Stock trading and investing starts with the fundamentals

Stock market

Stock trading and stock investing starts with the fundamentals.What drives up or down stocks and their prices?It is demand and supply based on fundamentals and expectations.Good fundamentals will usually drive stock prices up.But valuations is always a top factor to consider in the stock market.A great stock of a company could be overvalued.So while technical analysis of stocks is important the main focus should be on the fundamental analysis of a company and its stock.Because just buying a stock because it is in uptrend is very risky without an analysis of basic fundamentals such as profitability,cash flow etc.

US stock market shows persistent strength

US stock market after almost 2 weeks have passed from the Presidential Election

Almost 2 weeks after the US presidential election is officially over and there is a new US president, US stock market continues to show a persistent strength.
On Friday 18th November 2016 the major indices closed as follows :
S&P 500 2.181,90,-5,22,(-0,24%)
Dow 30 18.867,93,-35,89,(-0,19%)
Nasdaq 5.321,51,-12,46,(-0,23%)
Source : Yahoo Finance

With all 3 major indices having made higher prices it is interesting to watch for either a correction or a continuation of this current trend.All indices are in overbought levels using technical analysis indicators,so caution is necessary.As long as the uptrend continues buying dips on stocks seems safer than selling short stocks, but valuation is a concern as many stocks have risen in value so fast after the US election.

Tesla Motors, Inc. Stock Fundamental Analysis

Tesla Motors, Inc. Stock Fundamental Analysis

Company Information
Name: Tesla Motors, Inc.
Sector: Consumer Discretionary
Industry: Automobile Manufacturers

Business Summary:

Tesla Motors, Inc. designs, develops, manufactures and sells electric vehicles and energy storage products. The Company produces and sells two electric vehicles: the Model S sedan and the Model X sport utility vehicle (SUV).
Key Information:
Stock price close at 16th November 2016: $183.93
Market Cap: 27.57B
52 Week Range : $141.05 – $269.34
Beta: 1.14
PE Ratio (TTM): -29.09
EPS (TTM):-6.32
Tesla Motors, Inc. (NASDAQ:TSLA) is an electric car manufacturer with products such as Model S, which we love and would buy without any hesitation. Great car with fantastic design and technology. But it is another thing to like a company and its products and to like or not the company’s stock. Having a thorough fundamental analysis on Tesla’s stock what can we point out as strengths and weaknesses?

Fundamental Analysis

Income Statement:

We will perform stock fundamental analysis for 5 years, from 2011 to 2015 and also focus on latest quarters for 2016.Total revenues and gross profit have followed a huge increase. From $204 millions of revenues in 2011, Tesla earned 4046 millions in 2015.Gross profit followed an increase from $62 millions in 2011 to $ 924 millions in 2015. As Tesla invests in technology research and development expenses and selling general expenses have both increased significantly during this 5 years period. The net result is negative operating income for all 5 years, with a huge negative increase in year 2015 of -$714 millions compared to -$187 millions to 2014.Net income after taxes is negative for all 5 years, with year 2015 having the biggest negative number of the 5 years -$889 millions. The trend of diluted normalized EPS is negative also, no surprise here, following the same trend as net income. In 2015 the diluted normalized EPS was -$6.93, the lowest point for the 5 year period.

Balance Sheet:

While cash and short term investments have been increasing from $280 millions to $1197 millions in 2015, what is alarming is the increase of total debt over the 5 years. It has increased from $280 millions in 2011 to $2,696 millions in 2015.Each year the total debt follows an increase compared to previous year. While total equity shows also a large increase over the 5 years from $224 millions in 2011 to $1084 millions in 2015.

Cash Flow Statement:

Here we have an interesting trend for cash flows from operating activities and cash flows from investing activities compared to cash flows from financing activities. Cash flows from financing activities have showed an increasing trend, as the company issued stocks and debt and the net result was an increase of cash but for the same period cash from operating and investing activities has been negative. And free cash flow has been negative for 4 out of the 5 years, with year 2015 being at -$2159 millions showing a negative increase of about 110% compared with year 2014.

