Latest news with #TrefisHighQuality
Forbes
12-06-2025
- Business
- Forbes
Why AAL Stock Is A Risky Bet
American Airlines (NASDAQ:AAL) shares are currently priced around $11.10, reflecting a 35% decline this year, and positioning itself as a less attractive investment despite its apparently low valuation. A thorough examination of American Airlines' operational performance, financial health, and historical endurance uncovers numerous critical issues that overshadow its reduced price. With that in mind, if you are looking for upside with reduced volatility compared to individual stocks, the Trefis High Quality portfolio offers an alternative — having surpassed the S&P 500 and yielded over 91% returns since its launch. Additionally, examine – Boeing Stock Faces Fresh Crisis After 787 Dreamliner Crash In comparing the valuation of American Airlines to the broader market, the stock seems inexpensive based on sales or profit metrics. Its price-to-sales (P/S) ratio is 0.1, which is significantly lower than the S&P 500's 3.0. Likewise, the company's price-to-free cash flow (P/FCF) ratio is 1.8 compared to the S&P 500's 20.5, and its price-to-earnings (P/E) ratio is 11.3 against the benchmark's 26.4. Although these indicators imply a bargain, a more in-depth look at the company's fundamentals paints a more intricate picture. Our dashboard on American Airlines Valuation Ratios provides further details. American Airlines' revenue has seen some growth over the last few years. In the past three years, its revenue has increased at an average rate of 18.0%, surpassing the S&P 500's 5.5% rise. Over the last 12 months, revenues grew by 1.9% from $53 billion to $54 billion, although this is behind the S&P 500's 5.5% growth. However, its latest quarterly revenues experienced a slight drop of 0.2% to $13 billion compared to the previous year, unlike the S&P 500's 4.8% improvement. Despite some revenue growth, the company's profitability continues to be a major concern. American Airlines' operating income over the last four quarters was $2.9 billion, resulting in a low operating margin of 5.4%, considerably lower than the S&P 500's 13.2%. Its operating cash flow (OCF) for the same period was $4.3 billion, leading to a disappointing OCF margin of 7.9% compared to the S&P 500's 14.9%. Moreover, American Airlines' net income over the last four quarters was just $685 million — revealing a very weak net income margin of 1.3%, substantially under the S&P 500's 11.6%. American Airlines' financial stability also appears fragile. As of the latest quarter, the company's debt stood at $37 billion, while its market capitalization was $7.3 billion (as of June 11, 2025). This results in a very unfavorable Debt-to-Equity Ratio of 474.3%, starkly contrasting with the S&P 500's 19.9%. A lower Debt-to-Equity Ratio is usually preferred. On a positive note, cash and cash equivalents amounting to $7.5 billion represent 11.9% of American Airlines' total assets of $63 billion, demonstrating a reasonable cash-to-assets ratio compared to the S&P 500's 13.8%. American Airlines' ability to endure economic downturns has historically been significantly poorer than the S&P 500 index. During the Inflation Shock of 2022, AAL stock dropped 57.7% from a peak of $25.82 in June 2021 to $10.92 in October 2023, while the S&P 500 saw a peak-to-trough decline of 25.4%. The stock has not yet returned to its pre-crisis high. Similarly, during the Covid Pandemic in 2020, AAL stock fell 70.3% from a high of $30.47 in February 2020 to $9.04 in May 2020, markedly underperforming the S&P 500's 33.9% decrease. It has also failed to regain its pre-crisis high from that time. The Global Financial Crisis of 2008 witnessed an even more significant drop, with AAL stock crashing 97.2% from a peak of $61.96 in January 2007 to $1.76 in July 2008, in comparison to the S&P 500's 56.8% decline. The stock has not recovered to its pre-crisis high from 2008 as well. To conclude, while American Airlines exhibits notable revenue growth, this advantage is overshadowed by substantial financial troubles. The corporation grapples with poor profitability and limited financial stability, and its capacity to endure economic downturns is severely compromised. These combined elements result in an overall 'unfavorable' evaluation for the stock. Thus, despite its current very low valuation, American Airlines is regarded as a high-risk investment and an unattractive stock to purchase at its existing price. While it would be prudent to steer clear of AAL stock for now, you might consider exploring the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (a mix of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to deliver strong returns for investors. What's the reason for that? The quarterly rebalanced structure of large-, mid-, and small-cap RV Portfolio stocks offered an agile approach to capitalize on favorable market conditions while minimizing losses when markets decline, as outlined in RV Portfolio performance metrics.
