Valuation Rating Changes - Week of November 25th
Volatility in the stock market finally eased up and therefore we only have 5 rating changes that took place last week.
Every Friday evening I update the valuation for each company in the Investable Universe. This process starts with updating the free cash flow per share and forward dividend yield for any of the companies that reported earnings or announced a dividend hike during the week. Afterwards each company is put through the custom FCF valuation model and new “fair price” estimates are saved in the valuation rating tracker.
If you’re a paid subscriber you can access the live valuation ratings at any time here. You can also find a copy of my custom Free Cash Flow valuation tool currently covering 202 dividend growth stocks and gain access to the model portfolios designed around this investable universe.
Let’s take a look at which stock had a valuation rating change last week.
3 rating changes are downgrades and 2 are upgrades. Let’s take a closer look at each.
Applied Materials AMAT 0.00%↑
The share price moved up from about $169 on 11/15/24 to about $175 by the end of last week. This minor shift in share price pushed my forward expected rate of return below 10% and as a result triggered a lower “buy” price expectation from my custom valuation model. Hence the stock has been downgraded from a “buy” to a “hold”.
Garmin GRMN 0.00%↑
Near the end of October GRMN 0.00%↑ shot up like a rocket, pushing the stock into my “trim” zone. However, since last week GRMN 0.00%↑ has seen an increase in its forward expected earnings growth rate, from 9.78% to 15.8%. This favorable change has pushed GRMN 0.00%↑ forward expected rate of return in my model above 10%, as a result driving my price targets for the stock. Hence GRMN 0.00%↑ has been upgraded from a “trim” to a “hold”.
HCA Healthcare HCA 0.00%↑
HCA 0.00%↑ has been upgraded from a “trim” to a “hold” primarily driven by the share price dipping following the U.S. election earlier this month. This downward momentum is driven by expected policies from the incoming party not seen as favorable for healthcare stocks. HCA 0.00%↑ is still roughly $50 above my target “buy” price so it’ll be interesting to see if it will continue to trend down to reach this threshold. It’s worthy to note that the forward expected rate of return as of today stands at 8.59%, as the stock continues to see its share price decline this rate of return increases. Once it crosses above 10% the price targets will be revised higher and the stock can reach the “buy” zone much sooner than the current $278 fair price estimate.
NetEase NTES 0.00%↑
NTES 0.00%↑ saw its TTM free cash flow per share decline from $53.67 to $23.99. That is quite a large drop and as you can see in the valuation chart above, now NTES 0.00%↑ no longer look attractive based on a fair multiple of its free cash flow. NTES 0.00%↑ also saw its forward earnings growth rate decline from 6.1% to 5.22%, further driving its investment case lower.
NXP Semiconductor NXPI 0.00%↑
NXPI 0.00%↑ saw its forward earnings growth rate decline from 6.6% to 6.2%. This feeds into my forward expected rate of return that as of Friday stands at 9.54%, last week it was 10.76%. The rating downgrade from a “strong buy” to a “buy” is primarily driven by this change, but also by the share price moving roughly $10 higher over the course of last week.
Please note that the valuation model is based on quantitative data and therefore does not factor in any qualitative information. As such it is very important to perform further due diligence on each stock to make sure there isn’t a valid reason driving the valuation upgrade.
As a reminder all paid subscribers can access live valuation ratings here.
Here are one-pagers for the 5 stocks covered above.