As mentioned before the company has negative EPS for all 5 years, with year 2015 having the highest negative earnings per share of -$6.93 for the period. While gross profit margin is positive for all 5 years it has shown a diminishing trend and is currently at +22.82% for year 2015.Net profit margin is negative for all 5 years, showing a great improvement from year 2011, but for year 2015 it is at -21.96% almost doubled from last year. ROE is negative for all 5 years, again showing an improvement from base year 2011 but for year 2015 it is at -82.00% compared to -32.25% for year 2014 a very negative performance.

Both current ratio and quick ratio have showed a declining trend for our 5 year period. Current ratio for year 2015 is at 0.99, it was 1.95 at year 2011, while quick ratio for year 2015 is at 0.54, it was 1.69 at year 2011. Debt / Equity ratio is very alarming as it has been increased significantly during these 5 years. It was 1.2504 at year 2011, it was 2.488 for year 2015.
Relative value analysis with industry:
Tesla Motors, Inc. has negative profit margin, ROE and interest coverage ratios compared to the relevant ratios of the automobile manufacturers industry. The industry has all 3 positive ratios. The company has a negative P/E ratio, while the industry a P/E ratio of 9.48.The company has a price/tangible book value ratio of 10.29 compared to the 1.84 price/tangible book value ratio of the industry.

The expected EPS growth rate for next 3-5 years is about 30%.Tesla Motors, Inc. had a recent EPS surprise of 112.28% on 26th October 2016, the first in last 4 quarters showing positive EPS of $0.14 compared to expected EPS of – $1.14.

Technical Analysis:

Tesla stock
Tesla stock

The stock has been in a downtrend and its recent price close of $183.93 on 16th November 2016 is below the daily moving averages of 50 and 200 days, which are currently at 198.75 and 212.48 respectively. Both moving averages show a declining trend. MACD is negative currently having a value of -4.746.Other indicators such as full stochastics for 14 days show an oversold condition being at 15.35.

We do not like the fact that Tesla has not showed profitability for last 5 years. It has a lot of debt which makes it a very risky stock. Until it shows a consistent profitability we cannot suggest to buy the stock. It seems extremely overvalued on a comparative value analysis with the industry it belongs. Unless fundamentals improve a lot and show not just once improvement but a long term improvement, our bias is to sell or go short the stock going with current declining trend.

Legal disclaimer and sources:
The author has not any current shares of the stock in his portfolio or intends to buy, sell any stocks of the company in the near future. This is an independent financial analysis with not any financial compensation from any source. Sources used are,, and yahoo finance.

TIME INC NEW COM Fundamental Analysis

TIME INC NEW COM Fundamental Analysis
Symbol: NYSE: TIME
Sector: Consumer Discretionary
Industry: Publishing

Business Summary:

Time Inc. is a media company. The company has several well-known publications and provides content marketing, targeted local print and digital advertising programs, branded book publishing, and marketing and support services, including subscription sales services for magazines and other products, retail distribution and marketing services, and customer service and fulfillment services, for the company and third-party clients, including other magazine publishers.
Key Information:
Stock price close on 14th November 2016: $13.70
Market Cap 1.36B
Beta N/A
PE Ratio (TTM) -15.15
52 Week Range 12.23 – 17.66
Dividend & Yield 0.76 (5.80%)

Fundamental Analysis:

We will have a 5 year financial analysis of important fundamental metrics such as revenues, profit margins, net income, earnings per share, cash flow and balance sheet, examining years 2011 to 2015.Starting with revenues first thing we notice is a steady 5 year decline in revenues growth. For each of the last 5 years the company has made less sales compared to previous years. So we have a 5 year negative growth rate for revenues. Current sales growth for year 2015 is -5.43%. What is remarkable is the fact that gross margin shows a stability for the 5 years period, currently at +60.72% having a range of +62.12%/+60.72%. But net margin shows a different story. It has followed the same path as sales, declining for each of the last 5 years ranging from +10.01% during 2011, the highest piece to -28.39% for year 2015, which is the lowest for the 5 year range.
Net income after taxes shows a declining trend for the last 5 years ranging from +368 millions in 2011, the highest point to our range to -881 millions in 2015, the lowest point of reference. Diluted normalized EPS show a steady declining trend for the 5 years period ranging from 3.54 the highest price in the range in 2011, to -1.72 in 2015, the lowest point in the range. Cash flow analysis shows that cash from operating activities remain positive for each of the 5 years, but still showing a declining trend, ranging from 474 millions in 2011,the highest point in our range to 154 millions in year 2015, the lowest point in the range. Free cash flow follows the same trend as operating cash flow, a declining trend from 426 millions in 2011, the highest point in our range to -58 millions for year 2015, the lowest point to the range. And also turned negative from positive.