Forbes
05-06-2025
- Business
- Forbes
Time To Buy AMZN Stock?
A view of the Amazon warehouse in Pawlikowice, Poland on May 29, 2025. (Photo by Jakub ... More Porzycki/NurPhoto via Getty Images) Amazon (NASDAQ:AMZN) is really leaning into AI, recently announcing a massive $10 billion investment in new data centers in North Carolina. Like Google and Microsoft, Amazon has been a major player in the AI boom, spending a whopping $222 billion on capital expenditures since 2022. The stock has seen a nice jump lately, climbing 24% from around $167 on April 21 to $208 now. This rally seems to be fueled by the broader market's positive reaction to new trade deals and a pause on reciprocal tariffs between the U.S. and China. The probability of the U.S. economy going into a recession this year has also come down from 60% earlier to 40% now, according to J.P. Morgan Research. Given the change in overall market sentiment, you might be wondering if Amazon is still a smart investment after its recent climb. We believe it is. Even with the recent rally, Amazon shows strong operational growth and solid financial health, and its stock isn't overpriced. Our analysis dives deep into Amazon's investment potential by looking at its current valuation compared to its recent operating performance and overall financial health. We've assessed Amazon across key areas like Growth, Profitability, Financial Stability, and Downturn Resilience. Our findings show that Amazon has a strong operating performance and financial condition. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – RGTI Stock: What's Next After An 1,100% Rally? When we look at AMZN stock against the broader market, it seems pretty reasonable. Amazon's price-to-sales ratio is 3.4 times, which is pretty close to the S&P 500's 3.0 times. Its price-to-earnings (P/E) ratio of 33.3 times is higher than the market's 26.4 times, but its price-to-free cash flow ratio is 19.3 times, which is slightly better than the S&P 500's 20.5 times. This means Amazon is doing a good job generating cash compared to its price. Check out our dashboard on Amazon's Valuation Ratios for more details. This moderate valuation suggests that Amazon isn't really getting a premium for its growth potential right now. It's likely that those high capital expenditures we mentioned earlier have made some investors a bit nervous. While that higher P/E ratio signals that the market expects Amazon's earnings to keep growing, it also means the stock could be vulnerable if that growth slows down. However, it's worth noting that this 33x P/E is actually lower than Amazon's average P/E of 46x over the past two years. Amazon's revenue just keeps climbing, showing how good they are at expanding across all their different businesses. Over the last three years, their annual revenue has grown by an average of 11%, much better than the S&P 500's 5.5%. This strong performance continued in the past year, with revenues jumping 10.1% from $591 billion to $650 billion. Looking at their most recent quarterly results, things are still looking good. Revenues grew 8.6% to $156 billion compared to $143 billion in the same period last year. This consistent growth, whether we're looking at annual or quarterly numbers, really highlights how Amazon's diverse business model keeps them expanding, even as they get bigger and bigger. While Amazon's revenues are trending higher, its profitability tells a slightly different story, and it might explain why some investors are a bit hesitant. For instance, their operating margin is 11.0%, which is a bit lower than the S&P 500's average of 13.2%. This suggests they're facing some challenges in turning all that revenue into efficient operations. Similarly, Amazon's net income margin of 10.1% also lags behind the broader market's 11.6% average. However, Amazon's operating cash flow margin is 17.5%, actually beating the S&P 500's 14.9%. This means they're doing a great job at generating cash, even if their accounting profits seem lower. This difference often comes down to Amazon's huge investments in growth and infrastructure. These investments might hit the company's short-term profit margins, but they're setting it up for bigger growth down the road. Amazon's balance sheet is incredibly strong, giving them a really solid base to handle any economic bumps in the road. The company's debt-to-equity ratio is super low at just 6.1%, which is way better than the S&P 500's average of 19.9%. This conservative approach means Amazon has tons of financial wiggle room for big investments. They're also sitting on a good amount of cash. Cash and cash equivalents make up 14.7% of their total assets, slightly more than the broader market's 13.8%. With $95 billion in