Our mantra at Stockopedia’s is that good, cheap, improving stocks generally outperform expensive, deteriorating, junk stocks. We have therefore developed the QVM StockRank in order to highlight higher probability shares. This article provides an overview of companies that have shot up, or down, in the rankings and should therefore help investors to develop their own investment ideas.
QVM movers
A common driver of StockRank changes is of course the publication of companies’ annual or interim results. Improving or deteriorating fundamentals are made apparent to the public for the first time. This can cause share prices to rise or fall, with obvious consequences for the MomentumRank. The MomentumRank may change further if brokers revise their earnings expectations in light of new data. Furthermore, improving, or deteriorating, profitability can also mean that a company becomes cheap, or expensive, compared to what it owns, or what it earned over the previous year. This drives the ValueRank up or down.
A useful case in point is Halma (HLMA) - a company engaged in the business of detecting health hazards. The company has jumped 17 ranks over the last week to gain an overall QVM StockRank of 81. This is partly because the company released annual results on 12 June, revealing improving fundamentals across the board. In terms of the firm’s:
- Financial position: the Debt/Asset ratio dropped from 15.5 to 13, while the current ratio increased from 2.20 to 2.23.
- Productivity: the Asset Turnover has risen from 0.73 to 0.86, while the ROCE and operating margins remain strong (21% for both metrics).
The company also generates a lot of cash. It has more operating cash flow per share (32p) than earnings per share (23.8p). This means that Halma has been able to acquire companies like Longer Pump without having to dilute earnings in order to raise funds from shareholders. These figures give Halma an overall Quality rank of 91 - up 23 ranks from the previous week.
The brokers of course like these fundamentals, and have upped the consensus forecast for 2015 from 29.7p to 30.2p over the last two months. These upgrades, combined with the fact that Halma has beaten the market by 10% this year, give the company a strong momentum rank (80). However, the share price appreciation has knocked Halma’s value rank to 42, as the company gains a forward P/E ratio of 19.6.
Alternative Networks (AN.) has enjoyed a recent share…
