Petrobras Taps Chinese Companies to Help Revive Shipbuilding
A memorandum of understanding Saturday included China's Cosco, Offshore Oil Engineering Co., China State Shipbuilding Co. and China International Marine Containers Ltd. and Brazilian peers EBR, Rio Grande, Maua, Enseada and Atlantico Sul. State-controlled Petroleo Brasileiro SA and its Transpetro logistics subsidiary will serve as anchors for potential technological and business partnerships.
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LKQ (NASDAQ:LKQ) stock performs better than its underlying earnings growth over last five years
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the LKQ Corporation (NASDAQ:LKQ) share price is up 51% in the last five years, that's less than the market return. Zooming in, the stock is actually down 6.7% in the last year. The past week has proven to be lucrative for LKQ investors, so let's see if fundamentals drove the company's five-year performance. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During five years of share price growth, LKQ achieved compound earnings per share (EPS) growth of 7.3% per year. So the EPS growth rate is rather close to the annualized share price gain of 9% per year. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth. The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image). It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free interactive report on LKQ's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further. As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for LKQ the TSR over the last 5 years was 65%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return. Investors in LKQ had a tough year, with a total loss of 3.9% (including dividends), against a market gain of about 15%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 10% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand LKQ better, we need to consider many other factors. For example, we've discovered 1 warning sign for LKQ that you should be aware of before investing here. LKQ is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. — Investing narratives with Fair Values Suncorp's Next Chapter: Insurance-Only and Ready to Grow By Robbo – Community Contributor Fair Value Estimated: A$22.83 · 0.1% Overvalued Thyssenkrupp Nucera Will Achieve Double-Digit Profits by 2030 Boosted by Hydrogen Growth By Chris1 – Community Contributor Fair Value Estimated: €14.40 · 0.3% Overvalued Tesla's Nvidia Moment – The AI & Robotics Inflection Point By BlackGoat – Community Contributor Fair Value Estimated: $359.72 · 0.1% Overvalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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Is There An Opportunity With Allison Transmission Holdings, Inc.'s (NYSE:ALSN) 37% Undervaluation?
Allison Transmission Holdings' estimated fair value is US$156 based on 2 Stage Free Cash Flow to Equity Allison Transmission Holdings' US$97.93 share price signals that it might be 37% undervalued The US$105 analyst price target for ALSN is 33% less than our estimate of fair value How far off is Allison Transmission Holdings, Inc. (NYSE:ALSN) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by estimating the company's future cash flows and discounting them to their present value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow. Companies can be valued in a lot of ways, so we would point out that a DCF is not perfect for every situation. If you want to learn more about discounted cash flow, the rationale behind this calculation can be read in detail in the Simply Wall St analysis model. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years. A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate: 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Levered FCF ($, Millions) US$831.0m US$876.0m US$763.0m US$803.0m US$796.5m US$799.1m US$807.9m US$821.3m US$838.1m US$857.4m Growth Rate Estimate Source Analyst x3 Analyst x2 Analyst x1 Analyst x1 Est @ -0.80% Est @ 0.32% Est @ 1.11% Est @ 1.66% Est @ 2.04% Est @ 2.31% Present Value ($, Millions) Discounted @ 8.2% US$768 US$749 US$603 US$587 US$538 US$499 US$467 US$439 US$414 US$391 ("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = US$5.5b The second stage is also known as Terminal Value, this is the business's cash flow after the first stage. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 5-year average of the 10-year government bond yield of 2.9%. We discount the terminal cash flows to today's value at a cost of equity of 8.2%. Terminal Value (TV)= FCF2035 × (1 + g) ÷ (r – g) = US$857m× (1 + 2.9%) ÷ (8.2%– 2.9%) = US$17b Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$17b÷ ( 1 + 8.2%)10= US$7.7b The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$13b. To get the intrinsic value per share, we divide this by the total number of shares outstanding. Compared to the current share price of US$97.9, the company appears quite good value at a 37% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. Part of investing is coming up with your own evaluation of a company's future performance, so try the calculation yourself and check your own assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Allison Transmission Holdings as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 8.2%, which is based on a levered beta of 1.205. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business. Check out our latest analysis for Allison Transmission Holdings Strength Earnings growth over the past year exceeded the industry. Debt is well covered by earnings and cashflows. Dividends are covered by earnings and cash flows. Weakness Earnings growth over the past year is below its 5-year average. Dividend is low compared to the top 25% of dividend payers in the Machinery market. Opportunity Annual earnings are forecast to grow for the next 3 years. Good value based on P/E ratio and estimated fair value. Threat Annual earnings are forecast to grow slower than the American market. Although the valuation of a company is important, it ideally won't be the sole piece of analysis you scrutinize for a company. The DCF model is not a perfect stock valuation tool. Rather it should be seen as a guide to "what assumptions need to be true for this stock to be under/overvalued?" If a company grows at a different rate, or if its cost of equity or risk free rate changes sharply, the output can look very different. Why is the intrinsic value higher than the current share price? For Allison Transmission Holdings, we've compiled three relevant items you should further examine: Risks: To that end, you should be aware of the 2 warning signs we've spotted with Allison Transmission Holdings . Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for ALSN's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors. Other High Quality Alternatives: Do you like a good all-rounder? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing! PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NYSE every day. If you want to find the calculation for other stocks just search here. — Investing narratives with Fair Values Suncorp's Next Chapter: Insurance-Only and Ready to Grow By Robbo – Community Contributor Fair Value Estimated: A$22.83 · 0.1% Overvalued Thyssenkrupp Nucera Will Achieve Double-Digit Profits by 2030 Boosted by Hydrogen Growth By Chris1 – Community Contributor Fair Value Estimated: €14.40 · 0.3% Overvalued Tesla's Nvidia Moment – The AI & Robotics Inflection Point By BlackGoat – Community Contributor Fair Value Estimated: $359.72 · 0.1% Overvalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data
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2 hours ago
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Is Now The Time To Look At Buying Herc Holdings Inc. (NYSE:HRI)?
While Herc Holdings Inc. (NYSE:HRI) might not have the largest market cap around , it led the NYSE gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Herc Holdings's outlook and valuation to see if the opportunity still exists. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. Herc Holdings appears to be overvalued by 24% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$145 on the market compared to our intrinsic value of $116.96. This means that the opportunity to buy Herc Holdings at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Herc Holdings's share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market. Check out our latest analysis for Herc Holdings Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for Herc Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation. Are you a shareholder? HRI's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe HRI should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed. Are you a potential investor? If you've been keeping tabs on HRI for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for HRI, which means it's worth diving deeper into other factors in order to take advantage of the next price drop. So while earnings quality is important, it's equally important to consider the risks facing Herc Holdings at this point in time. Every company has risks, and we've spotted 3 warning signs for Herc Holdings (of which 1 doesn't sit too well with us!) you should know about. If you are no longer interested in Herc Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential. — Investing narratives with Fair Values Suncorp's Next Chapter: Insurance-Only and Ready to Grow By Robbo – Community Contributor Fair Value Estimated: A$22.83 · 0.1% Overvalued Thyssenkrupp Nucera Will Achieve Double-Digit Profits by 2030 Boosted by Hydrogen Growth By Chris1 – Community Contributor Fair Value Estimated: €14.40 · 0.3% Overvalued Tesla's Nvidia Moment – The AI & Robotics Inflection Point By BlackGoat – Community Contributor Fair Value Estimated: $359.72 · 0.1% Overvalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