cash and $643 billion in total assets, Amazon has serious resources to chase new growth opportunities and ride out any tough times. Looking back at how Amazon's stock performed during past market downturns gives us some good insights. It shows they can be pretty resilient, but also quite volatile. During the COVID-19 pandemic in 2020, Amazon actually held up pretty well. Their stock only dropped 22.7% compared to the S&P 500's 33.9% plunge, and it bounced back to pre-crisis levels in just two months. However, things were a bit different during the 2022 inflation shock. Amazon's stock took a bigger hit, falling 56.1% while the market dropped 25.4%. It took almost two years for the stock to fully recover, which just goes to show how growth stocks can feel more pain when interest rates go up and valuations get squeezed. The 2008 financial crisis presented similar challenges, with Amazon declining 65.3% against the market's 56.8% drop, though it also recovered within two years. These patterns suggest that while Amazon tends to swing more during severe market stress, it typically has the underlying strength to bounce back over time. We believe Amazon is an attractive investment right now. It offers a good valuation combined with incredibly strong fundamentals and a solid financial position. The company is delivering double-digit revenue growth and boasts a fortress-like balance sheet. These strengths outweigh any minor concerns about profitability. Notably, Amazon's AWS segment is far more profitable, boasting estimated EBITDA margins of around 45% last year, than its other businesses, which have EBITDA margins under 15%. With AWS's contribution to the company's overall sales on the rise—up from 12% in 2021 to 17% last year—the overall profitability will also improve. Furthermore, with a proven ability to recover from downturns, Amazon provides an excellent entry point into the long-term growth trends of the ongoing AI boom. It's a strong addition for growth-oriented portfolios. Not too happy about the volatile nature of AMZN stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Forbes
05-06-2025
- Business
- Forbes
Buy HPE Stock At $18?
Hewlett Packard Enterprise (NYSE:HPE) recently revealed its Q2 fiscal 2025 results (the fiscal year concludes in October), slightly surpassing analyst forecasts. The firm announced earnings of $0.38 per share on revenues of $7.6 billion, exceeding consensus predictions of $0.33 and $7.5 billion, respectively. Even with this favorable result, HPE's stock largely stayed around $18. This inertia can be partially ascribed to the company revising its full-year revenue growth outlook to 7% to 9%, a reduction from its earlier estimate of 7% to 11%. If you're seeking consistent returns, you may want to examine diversified investment avenues such as the Trefis High Quality portfolio, which has demonstrated exceptional performance, achieving returns of over 91% since its inception. Additionally, see – RGTI Stock: What's Next After An 1,100% Rally? Considering HPE's latest performance, you may be questioning whether it's a wise investment right now. From a valuation standpoint, we believe HPE stock seems to have potential for growth. Priced at roughly $18 per share, it is valued at 0.7 times its trailing revenues. This is slightly lower than its three-year average price-to-sales (P/S) ratio of 0.8 times. Although a decline in valuation multiples might seem warranted by the company's average revenue growth of only 3% over the past three years and a drop in its net income margin from a three-year average of 6% to the current 4%, this doesn't capture the entire picture. HPE's Q2 results exhibited year-over-year revenue growth of 6%. Its Annualized Revenue Run Rate (ARR) surged by 46% to $2.2 billion, fueled by a robust 13% increase in hybrid cloud revenue, a 7% rise in intelligent edge segment sales, and a 6% increment in server revenue. While the adjusted gross margin fell by 370 basis points year-over-year to 29.4%, HPE's net income was significantly affected by a non-cash impairment charge of $1.4 billion for legacy goodwill, leading to a GAAP loss of $0.82 per share. However, on an adjusted basis, HPE posted earnings of $0.38 per share, reflecting a slight decrease from $0.42 in the same quarter of the previous year. Looking forward, HPE's Q3 revenue forecast of $8.2 billion to $8.5 billion also surpassed the consensus prediction of $8.17 billion. Building on the valuation discussion, HPE is currently experiencing a growth rate faster than it has for the previous three years. Analysts anticipate sales to increase by 8% this year and an additional 6% the following year. This upward trajectory of growth suggests that an increase in valuation