Winnebago Industries, Inc. ($WGO$) has a current MF Rank of 606. 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.
Active investors are typically interested in the factors that drive stock price movements. Buying an individual stock means that you own a piece of the company. The hope is that the company does very well and becomes highly profitable. A profitable company may decide to do various things with the profits. They may reinvest profits back into the business, or they may choose to pay shareholders dividends from those earnings. Sometimes stocks may eventually become undervalued or overvalued. Spotting these trends may lead to further examination or the underlying fundamentals of the company. A company that continues to disappoint on the earnings front may have some issues that need to be addressed. It is highly important to make sure all the research is done on a stock, especially if the investor is heavily weighted on the name. Sometimes earnings reports may be good, but the stock price does not reflect that. Having a good understanding of the entire picture may help investors better travel the winding stock market road.
In their 2008 paper, professors Cooper, Gulen and Schill provided evidence that a firm’s assets growth rates are strong predictors of future abnormal returns.
“The findings suggest that corporate events associated with asset expansion (i.e., acquisitions, public equity offerings, public debt offerings, and bank loan initiations) tend to be followed by periods of abnormally low returns, whereas events associated with asset contraction (i.e., spin-offs, share repurchases, debt prepayments, and dividend initiations) tend to be followed by periods of abnormally high returns.” – Cooper, Gulen & Shill in Asset Growth and the Cross-Section of Stock Returns. In a study on US data during the period 1967-2007, they find that:
– A hedge portfolio rebalanced annually that is long (short) the stocks of companies with the lowest (highest) percentage growth in total assets over the previous 12 months generates an average annual return of 22%.
– This asset growth effect is stronger for small capitalization stocks, but is still substantial for large capitalization stocks.
– The effect is strongest in the month of January.
– Asset growth rate retains large explanatory power for future stock returns after accounting for firm size, book-to-market ratio and momentum. In fact the asset growth effect is at least as powerful in explaining returns as these other widely used factors.
We calculate asset growth as follows:
Total Asset Growth = (Total AssetsTotal Assets y-1) − 1. Winnebago Industries, Inc. (WGO) has a total asset growth number of 0.121665.
Net Debt to Market Cap
This ratio gives a sense of how much debt a company has relative to its market value. Companies with high debt levels compared to their peers can be volatile. We calculate it as follows:
Net Debt to Market Cap = (Total Debt−Cash and ST Investments) / Market Cap
Winnebago Industries, Inc. (WGO) has a net debt to market cap ratio of 0.242543.
External Financing Ratio
This factor was introduced by Richard Tortoriello, a senior quantitative analyist for S&P Capital IQ. He authored a book on quantitative analysis: Quantitative Strategies for Achieving Alpha (2009, McGraw Hill). In this book, he identified the External Financing Ratio as a factor that is very good at predicting investment underperformance.
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External finance ratio = (Total Assets−Total Assets y-1−Cash Flow from Operations) / Total Assets
Winnebago Industries, Inc. (WGO) has an external finance ratio of 0.011364.
Altman Z Score
Winnebago Industries, Inc. (WGO) has an Altman Z score of 4.675024. The Z-Score for predicting bankruptcy was published in 1968 by Edward I. Altman, who was assistant professor of finance at New York University at that time. It measures the financial health of a company based on a set of income and balance sheet values. The Altman Z-Score predicts the probability that a firm will go bankrupt within 2 years. In its initial test, the Altman Z-Score was found to be 72% accurate in predicting bankruptcy two years before the event. In a series of subsequent tests, the model was found to be approximately 80%–90% accurate in predicting bankruptcy one year before the event
Atman built the model by applying the statistical method of discriminant analysis to a dataset of publicly held manufacturers. Since then he has published new versions based on other datasets for private manufacturing (Z’-Score), non-manufacturing, service companies and companies in emerging markets. (Z”-Score)
Please also note that the original dataset used was quite small and consisted of only 66 firms of which half filed for bankruptcy. All companies were manufacturers and small firms (total assets less than $1m) were removed.
Book to market
BTM is a comparison of a company’s net asset value per share to its share price. This is a useful tool to help determine how the market prices a company relative to its actual worth. A ratio greater than one indicates an undervalued company, while a ratio less than one means a company is overvalued. Value managers seek out companies with high BTMs for their portfolios.
Book-to-Market Ratio = Common Shareholders Equity Divided by Market Cap.
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 Winnebago Industries, Inc. (WGO) is 6. 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.
Return on Assets
There are many different tools to determine whether a company is profitable or not. One of the most popular ratios is the “Return on Assets” (aka ROA). This score indicates how profitable a company is relative to its total assets. The Return on Assets for Winnebago Industries, Inc. (WGO) is 0.113616. This number is calculated by dividing net income after tax by the company’s total assets. A company that manages their assets well will have a higher return, while a company that manages their assets poorly will have a lower return.
As we sail into the second half of the calendar year, investors may be looking to see what has gone right and what has gone wrong so far this year. Making necessary changes to some holdings may help position investors for the next couple of quarters. Being able to cut the riskier losers and take some profits from winners may help solidify the stock portfolio. As we run through the next round of company earnings reports, investors will be keeping a close eye on the data that is reported. Investors may be looking to buy companies that continue to post beats on the earnings front, and cut ties with ones that are not hitting their marks.
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