Quant Signal & Data Review For Canadian Pacific Railway Limited (TSX:CP), Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND)

In trying to determine how profitable a company is per asset dollar, we can take a look at  the firm’s Return on Assets.  Return on assets is calculated by dividing a company’s net income (usually annual income) by its total assets, and is displayed as a percentage. At the time of writing, Canadian Pacific Railway Limited (TSX:CP) has 0.122696 ROA.  The measure is commonly used to compare the performance of businesses within the same industry, since it is very difficult for someone to obfuscate the cash flow figure. Thus, the ratio is quite a reliable and comparable measure of asset performance across an industry.

Investors who are new to picking stocks may find themselves tempted to buy shares that have been recently rising the most. Although the traditional advice is to buy low and sell high, novice investors often do just the opposite. Buying a particular stock just because it has been rising recently may end up leaving the investor shaking their head down the road. Expecting that a stock will continue to ride the wave higher can lead to disappointment when momentum suddenly shifts. Studying the fundamentals of a certain company can help the investor gauge if the stock is a worthy buy at current levels.

Valuation Scores

Checking in on some valuation rankings, Canadian Pacific Railway Limited (TSX:CP) has a Value Composite score of 52. Developed by James O’Shaughnessy, the VC score uses five valuation ratios. These ratios are price to earnings, price to cash flow, EBITDA to EV, price to book value, and price to sales. The VC is displayed as a number between 1 and 100. In general, a company with a score closer to 0 would be seen as undervalued, and a score closer to 100 would indicate an overvalued company. Adding a sixth ratio, shareholder yield, we can view the Value Composite 2 score which is currently sitting at 44.

Canadian Pacific Railway Limited (TSX:CP) has a current MF Rank of 5633. Developed by hedge fund manager Joel Greenblatt, the intention of the formula is to spot high quality companies that are trading at an attractive price. The formula uses ROIC and earnings yield ratios to find quality, undervalued stocks. In general, companies with the lowest combined rank may be the higher quality picks.

The price to book ratio or market to book ratio for Canadian Pacific Railway Limited (TSX:CP) currently stands at 5.235928.  The ratio is calculated by dividing the stock price per share by the book value per share.  This ratio is used to determine how the market values the equity.  A ratio of under 1 typically indicates that the shares are undervalued.  A ratio over 1 indicates that the market is willing to pay more for the shares.  There are often many underlying factors that come into play with the Price to Book ratio so all additional metrics should be considered as well. 

Ever wonder how investors predict positive share price momentum?  The Cross SMA 50/200, also known as the “Golden Cross” is the fifty day moving average divided by the two hundred day moving average.  The SMA 50/200 for Canadian Pacific Railway Limited (TSX:CP) is currently 0.98863.  If the Golden Cross is greater than 1, then the 50 day moving average is above the 200 day moving average – indicating a positive share price momentum.  If the Golden Cross is less than 1, then the 50 day moving average is below the 200 day moving average, indicating that the price might drop.

The Leverage Ratio of Canadian Pacific Railway Limited (TSX:CP) is 0.408298. Leverage ratio is the total debt of a company divided by total assets of the current and past year divided by two. Companies take on debt to finance their day to day operations. The leverage ratio can measure how much of a company’s capital comes from debt. With this ratio, investors can better estimate how well a company will be able to pay their long and short term financial obligations.

Volatility

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 Canadian Pacific Railway Limited (TSX:CP) is 24.266100.  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 Canadian Pacific Railway Limited (TSX:CP) is 29.885100.  The Volatility 6m is the same, except measured over the course of six months.  The Volatility 6m is 25.921200.

Quant Scores

The Q.i. Value of Canadian Pacific Railway Limited (TSX:CP) is 31.00000.  The Q.i. Value is a helpful tool in determining if a company is undervalued or not.  The Q.i. Value is calculated using the following ratios: EBITDA Yield, Earnings Yield, FCF Yield, and Liquidity.  The lower the Q.i. value, the more undervalued the company is thought to be.

The Piotroski F-Score is a scoring system between 1-9 that determines a firm’s financial strength.  The score helps determine if a company’s stock is valuable or not.  The Piotroski F-Score of Canadian Pacific Railway Limited (TSX:CP) is 9.  A score of nine indicates a high value stock, while a score of one indicates a low value stock.  The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings.  It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue.  The score is also determined by change in gross margin and change in asset turnover.

The M-Score, conceived by accounting professor Messod Beneish, is a model for detecting whether a company has manipulated their earnings numbers or not. Canadian Pacific Railway Limited (TSX:CP) has an M-Score of -999.000000.  The M-Score is based on 8 different variables: Days’ sales in receivables index, Gross Margin Index, Asset Quality Index, Sales Growth Index, Depreciation Index, Sales, General and Administrative expenses Index, Leverage Index and Total Accruals to Total Assets.  A score higher than -1.78 is an indicator that the company might be manipulating their numbers.

