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RTLR - A Spinoff w/ Room to GrowFoundation of revenue from long-term fixed contracts provided by the parent company (FANG). Utilizing FCF to fund five JV's; three of which are paid for and already generating cash. The other two require an additional $79m in Capex before completion. Additionally utilizing FCF for an 'aggressive' share buyback program. This should result in 2021 results showing decreased CAPEX, and higher cash-flow as joint ventures are completed and optimized. With a 7.79% dividend and a nice ascending triangle, RTLR seems primed for a move up in the short-term, along with a promising foundation for the medium to long-term. The Fibonacci extensions provide some insight into potential short term targets once weekly candles begin to close outside of the blue triangle. This post is purely for education purposes. I am not a financial advisor, and as such, this post should not be interpreted as financial advice.
RLong
by Halams
1
Northop Grumman a buy near trend line supportDefense contractor Northop Grumman fell hard toward trend line support both before and after its earnings report last Friday, despite a solid beat of analyst expectations. The fall has occurred as analysts adjusted forward estimates of earnings and sales downward for the next two years. Despite the downward revisions, Northop Grumman remains a growth company, with PEG ratio of 1.8. The share price has fallen much faster than earnings expectations, making NOC a very attractive buy as it approaches support. Let's look at NOC's current price ratios compared to its three-year median price ratios on earnings dates. Here is the implied upside from the current price ratio to the median price ratios on earnings dates over the last three years: P/E: 21% Fwd P/E: 18% P/S: 17% Fwd P/S: 21% P/D: 17% Fwd P/D: 23% P/B: 31% P/FCF: 81% Sentiment on NOC is positive, with an 8.3/10 analyst summary score (average rating Buy). The news environment for the company is good, thanks to several US government contracts recently signed, and several others recently successfully completed. Open interest on NOC is about evenly split between bulls and bears, but the 30-day average of trading volume favors the bulls. NOC is nearing support from July lows and a seven-month trend line. I will look to make a buy around 287.
NYSE:NOCLong
by ChristopherCarrollSmith
7
HPE sentiment is changingLast week I put up a post titled "HPE sentiment may change for the better," but the post got blocked because I had a link in there that the mods felt constituted advertising. Well, HPE sentiment has begun to change for the better, as I predicted, so I think this is worth an update and repost with the offending link removed. I track metrics of both value and sentiment, and I usually only buy a stock if measures of both value and sentiment are aligned. I've noticed, though, that there's more money to be made if you can pick a stock with good value and poor sentiment that's about to improve. HPE may be a candidate for just such a positive change in sentiment. Value I've struggled with how to calculate PEG ratios post-Covid. I generally take my earnings growth rate from an approximately five-year linear regression line (three years past actuals, two years future estimates). But when you've got a black swan event right in the middle of your time series, what do you do with that? Do you use a continuous function that makes the growth rate look negative? Or do you use a piecewise function that makes it look positive? I've settled on taking the average of the two. So, keep that in mind when I tell you that I've calculated HPE's PEG ratio at 3.39 and PSG ratio at 0.36. I typically multiply the two values together to get a composite PEG*PSG ratio, in this case 1.23. Of the stocks I track, the only one with a better PEG*PSG than this is $HPQ. HPE is also trading near the bottom of its 3-year valuation range in terms of forward P/E and forward P/S. It has generally traded at about .75 forward P/S. Right now it's about .47. Implicitly, there's about 59% upside from here. Do the same calculation with forward P/E, and the numbers imply about 40% upside from here. Another thing I really like about HPE is how innovative it is. Over the last three years, HPE has averaged 50 patents granted per billion dollars of current market cap, making it more innovative for its size than any other company I watch save IBM. Throw in the fact that HPE is expected to pay 4.8% in dividends over the next 12 months, and you've got a stock that combines both shareholder returns and growth potential. That's rare. Sentiment HPE's Equity Starmine Summary Score improved from 1.6/10 to 3.7/10 in the last 24 hours, meaning that analysts are growing more positive on the stock. The upgrade caused a nice spike in the stock price today. The sentiment change comes after HPE reported 3Q results and not only beat analyst expectations on earnings and revenue, but also beat analyst expectations on 4Q guidance. Analysts sharply increased earnings estimates for the next couple years after the earnings report. Perhaps even more importantly, HPE dramatically improved its financial health from the year-ago quarter. From the conference call: "Our Q3 free cash flow of $924 million was up $276 million year over year, driven by a record cash flow from operations as a result of our improved execution this quarter. . . . We generated cash flow from operations of approximately $1.5 billion. This is the highest level for the past 11 quarters, as we improved our operational execution." The company does expect cash flow to be sequentially lower next quarter due to restructuring, but the company is still in stellar shape financially, with an $8.5 billion cash reserve. Given HPE's strong results, I expect continued analyst upgrades. And I'm not alone in thinking so; HPE now has a bullish put/call ratio of 0.51. Technicals HPE's technicals are neutral at the moment, with the stock in a triangle. A couple ways to play it would be to buy near the bottom of the triangle or wait for an upside breakout. I do think there's a good chance HPE will make an upside breakout in the coming weeks, overall market conditions permitting.
NYSE:HPELong
by ChristopherCarrollSmith
4