VectorVest's latest report on AYSI
Some of you may remember that a few months back I asked VectorVest to add AYSI to its database. Below is VectorVest's current analysis of AYSI.
The VectorVest system combines a weighted average of three metrics: relative value (RV), relative safety (RS), and relative timing (RT). It overweights timing (i.e., price action) and underweights valuation.
Mainly because of AYSI's awful price action recently, VV gives it a sell rating -- the sinking share price gives AYSI an awful RT and a bad RS, since RS is based partly on price action too.
But VV does consider AYSI to have an excellent relative value (RV), as it considers the stock to be worth $2.68 per share. In my experience with VV, its RV calculations have been the most accurate of the three, maybe because its earnings estimates have been the most accurate.
A specific example, WRT AYSI: when it was first added to the database, VV gave it an earnings estimate of about 17 cents I sent an e-mail to VV noting how much AYSI had earned in the first half of the year, and suggesting this earnings estimate was too low. It turns out that VV's estimate was a lot closer to what AYSI will earn this year than mine or any other long's was. So I am inclined to give more weight to their earnings and RV calcs, which are driven in part by their earnings estimates.
I haven't seen as much predictive value with their RT scores, which in my experience seem to be more reactive.
Below is VV's report. FYI, anytime a stock trades below VV's stop price for it, it gets a sell rating. For AYSI to get a hold or a buy rating from VV, it will need to rise above VV's stop (which itself can be adjusted up or down):
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VectorVest Stock Analysis of Alloy Steel as of 9/29/2010
This report has five major sections.
Capital Appreciation Analysis
Dividend Analysis
Price-Volume Data
Sales / Market Capitalization Information
Summary
Business: Alloy Steel, (AYSI) Alloy Steel International Inc, engages in the manufacture and distribution of Arcoplate, a wear-resistant alloy overlay wear plate. The company offers fused-alloy steel plates for installation and use in structures and machinery that suffer wear and hang-up problems. Its customer base consists of companies involved in the mining industries primarily in Australia, the United States, South America, India, Indonesia, Singapore, South Africa, Japan, China, Canada, and Malaysia. Alloy Steel International markets its Arcoplate products primarily to consultant engineers to incorporate Arcoplate materials into their equipment and plant designs. The company was founded in 2000 and is based in Malaga, Australia.
Business Sector: AYSI has been assigned to the Steel Business Sector. VectorVest classifies stocks into over 200 Industry Groups and 40 Business Sectors.
Industry Group: AYSI has been assigned to the Steel (Alloy) Industry Group. VectorVest classifies stocks into over 200 Industry Groups and 40 Business Sectors.
Capital Appreciation Analysis Back to top
Value: Value is a measure of a stock's current worth. AYSI has a current Value of $2.68 per share. Therefore, it is undervalued compared to its Price of $0.49 per share. Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitability increase, and when interest and inflation rates decrease. VectorVest advocates the purchase of undervalued stocks. At some point in time, a stock's Price and Value always will converge.
RV (Relative Value): RV is an indicator of long-term price appreciation potential. AYSI has an RV of 1.57, which is excellent on a scale of 0.00 to 2.00. This indicator is far superior to a simple comparison of Price and Value because it is computed from an analysis of projected price appreciation three years out, AAA Corporate Bond Rates, and risk. RV solves the riddle of whether it is preferable to buy High growth, High P/E stocks, or Low growth, Low P/E stocks. VectorVest favors the purchase of stocks with RV ratings above 1.00.
RS (Relative Safety): RS is an indicator of risk. AYSI has an RS rating of 0.63, which is poor on a scale of 0.00 to 2.00. RS is computed from an analysis of the consistency and predictability of a company's financial performance, debt to equity ratio, sales volume, business longevity, price volatility and other factors. A stock with an RS rating greater than 1.00 is safer and more predictable than the average stock in the VectorVest database. VectorVest favors the purchase of stocks of companies with consistent, predictable financial performance.