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 Canadian Pacific Railway Limited (TSX:CP) is 8.00000.  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.

When examining current stock market levels, investors who have been staying on the sidelines may be wondering if now is a good time to get back into the ring. Nobody can say for sure if momentum will continue to push to the upside, and investors may be overly cautious at this stage. Studying company financials and paying attention to pertinent economic data can help the investor make more educated decisions when it comes to the stock market. It is obviously very hard for a new investor to become highly successful in the stock market right out of the gate. Doing all the homework and dedicating the proper amount of time can help the investor get on the right track to accumulating profits down the road.

Taking a look at some key metrics and ratios for Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND), we note that the ROA or Return on Assets stands at 0.269943. Return on Assets shows how many dollars of earnings result from each dollar of assets the company controls. Return on assets gives an indication of the capital intensity of the company, which will also depend on the type of industry.

As investors gear up for the stretch run towards the end of the year, the focus will be on which way stock market momentum seems to be shifting. Investors may be taking note of various economic reports and keeping a close eye on global political news. There are many factors that can affect the price of a stock. Tracking the markets from different angles may help to put together the bigger investing picture. Investors may be wondering if they have missed the boat as stocks have cooled off a bit recently. It may be wise to remember that there are always plenty of market opportunities to take advantage of. Diving into the fray may not be necessary until all the boxes are ticked off on the investor’s checklist. 

In addition to ROA, there are a number of additional ratios and Quant signals available to investors in order to decipher if the shares are a good fit for their portfolio.  The Shareholder Yield is a way that investors can see how much money shareholders are receiving from a company through a combination of dividends, share repurchases and debt reduction.  The Shareholder Yield of Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is -0.002422.  This percentage is calculated by adding the dividend yield plus the percentage of shares repurchased.  Dividends are a common way that companies distribute cash to their shareholders.  Similarly, cash repurchases and a reduction of debt can increase the shareholder value, too.  Another way to determine the effectiveness of a company’s distributions is by looking at the Shareholder yield (Mebane Faber).  The Shareholder Yield (Mebane Faber) of Ligand Pharmaceuticals Incorporated NasdaqGM:LGND is -0.24424.  This number is calculated by looking at the sum of the dividend yield plus percentage of sales repurchased and net debt repaid yield.

The EBITDA Yield is a great way to determine a company’s profitability.  This number is calculated by dividing a company’s earnings before interest, taxes, depreciation and amortization by the company’s enterprise value.  Enterprise Value is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.  The EBITDA Yield for Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 0.054404. 

The Earnings to Price yield of Ligand Pharmaceuticals Incorporated NasdaqGM:LGND is 0.071351.  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 Ligand Pharmaceuticals Incorporated NasdaqGM:LGND is 0.050242.  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 Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 0.011126.

The Price to book ratio is the current share price of a company divided by the book value per share.  The Price to Book ratio for Ligand Pharmaceuticals Incorporated NasdaqGM:LGND is 3.582191.  A lower price to book ratio indicates that the stock might be undervalued.  Similarly, Price to cash flow ratio is another helpful ratio in determining a company’s value.  The Price to Cash Flow for Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is .  This ratio is calculated by dividing the market value of a company by cash from operating activities.  Additionally, the price to earnings ratio is another popular way for analysts and investors to determine a company’s profitability.  The price to earnings ratio for Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 14.015170. This ratio is found by taking the current share price and dividing by earnings per share.

Quant

The Piotroski F-Score is a scoring system between 1-9 that determines a firm’s financial strength.  The score helps determine if a company’s stock is valuable or not.  The Piotroski F-Score of Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 5.  A score of nine indicates a high value stock, while a score of one indicates a low value stock.  The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings.  It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue.  The score is also determined by change in gross margin and change in asset turnover.

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 Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 38.00000.  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.

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 Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 6422.  The lower the ERP5 rank, the more undervalued a company is thought to be.

The M-Score, conceived by accounting professor Messod Beneish, is a model for detecting whether a company has manipulated their earnings numbers or not. Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) has an M-Score of -999.000000.  The M-Score is based on 8 different variables: Days’ sales in receivables index, Gross Margin Index, Asset Quality Index, Sales Growth Index, Depreciation Index, Sales, General and Administrative expenses Index, Leverage Index and Total Accruals to Total Assets.  A score higher than -1.78 is an indicator that the company might be manipulating their numbers.

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The VC1 of Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 60.  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 Ligand Pharmaceuticals Incorporated (NasdaqGM:LGND) is 62.

Often times, investors may become worried when the stock market is highly volatile. Being prepared for volatile situations can help ease the fears that come along with turbulence. Following a well-crafted plan might help ride out the ups and downs that are a normal part of dealing with the market. Investors should be prepared for market situations that provide ample opportunities. Although market downturns can be unsettling and cause panic, investors who are able to stay the course and keep calm may be able to spot good buying opportunities when the wider market is selling. 

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