Selecting Stock Homework
stock
stock_example.docxInvestor profile Goal: invest $50,000 and would like to get profit and might be marriage in next 5 years. Risk preference: low Rate of Return: 15 %
P/E (Price per ratio)
Price per ratio helps investors to estimate stock price and refer to stock value. Normally, the high P/E also has the high risk. The higher P/E ratio probably implies that stock might be over value. In this case, I would prefer the low risk investment, and the P/E ratio should be between 5 and 15.
Beta coefficient
Beta is used to measure risk of stock. In the case, we are looking to invest and get profit in next 5 years which is the long term investment. The range of beta is between 0.5 to 1.0.
EPS growth rate
Earning per share growth rate would show the raise of earning per share in period of time. In the long term period, we set the EPS growth rate up to 25% in next 5 years approximately.
Appendix A
|
Anheuser-Busch Inbev SA Sponsor |
0.81 |
20.43 |
30.492% |
|
|
|
CalAmp Corp. |
0.69 |
21.39 |
29.448% |
||
|
First Cash Financial Services, |
0.69 |
20.23 |
28.891% |
||
|
Investors Bancorp, Inc. |
0.85 |
22.11 |
44.736% |
||
|
Liquidity Services, Inc. |
-0.64 |
24.86 |
50.348% |
||
|
Mastercard Incorporated Common |
0.82 |
23.84 |
29.625% |
||
|
Mellanox Technologies, Ltd. |
0.67 |
20.83 |
29.77% |
||
|
Middleburg Financial Corporatio |
0.59 |
20.48 |
27.203% |
||
|
New Oriental Education & Techno |
0.99 |
22.73 |
48.156% |
||
|
OSI Systems, Inc. |
0.89 |
24.84 |
30.362% |
||
|
Silver Wheaton Corp Common Shar |
1 |
22.55 |
53.243% |
||
|
Trinity Biotech plc |
0.67 |
22.16 |
30.956% |
||
|
ViewPoint Financial Group, Inc. |
0.88 |
21.18 |
44.251% |
Appendix B
|
Anheuser-Busch Inbev SA Sponsor |
0.81 |
20.43 |
30.492% |
|
|
I SBC |
Investors Bancorp, Inc. |
0.85 |
22.11 |
44.736% |
|
Liquidity Services, Inc. |
-0.64 |
24.86 |
50.348% |
|
|
New Oriental Education & Techno |
0.99 |
22.73 |
48.156% |
|
|
OSI Systems, Inc. |
0.89 |
24.84 |
30.362% |
Anheuser-Busch Inbev SA Sponsor (BUD)
|
Anheuser-Busch Inbev SA Sponsor |
0.81 |
20.43 |
30.492% |
Company profile
Anheuser-Bush Inbev is the brewing company, engages in the production, marketing, and distribution of beer in Latin America, North America, Europe, and Asia pacific. The company has approximately 200 beer bands, and the global brands are called Budweiser, Stella Artois, and Beck. Multi-country brands consist of Leffe and Hoegaarden; and local brands comprise such as Bud Light. The company also produces and distributes soft drinks. Anheuser-Busch InBev SA/NV was founded in 1366 and is headquartered in Leuven, Belgium.
Analysis
- Beta is 0.81, it means that the risk of BUD is low and the investor could buy and hold this stock for the long term investment.
- The market capital is approximately $149.40 billion, and the 5 years growth rate of 30.492% that would be profitable for the investor who wants to hold stock and make profit for long term, due to the large market capital and the profile of company, an investor would be confidence with this stock.
Investors Bancorp, Inc. (ISBC)
|
I SBC |
Investors Bancorp, Inc. |
0.85 |
22.11 |
44.736% |
Company Profile
Investors Bancorp, Inc. operates as the holding company for Investors Bank that provides a range of banking services for various businesses and individuals in the United States. This company offers deposit products. The company loans portfolio includes commercial real estate, construction, and commercial and industrial loans. It operates 87 branch offices located throughout northern, central NJ, and NY. The company was founded in 1926.
Analysis
- Although, this company is not the popular company, but we can see the confidence of this firm from the date that has been in the stock market that was a long time.
- ISBC has the beta at 0.85 which is below than 1.0, and the 5 years growth rate is approximately 44.763% which is the high number.