multiples is justified. Notably, the average price target set by analysts for HPE is $21, reflecting an upside potential of over 15%. This target corresponds to a 0.9 P/S ratio, in contrast to the current 0.7x and the three-year average of 0.8x. HPE's strategic priority lies in its edge-to-cloud platform transition, especially leveraging its GreenLake hybrid cloud solution. This strategy is designed to capture recurring income through flexible consumption models that effortlessly connect on-premises with cloud environments. The company's strategic pivot towards edge, hybrid cloud, and AI delivered via the HPE GreenLake platform is yielding success. Moreover, HPE's alliance with NVIDIA for integrated AI computing solutions places it in a competitive position against hyperscaler-driven alternatives by providing enterprise clients with on-premises and edge deployment flexibility. On another note, take a look at – Is CRWD Stock Overvalued At $460? While the valuation of HPE stock seems to present an opportunity for growth, it is essential to factor in potential risks. Historically, HPE's stock has underperformed the broader market during economic recessions. For example, it dropped by 32% from its peak amid the 2022 inflation shock, compared to a 25% decrease for the S&P 500. Similarly, during the COVID-19 market correction in 2020, it plummeted by 52% against a 34% drop for the S&P 500. This pattern implies that HPE stock is more susceptible to adverse macroeconomic conditions. See – Buy or Sell HPE Stock – for further details. You may consider purchasing HPE stock in the current downturn, but remember that investing in a single stock, no matter how promising, carries risks. If you wish to mitigate that risk while benefiting from substantial upside, consider the High Quality portfolio, which has outperformed the S&P 500 and generated returns exceeding 91% since its inception. Why is that? As a collective, HQ Portfolio stocks have yielded better returns with lower risk compared to the benchmark index; offering a smoother investment journey, as shown in HQ Portfolio performance metrics.
Forbes
05-06-2025
- Business
- Forbes
What's Happening With MDB Stock?
UKRAINE - 2021/04/29: In this photo illustration, a MongoDB logo seen displayed on a smartphone and ... More a pc screen. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) MongoDB (NASDAQ: MDB), a prominent database management firm, recently reported impressive Q1 results that greatly surpassed analyst predictions. The company reported adjusted earnings of $1.00 per share on revenue of $549 million, easily exceeding consensus forecasts of $0.66 per share and $528 million, respectively. This robust performance resulted in a 15% increase in MDB stock during after-hours trading. Now, investors looking for stable returns may want to consider diversified investment alternatives such as the Trefis High Quality portfolio, which has showcased impressive performance, yielding over 91% returns since its inception. Separately, see – RGTI Stock: What's Next After An 1,100% Rally? Given MDB's recent stock increase and inherent volatility, you may be questioning whether it remains a sound investment. Despite trading at elevated valuations, we believe MongoDB still has potential for growth. Currently priced at approximately $230 per share, the stock is trading at 8.8x trailing revenues and 55x trailing adjusted earnings. Although these multiples seem high, they are significantly lower than its three-year average price-to-sales (P/S) ratio of 12.2x and price-to-earnings (P/E) ratio of 143x. MongoDB commands these high valuation multiples due to its remarkable financial performance and strong market presence. The company has consistently increased its revenues at an average annual rate exceeding 30% over the past three years. Even though it currently reports GAAP losses, it has a robust adjusted net income margin of 16%. The adjusted net income excludes non-cash items such as stock-based compensation and one-time expenses like acquisition-related costs. Moreover, MongoDB maintains a solid balance sheet, with debt comprising only 0.2% of equity and a high cash-to-total-assets ratio of 68%. MongoDB's Q1 results exhibited solid growth across essential metrics. Overall sales rose by 22% year-over-year, primarily driven by a 26% increase in Atlas revenues, which reached approximately $395 million. The company also experienced significant enhancements in margins, with its reported operating margin improving from -22% in the prior-year quarter to -10% in Q1. Likewise, the adjusted operating margin soared by 900 basis points to 16% over the same period. As a result, MongoDB's net profitability received a significant boost, with adjusted