Balance Sheet:
What we can notice for the 5 years analysis are the following. A decrease of total assets and total equity, an increase of total liabilities and mainly a huge increase in total debt ranging from 34 millions in 2011, the lowest point in our range to 1,293 millions in year 2015, the highest point in the range. Current ratio for year 2015 is 1.26 and quick ratio is 1.23, both above 1 which is considered as a safe ratio but most importantly also both ratios are currently at the highest price for the 5 years range. Debt/Equity ratio has skyrocketed the last 5 years and is currently at 0.7178, the highest point in the time range but still below the price of 1, again considered safe.

Relative value analysis:
Comparing the Net Profit Margin, Return on Equity, Interest Coverage ratios we notice that TIME INC NEW Com has lower ratios than the industry ratios. Price to cash flow ratio is also higher for the company compared to the ratio of the industry. However the company has a higher dividend yield than the dividend yield of the industry.

Growth prospects:
The company has a current PEG ratio of 2.21 and estimated earnings growth for next 3-5 years of 5%.During last 4 quarters the stock has only one positive earnings surprise and the consensus for earnings in year 2017 has been in decline.

Technical Analysis:

TIME stock price
TIME stock price

The stock has been recently in a downtrend and current price of $13.70 is blow moving averages of 50 days and 200 days, currently at 13.83 and 14.58 respectively. However the stock has made a recent bounce from low price range of about $12.5 per share, while momentum indicators such as MACD,Stochastics and RSI show bullish momentum and are not at extreme levels.

We strongly believe that unless a radical financial improvement happens our recommendation is to avoid buying the stock. In fact we favor selling the stock at any strong rally as very poor financial performance and a technical analysis that shows the stock is still in downtrend does not give us any strong argument to buy the stock.

Legal disclaimer and sources:
The author has not any current shares of the stock in his portfolio or intends to buy, sell any stocks of the company in the near future. This is an independent financial analysis with not any financial compensation from any source. Sources used are,, and yahoo finance.

Facebook’s bull rally has gone on for far too long, what is next

Facebook’s bull rally has gone on for far too long, what is next?

• Earnings and revenues show good momentum and increase
• Valuation is a lot of concern now
• Instagram is a great add-on to revenues

Facebook(FB) has made this year an impressive rally of almost 36% closing on 21st September 2016 at $129.94 per share. While this stock price increase can be attributed to strong revenues and profitability over last year, what is the future for Facebook stock?

Earnings and revenues show strong momentum

Earnings per share and total revenues show an increase during last 5 fiscal years. Free cash flow also shows an increase for all 5 last fiscal years, so Facebook has a strong financial performance and is producing a lot of cash, which is very bullish. 1 year EPS growth rate is 44.5% while next 3-5 years EPS growth rate is 69%, much higher than relevant internet industry and technology sector growth rates. So Facebook is a growth stock with a lot of momentum, but what about its valuation? Does recent rally leave plenty of stock price upside?

Valuation is a lot of concern now

While Facebook has a very good profitability trend as both its operating margin and profit margin are higher than relevant ratios for industry and sector some very important ratios, such as Price/Earnings, Price/Cash Flow, Price/Sales and Price/Book Value are much higher than all ratios of both industry and sector. Facebook has an earnings yield of 1.6% much lower than 5.1% earnings yield for S&P 500. What about the main industry peers of Facebook, Alphabet(GOOGL), LinkedIn(LNKD), Yahoo(YHOO) and Twitter(TWTR)? Facebook has a higher Price/Sales ratio than all 4 mentioned peers. Also Price/Book ratio is also higher than all 4 peers. Comparing Price/Earnings ratio Facebook has only higher ratio than Google, while both LinkedIn and Twitter have a negative ratio. As this shows a mixed trend, as a whole Facebook seems to trade at a very significant premium both compared to its industry and sector averages, and to its main industrial peers. We are concerned that while Facebook shows strong profitability, the current stock price seems to be very rich on a relative value analysis.