RT (Relative Timing): RT is a fast, smart, accurate indicator of a stock's price trend. AYSI has a Relative Timing rating of 0.04, which is very poor on a scale of 0.00 to 2.00. RT is computed from an analysis of the direction, magnitude, and dynamics of a stock's price movements over one day, one week, one quarter and one year time periods. Once a stock's price has established a strong trend, it is expected to continue in that trend for the short-term. If a trend dissipates, RT will gravitate toward 1.00. RT will explode from bottoms, dive from tops, and reflect changes in price momentum. VectorVest favors the purchase of stocks with RT ratings above 1.00.
VST (VST-Vector): VST is the master indicator for ranking every stock in the VectorVest database. AYSI has a VST rating of 0.91, which is fair on a scale of 0.00 to 2.00. VST is computed from the square root of a weighted sum of the squares of RV, RS, and RT. Stocks with the highest VST ratings have the best combinations of Value, Safety and Timing. These are the stocks to own for above average, long-term capital appreciation. VectorVest advocates the purchase of safe, undervalued stocks rising in price.
Recommendation (REC): VectorVest gives a Buy, Sell, Hold recommendation on every stock, every day. AYSI has a Sell recommendation. REC reflects the cumulative effect of all the VectorVest parameters working together. These parameters are designed to help investors buy safe, undervalued stocks rising in price. They also help investors avoid or sell risky, overvalued stocks falling in price. VectorVest recommends that investors buy high VST-Vector, Buy-rated stocks in rising markets.
Stop (Stop-Price): Stop is an indicator of when to sell a long position or cover a short position. AYSI has a Stop of $1.10 per share. This is $0.61 above AYSI's current closing Price. A stock's Stop is computed from a 13 week moving average of its closing prices, and is fine-tuned according to the stock's fundamentals. High RV, high RS stocks have lower Stops, and low RV, low RS stocks have higher Stops. In the VectorVest system, a stock gets a 'B' or 'H' recommendation if its Price is above its Stop and an 'S' recommendation if its Price is below its Stop.
GRT (Earnings Growth Rate): GRT reflects a company's one to three year forecasted earnings growth rate in percent per year. AYSI has a forecasted Earnings Growth Rate of 34.00%, which VectorVest considers to be excellent. GRT is computed from historical, current and forecasted earnings data. It is updated each week for every stock in the VectorVest database. GRT often foretells a stock's future price trend. If a stock's GRT trend is upward, the stock's price will likely rise. If GRT is trending downward, the stock's Price will probably fall. VectorVest favors the purchase of stocks whose GRT is rising and is greater than the sum of current inflation and interest rates, as shown weekly in our investment climate report.
EPS (Earnings per Share): EPS stands for leading 12 months Earnings Per Share. AYSI has a forecasted EPS of $0.25 per share. VectorVest determines this forecast from a combination of recent earnings performance and traditional fiscal and/or calendar year earnings forecasts.
P/E (Price to Earnings Ratio): P/E is a popular measure of stock valuation which shows the dollars required to buy one dollar of earnings. AYSI has a P/E of 1.96. This ratio may be deemed to be high or low depending upon your frame of reference. The average P/E of all the stocks in the VectorVest database is 46.78. P/E is computed daily using the formula: P/E = Price/EPS.
EY (Earnings Yield): EY reflects earnings per share as a percent of Price. EY is related to P/E via the formula, EY = 100 / (P/E), and may be used in place of P/E as a measure of valuation. EY has the advantages that it is always determinate and can reflect negative earnings. AYSI has an EY of 51.02 percent. This is above the current average of 2.12% for all the stocks in the VectorVest database. EY equals 100 x (EPS/Price).
GPE (Growth to P/E Ratio): GPE is another popular measure of stock valuation. It compares earnings growth rate to P/E ratio. AYSI has a GPE rating of 17.35. High growth stocks are believed to be able to justify high P/E ratios. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00. Unfortunately, this rule of thumb does not take into account the effect of interest rates on P/E ratios. The operative GPE ratio of 1.00 is valid when and only when interest rates equal 10%. With long-term interest rates currently at 3.45%, the operative GPE ratio is 0.12. Therefore, AYSI may be considered to be undervalued.