earnings of $1.00 per share, representing a 96% increase from $0.51 in the same quarter of the previous year. Looking forward, MongoDB anticipates Q2 revenue to fall within the range of $548 million to $553 million and adjusted earnings per share between $0.62 and $0.66. These projections are optimistic, surpassing consensus estimates of $549.3 million in revenue and $0.58 in adjusted EPS. MongoDB is strategically situated to take advantage of the artificial intelligence boom through its Atlas Vector Search features. This has established the company as a leading vector database for AI applications. MongoDB has actively broadened its AI Applications Program through new partnerships with prominent AI and technology firms. Additionally, the introduction of cost-reducing vector quantization features, which sustain performance, is anticipated to further propel MongoDB's growth in the dynamic AI landscape. On a separate note, check out – Is CRWD Stock Overvalued At $460? While MDB stock's valuation appears high but defensible, investors should thoroughly evaluate potential risks. MongoDB has historically shown greater vulnerability to economic downturns compared to the broader market. For example, during the 2022 inflation shock, the stock dropped by 76% from its peak, considerably underperforming the S&P 500's 25% decline. Similarly, during the 2020 COVID-19 pandemic correction, MDB decreased by 45% against a 34% decline for the S&P 500. This trend indicates that MDB stock is more exposed to unfavorable macroeconomic conditions. See – Buy or Sell MDB Stock – for more in-depth information. Moreover, there are concerns regarding a potential slowdown in sales growth. Consensus forecasts predict the company's overall sales to increase at a mid-teens average rate over the next few years, a marked deceleration from its impressive 30% average growth rate of the past three years. Consequently, while MongoDB stock may continue to be attractive, investors should carefully evaluate these risks against its strong growth potential and strategic positioning. While you may be inclined to purchase MDB after a strong Q1, investing in a single stock, regardless of its promise, carries risks. If you wish to spread that risk while exposing yourself to substantial upside, consider the High Quality portfolio, which has outperformed the S&P 500 and achieved returns exceeding 91% since inception. Why is that? As a group, HQ Portfolio stocks have delivered better returns with less risk compared to the benchmark index; less of a roller-coaster experience, as evidenced in HQ Portfolio performance metrics.
Forbes
03-06-2025
- Business
- Forbes
MDB Stock: How Will MongoDB React To Its Upcoming Earnings?
CANADA - 2025/03/07: In this photo illustration, the MongoDB logo is seen displayed on a smartphone ... More screen. (Photo Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty Images) MongoDB (NASDAQ:MDB) a database management company, is scheduled to report its earnings on Wednesday, June 4, 2025. Historically, MDB stock has reacted negatively to earnings announcements, with a one-day decline in 55% of instances over the past five years. The median drop has been 10%, with a maximum single-day loss of 26.9%. For event-driven traders, understanding these historical patterns can be advantageous. There are two primary strategies: either position yourself before the earnings release based on historical odds, or analyze the correlation between immediate and medium-term returns after the release to inform your subsequent moves. Consensus estimates project earnings of $0.66 per share on revenues of $527.5 million. This compares to $0.51 per share on sales of $450.6 million in the year-ago quarter. Fundamentally, MongoDB has a current market capitalization of $15 billion, with $2.0 billion in revenue over the last twelve months. However, the company reported an operating loss of $216 million and a net loss of $129 million during the same period. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – Merck Stock's Ticking Keytruda Time earnings reaction history of all stocks Some observations on one-day (1D) post-earnings returns: Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below. MDB 1D, 5D, and 21D Post-Earnings Return A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves "long" for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns. MDB Correlation Between 1D, 5D and 21D Historical Returns Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (combination of all 3, the S&P 500, S&P mid-cap, and Russell 2000), to produce strong returns for investors. Separately, if you want upside with a smoother ride than an individual stock like MongoDB, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