Instagram and WhatsApp can add more profitability to Facebook
Facebook has made several important acquisitions over last years to strengthen its dominant position in the technology sector and internet industry. Adding Instagram and WhatsApp to its business and marketing properties, these social media add-ons can provide significant revenues and profitability based on advertising platforms or charging a fee for services to their users. Social media competition is intense, but the potential of exploiting new promising sources of revenues is very large.


While Facebook has shown last 5 years impressive results in terms of earnings and revenues growth, and is considered a growth stock, the recent 1 year rally of 36% gains indicates that at current levels of $129.94 per share the stock is expensive on a relative value analysis. Technical analysis shows a very bullish picture as the stock both on a daily and weekly charts is above the 50 and 200 simple moving averages, which are also on a rising slope. There is a resistance around $132 per share but above that there is no significant resistance. The catalysts that can move the stock higher are mainly what sent stock higher last year, increased earnings per share and revenues. But we are concerned whether 3-5 years earnings growth of 69% is sustainable. While it is hard to ignore the strong financial performance of Facebook during last 5 years, we think at current levels the stock is not a buy. We tend towards a hold rating. Institutional ownership of shares is an impressive 72%, and this can provide support to the stock price. If Facebook fails to deliver strong earnings in the following quarters, a significant stock price correction is possible if combined with rich valuation on a relative comparison basis both to the industry, sector and the main peers. On the other hand good earnings momentum continuation could send the stock higher. We cannot rule out another stock price increase of a 10-20% from current levels sending the stock higher to 143-156 dollars per share. Any significant stock price corrections can be used as a good risk and reward investing positions to Facebook.

Legal disclaimer:
The author does not own any stocks of Facebook. Date used from sources CNBC, MarketWatch, and Morningstar.

One of the most important things for the stock market to make money with

One of the most important things for the stock market to make money with is timing

The stock market is volatile,risky and unpredictable.there are no guarantees about making money or having profits.Someone can lose a lot of money at the stock market.But one very important aspect to remember is that timing is very important for stocks.This first week of US elections result the US stock market had a rally.yet not all stocks performed well.There are some sectors that did very well.

Financials sector did very well this week

Financial stocks performed very well with strong gains,even Wells Fargo had a nice rally.Also industrials,information technology,materials and energy performed well, while real estate and telecommunication services were among the weak sectors.
This date was taken from source

Being at the right sector the correct time is essential to ride the wave and pick stocks that will perform well and make money with.It is not easy though.

Stock market reaction to US election result

Stock market volatility

Now that we now the result and winner of US elections the stock market needs to find a direction.Asian stock markets tanked as the winner of US election was officially announced.Gold moved up,oil down,European stock markets opened lower but now rebound.
How will the US stock market react to the election result?A sell-off is very likely.But this could be a great opportunity to buy stocks at lower prices or sell stocks that deem to be overvalued.Overall volatility seems to be present,so a lot of caution is required when investing or trading the stock market not only today but the following days until the investors and traders and hedge funds, or big institutional investors make an opinion on the market not based on emotions such as fear or greed but on logic.Stock market always makes dips,and rallies.

A very interesting stock market fact with todays big rally

Stock market today’s rally has something interesting

What is the stock market today’s feature that is worth mentioning?In such a strong rally even stocks that have been in a downtrend lets say with strong short selling interest may get positive reaction and trend higher.This however may not be a catalyst for a permanent trend change.If fundamentals have not changes caution is required as this strong rally may be short for stocks that have poor or bad fundamentals.

US elections may create volatility

Stock market news

The US stock market is waiting this week the result of US elections to assess the outcome and form a new trend or not.Last days there was a selloff in the stock market as the polls show a tight battle to win.There could be a lot of volatility this week, which is both good and bad.Any possible selloff may create buying opportunities and selling also stocks that seem either overvalued or are at a downtrend.Caution is necessary.

One of the most challenging stock market moments

As always stock market is a risky financial market

If how to invest in stock market was easy we would all be millionaires.There are numerous stock market for dummies tips but one of the most important stock market news are earnings.
it is almost impossible to predict stock market today,although technical analysis tries to do it.Take for instance Tesla motors(Nasdaq:TSLA). It was expected to announce yesterday again losses, yet it announced profits.So today as we saw from yesterday after hours trading we may probably see a rally in the stock.The point is though, is one profitability enough to change the stock market fundamental view about Tesla?