determines whether a company is profitable or not.  It tells investors how well a company is turning their capital into profits.  The ROIC is calculated by dividing the net operating profit (or EBIT) by the employed capital.  The employed capital is calculated by subrating current liabilities from total assets.  Similarly, the Return on Invested Capital Quality ratio is a tool in evaluating the quality of a company’s ROIC over the course of five years.  The ROIC Quality of SQLi (ENXTPA:SQI) is 10.78019.  This is calculated by dividing the five year average ROIC by the Standard Deviation of the 5 year ROIC.  The ROIC 5 year average is calculated using the five year average EBIT, five year average (net working capital and net fixed assets).  The ROIC 5 year average of SQLi (ENXTPA:SQI) is 0.268397.

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.

The Earnings to Price yield of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 0.059914.  This is calculated by taking the earnings per share and dividing it by the last closing share price.  This is one of the most popular methods investors use to evaluate a company’s financial performance.  Earnings Yield is calculated by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the company.  The Earnings Yield for Ituran Location and Control Ltd. NasdaqGS:ITRN is 0.077146.  Earnings Yield helps investors measure the return on investment for a given company.  Similarly, the Earnings Yield Five Year Average is the five year average operating income or EBIT divided by the current enterprise value.  The Earnings Yield Five Year average for Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 0.0535.

Equity market investors have plenty of information available to them when making stock selections. One of the toughest parts of selecting stocks may be figuring out which data to pay attention to. There are always swirling headlines in today’s financial news media. While some information may be highly important, other information may be much less important. Knowing exactly what to look for when doing stock research may take a lot of time to master. Investors who are able to stay highly focused may find it much easier to spot opportunities in the market. Once the investor knows what to look for, the stock market puzzle may be a bit easier to start piecing together.

Quant Scores/Key Ratios

Now we’ll turn to some key quant data and ratios. The Current Ratio of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 2.09. The Current Ratio is used by investors to determine whether a company can pay short term and long term debts. The current ratio looks at all the liquid and non-liquid assets compared to the company’s total current liabilities. A high current ratio indicates that the company might have trouble managing their working capital. A low current ratio (when the current liabilities are higher than the current assets) indicates that the company may have trouble paying their short term obligations.

Ituran Location and Control Ltd. (NasdaqGS:ITRN)’s Leverage Ratio was recently noted as 0.000244. This ratio is calculated by dividing total debt by total assets plus total assets previous year, divided by two. The leverage of a company is relative to the amount of debt on the balance sheet. This ratio is often viewed as one measure of the financial health of a firm.

The Gross Margin Score is calculated by looking at the Gross Margin and the overall stability of the company over the course of 8 years. The score is a number between one and one hundred (1 being best and 100 being the worst). The Gross Margin Score of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 11. The more stable the company, the lower the score. If a company is less stable over the course of time, they will have a higher score.

At the time of writing, Ituran Location and Control Ltd. (NasdaqGS:ITRN) has a Piotroski F-Score of 6. The F-Score may help discover companies with strengthening balance sheets. The score may also be used to spot the weak performers. Joseph Piotroski developed the F-Score which employs nine different variables based on the company financial statement. A single point is assigned to each test that a stock passes. Typically, a stock scoring an 8 or 9 would be seen as strong. On the other end, a stock with a score from 0-2 would be viewed as weak.

Ituran Location and Control Ltd. (NasdaqGS:ITRN) has an M-score Beneish of -2.278576. This M-score model is a little known investment tool that was developed by Messod Beneish in order to detect manipulation of financial statements. The score uses a combination of eight different variables. The specifics of the variables and formula can be found in the Beneish paper “The Detection of Earnings Manipulation”.

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The VC1 of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 46.  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 Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 39.

The MF Rank (aka the Magic Formula) is a formula that pinpoints a valuable company trading at a good price.  The formula is calculated by looking at companies that have a high earnings yield as well as a high return on invested capital.  The MF Rank of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 1993.  A company with a low rank is considered a good company to invest in.  The Magic Formula was introduced in a book written by Joel Greenblatt, entitled, “The Little Book that Beats the Market”.

Shifting gears, we can see that Ituran Location and Control Ltd. (NasdaqGS:ITRN) has a Q.i. Value of 19. The Q.i. Value ranks companies using four ratios. These ratios consist of EBITDA Yield, FCF Yield, Liquidity, and Earnings Yield. The purpose of the Q.i. Value is to help identify companies that are the most undervalued. Typically, the lower the value, the more undervalued the company tends to be.

Price Index/Share Movement

We can now take a quick look at some historical stock price index data. Ituran Location and Control Ltd. (NasdaqGS:ITRN) presently has a 10 month price index of 1.02636. The price index is calculated by dividing the current share price by the share price ten months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 0.97469, the 24 month is 1.3972, and the 36 month is 0.44893. Narrowing in a bit closer, the 5 month price index is 1.13633, the 3 month is 1.15461, and the 1 month is currently 1.02035.

Stock volatility is a percentage that indicates whether a stock is a desirable purchase.  Investors look at the Volatility 12m to determine if a company has a low volatility percentage or not over the course of a year.  The Volatility 12m of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 22.5549.  This is calculated by taking weekly log normal returns and standard deviation of the share price over one year annualized.  The lower the number, a company is thought to have low volatility.  The Volatility 3m is a similar percentage determined by the daily log normal returns and standard deviation of the share price over 3 months.  The Volatility 3m of Ituran Location and Control Ltd. (NasdaqGS:ITRN) is 24.9346.  The Volatility 6m is the same, except measured over the course of six months.  The Volatility 6m is 22.011.

Investors may be trying to decide which way the stock market will shift over the next couple of quarters. Having a general idea based on research is one thing, but constantly trying to time the market may lead to negative portfolio performance. Of course, overall market downturns can be frustrating to everyone invested in shares. Being able to ride out the day to day volatility and make proper investing decisions based on solid stock examination, may help the investor secure profits down the line. Investors who spend too much time focusing on stocks that have already made a run may find themselves in a sticky situation if they get into the name to late. Just because a certain stock has been going up for a long time, it doesn’t mean that the momentum will be sustained into the future. Taking the time to find quality stocks instead of just looking at the hot stock of the day, may allow investors to keep thriving in the market.