Does James Fisher and Sons plc ($FSJ.L$)’s Magic Formula of 2369 Signal a Buying Opportunity?

James Fisher and Sons plc (FSJ.L) has a Magic Formula rank of 2369.  The Magic Formula was introduced in a book written by Joel Greenblatt, entitled, “The Little Book that Beats the Market”. In this book he encourages people to take control of their own money and invest it themselves. Most people entrust their money to investment professionals but Greenblatt observes that most of them don’t beat the market. They make investing sound quite complicated but as Greenblatt explains, it’s actually quite simple. He devised a very straightforward model that can be implemented easily by everyone and has proven to beat the market significantly in the past. Greenblatt suggests purchasing 30 “good companies”: cheap stocks with a high earnings yield and a high return on capital. He touts the success of his magic formula in his book ‘The Little Book that Beats the Market’ citing that it does, in fact, beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8%.

Price Range 52 Weeks

Some of the best financial predictions are formed by using a variation of financial tools. The Price Range 52 Weeks is one of the tools that investors use to determine the lowest and highest price at which a stock has traded in the previous 52 weeks. The Price Range of James Fisher and Sons plc (FSJ.L) over the past 52 weeks is 0.774194. The 52-week range can be found in the stock’s quote summary.

Enterprise Value

James Fisher and Sons plc (FSJ.L) based out of United Kingdom and resides in the Industrials sector, has a market cap of 1041599.128 after recently touching 18.2 on a recent bid. James Fisher and Sons plc (FSJ.L) sees an average of trading volume of 730.24643. James Fisher and Sons plc (FSJ.L) competes in the Transportation Infrastructure industry.  Watching some historical volatility numbers on shares of James Fisher and Sons plc (FSJ.L), we can see that the 12 month volatility is currently 30.8058. The 6 month volatility is 39.2407, and the 3 month is spotted at 35.6231. Following volatility data can aid calculate how much the stock price has fluctuated over the specified time timeframe. Although past volatility action may aid project future stock volatility, it may also be vastly different when taking into account other factors that may be driving price action during the measured time timeframe. 

Altman Z

James Fisher and Sons plc (FSJ.L) currently has an Altman Z score of 3.526298. 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 enterprise 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.

EBITDA/EV

EBITDA/EV stands at 0.077997.
This multiple is similar to Earnings Yield, but here we use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as Nominator). By doing this, we can compare companies with a different capital structure and capital expenditures. This way it gives a much better idea of the value of a enterprise compared to the faddish P/E ratio. As O’Shaughnessy explaines:

” Stocks that have very high debt levels often have low PE ratios, but this does not necessarily mean that they are cheap in relation to other securities. Stocks that are highly leveraged tend to have far more volatile PE ratios than those that are not. A stock’s PE ratio is greatly affected by debt levels and tax rates, whereas EBITDA/EV is not. To compare valuations on a level playing field, you have to account for how a enterprise is financing itself and then compare how relatively cheap or expensive it is after accounting for all balance sheet items.” – James P. O’Shaugnessy in What works on Wall Street

You can think of it as the taking all the revenue and subtracting the costs that solely go into running the business. The downside of EBITDA is that it can be abused by companies declaring as “one-off” costs things that should really be considered normal costs. We use the EBITDA of the last 12 months.

Considering at some ROIC (Return on Invested Capital) numbers, James Fisher and Sons plc (FSJ.L)’s ROIC is 0.223089. The ROIC 5 year average is 0.230807. ROIC is a profitability ratio that measures the return that an investment generates for those providing capital. ROIC helps show how efficient a firm is at turning capital into profits. 

Earnings to Price (Yield), Earnings Yield, Earnings Yield Five Year

The Earnings to Price yield of James Fisher and Sons plc (FSJ.L) is 0.047423. This is determined by taking the EPS and dividing it by the last closing stock price. This is one of the most faddish procedures investors use to price out a enterprise’s financial performance. Earnings Yield is determined by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the enterprise. The Earnings Yield for James Fisher and Sons plc (FSJ.L) is 0.053947. Earnings Yield helps investors calculate the return on investment for a given enterprise. 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 James Fisher and Sons plc (FSJ.L) is 0.04513.

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