- The market capital is approximately $1.93 billion, so it indicates that this stock would be good investment for this period.
Liquidity Services, Inc. (LQDT)
|
Liquidity Services, Inc. |
-0.64 |
24.86 |
50.348% |
Company Profile
Liquidity Services, Inc. operates various online auction marketplaces for surplus, salvage, and scrap assets in the United States. It has been distributed since 1999. There are many websites that this company operates, and they operate in United States, Europe, and Asia to sell manufacturing surplus and salvage capital assets.
Analysis
Beta -0.64, P/E ratio 24.86, 5 years growth rate 50.348%
- Even if, the company is looked new from the investors because it has been operated for 14 years.
- The beta has the low number, moreover, the 5 years growth rate is greater than 50%, so if an investor wants to hold this stock and sell in next 5 years, then they can earn much profit.
- E-commerce has become important for the business, because seller does not have to pay for the rental, they pay just shipping, and that is why this company can make a lot of profit.
New Oriental Education & Techno (EDU)
|
New Oriental Education & Techno |
0.99 |
22.73 |
48.156% |
Company Profile
New Oriental Education & Technology Group Inc. provides private educational services primarily in China. The company offers language training courses that consist of various types of English language training courses, as well as training courses for other foreign languages, including German, Japanese, French, Korean, and Spanish. The company was founded in 1993 and is headquartered in Beijing, the Peoples Republic of China.
Analysis
Beta 0.99, P/E ratio 22.73, 5 years growth rate 48.156%
- It is not only the low risk according to the low beta but also stability of this stock would be attractive enough for investor who needs to invest in low risk stock in term of long period.
- The business that is about the education usually be stable for the long period, and nowadays, foreign language becomes important in China.
- Although, the number of beta closes to 1.0, but it will not be risky for investing with education business, because second language becomes important to Chinese people today.
- This company has more than 18,000 full-time employees.
OSI Systems, Inc. (OSIS)
|
OSI Systems, Inc. |
0.89 |
24.84 |
30.362% |
Company Profile
OSI Systems, Inc., together with its subsidiaries, designs and manufactures electronic systems and components for homeland security, healthcare, defense, and aerospace markets worldwide. Its products include baggage and parcel inspection, cargo and vehicle inspection, hold baggage screening, The company was founded in 1987, and is headquartered in Hawthorne, California.
Analysis
- OSIS actually has the high beta which closes to 1.0, and the 5 years growth rate is 30.362% which is not high much, but if we are looking at the long term investment then we have to focus on the stock that has high confidence that investor can believe in that stock.
- The return of this stock might not be too high but I strongly play safe if investor doesn’t have a huge budget to invest.
- In the huge country as United States, the freight service is the most important thing to do the business, and many companies and airport usually have the cargo screening, and this becomes popular in many international airports.
Conclusion
I chose one stock that has the high risk and high return because we invest with low risk for the rest, and the return might not be high, and then it is probably to get high return from LQDT stock. According to the company that just be in the stock market, they usually face with the risk as LQDT, but when we look at the company profile and the company’s website, it can gain confidence to investors, because nowadays, e-commerce becomes to the important part of business, and the company that is raising up, it will be great for the investor for investing. The thing is many companies that want to get into the stock market, they adjust numbers and show to the public that they has the high profit, then investor should concern about the production, and service that company produces, and compare with the business today that it can be profitable or not.
For the long term stock investment, if the investor want to be confidence that those companies that they invest will not be bankrupt, they should consider about the large firm by focusing that the company profile, background, and market capital. Actually, investor could invest to them, but there is the high cost and low return, so the reason I recommend to invest with one stock with high risk and low risk for the rest is to get profit with the risk that investor could receive. For example, EDU is the stock which is about the education and BUD which is the large brewing company, both of stocks is the large companies that investors can trust and invest for long term, so investor can invest in those stocks more than the rest to be confidence for the return.
It is not only to look at the Beta or P/E, but investor should focus on the business today that which way that the business is going. E-commerce is coming popular in that business today, and carrier services become important for the worldwide business.
References
- Screener.finance.yahoo.com
- http://www.ab-inbev.com
- http://www.isbnj.com
- http://www.liquidityservicesinc.com
- http://www.neworiental.org
- http://www.osi-systems.com
