- Investment strategies
- Why invest in the stock market?
- Buy and hold or technical analysis? Why you need an investment plan
- Value investing and short selling in volatile markets
- Using technical analysis to support value investing
- Investing in the unexpected
- Franking credits, explained
- What is dividend stripping and is it a sensible strategy?
- Investing in quality IPOs
- How to invest in stocks that benefit from a moving Australian dollar
- Reasons to avoid bonds when interest rates are low
- How value investors use Skaffold
- Quality, growth and value = a winning strategy
- Know your investor type and boost your performance
- Technical + fundamental analysis = better buy and sell decisions
- Fundamental investing
- Value investing and the price earnings ratio
- Intrinsic valuation models and methodology
- Value investments or value traps?
- How to find value stocks in a bull market
- Find value investments in expanding markets
- Why capital raisings struggle to add investment value
- How to value an insurance company
- Top stocks
- 5 qualities of top stocks
- How to find stocks with a competitive advantage
- Why return on equity is the best measure of business performance
- Using cash flow to find value investments
- Finding high quality dividend stocks
- Debt is not always a dirty word
- Why Skaffold share investment software makes sense
- Using economic factors to uncover the best investment options
- How do experts find top stocks to invest in?
- Investing in global stocks
- How to invest in international shares on global stock markets
- Benefits of investing in international shares
Find value investments in expanding markets
Not all well-priced shares turn into valuable long term investments. Find out how to choose those that can grow in expanding markets.
You’ve found a top-quality company whose share price is offering great value-for-money. Should you jump straight in and buy?
Assuming you’ve evaluated the company in detail, reviewed its future earnings per share forecasts, are comfortable with the level of debt and confident the company won’t tap you on the shoulder in the next 12 months asking for extra cash, there’s a few more things you should do to ensure you don’t get caught out.
Using Skaffold, look at the company’s Skaffold Verdict and Skaffold Line chart. Is Skaffold’s estimate of future change in value forecast to be positive or negative?
Future Value is the key to growth investments
Future Value, also known as FV or Forecast change in Value, is the forecast percentage of annual growth (or decline) in value for a company. Change in Future Value estimates will change as Skaffold's future intrinsic value estimates change.
On the company’s Skaffold Line chart, pay particular attention to the gold forecast area. What does the future value of the business look like? Is it set to continue rising or forecast to decline?
A business may have a great track record and for some companies the future looks just as promising. However businesses are dynamic. Economic environments impact business models, consumer sentiment changes and businesses that fail to adapt can be left behind.
Compare Skaffold’s future estimates for Flight Centre (FLT) and BC Iron (BCI).
Based on their 2013 full year financial results, both companies are rated A1. Skaffold’s A1 – C5 Scores are based on the most recent financial reports published by the company.
Companies can release up to four financial reports per year. Interim reports capture all relevant financial and business activities that occur since the last full year report and provide investors with up-to-date information on the state of the business.
A company’s Skaffold Score is based upon the most recent financial results. These can be interim (quarter, half or third quarter) or full year results.
Companies with a 30 June end date report their full year results in August and half-year results in February. Those companies with a 31 December year-end date report their full year results in February and half-year results in August. Some companies report outside these times. Companies in some jurisdictions provide interim reports on a quarterly basis.
Estimating future values and growth rates
Skaffold sources consensus analyst earnings per share, dividends per share, normalised profit and total equity figures for thousands of listed companies. These figures are used to produce Skaffold’s future intrinsic valuation estimates.
When a company releases new information, analysts covering the stock will spend time digesting the announcement. They may ring the company or arrange a meeting with its CEO and CFO to gain further insights. After undertaking further research, each analyst may update their financial model and these new estimates will be run through Skaffold's automated algorithims.
Does the business operate in an expanding market?
Your job as an investor is to research the markets the business operates in to see if they are expanding, stabilising or contracting.
Logically you’d prefer to invest in companies that operate in expanding markets.
It’s much easier to grow in an expanding environment, rather than fighting for market share and compromising your margins. The online space is a perfect example of an expanding market. Many internet-focused businesses are doing extremely well, whilst other markets such as retail, building and construction are suffering. So it’s important to think about the business in terms of the market it operates in and whether or not the returns it has been generating are sustainable in the future and likely to continue growing at a reasonable rate.
Owning a business whose prospects for future growth are deteriorating significantly and the estimated forecasts based on consensus numbers are less certain or the future less promising, is like a vegie garden full of weeds. No one likes to grow or nurture weeds. Think of your portfolio accordingly. Do not get emotionally attached to businesses. Be independent, remain unbiased and stay flexible.
Skaffold’s powerful filter allows investors to narrow down the universe of stocks to only those with growth on the horizon.