Basic analysis, seen from the BMW case

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8 May 2024

Value investors often use fundamental analysis and data to find stocks they believe are undervalued compared to their true value.

Currently, many value investors in the world stock market refer to Zacks stock rankings for reference in making investment decisions. This site focuses on earnings estimates and revisions to find strong stocks. However, not only stopping at the above two criteria, this site also evaluates stocks based on many criteria, including value trend, growth rate, and momentum, to detect potential companies. power.

Take the example of BMW, the German luxury car company that many people know. The stock has a Zacks rank of #1 (strong buy) and a value grade of A. The stock trades at a P/E of 6.23, below the industry average of 9.24. Over the past 12 months, BMW's forward P/E has ranged from 7.48 to 4.78, with an average of 5.76.

Additionally, BMW has a P/B ratio of 0.71. P/B reflects market value compared to book value, calculated as total assets minus total liabilities. P/B is attractive compared to the industry average of 1.13. Over the past year, BMW's P/B has ranged from 0.55 to 0.75, with an average of 0.66.

Value investors often use the P/S ratio, calculated by dividing market capitalization by company revenue. Investors prefer P/S because revenue numbers are less susceptible to manipulation on financial statements and more accurately reflect operating performance.

For BMW, the P/S ratio is 0.43, lower than the industry average of 0.74.

Another indicator

The value investors are interested in is the P/CF ratio (price to cash flow). This index takes into account a company's operating cash flow and can be used to find undervalued stocks based on a solid cash outlook.

In the case of BMW, P/CF is attractive compared to the industry average of 5.53. Over the past year, the company's P/CF has ranged from 2.72 to 3.80, with an average of 3.29.

While value investors may look at many other data points, the above metrics show whether a stock is overvalued or undervalued. In addition to the above indicators, investors should also refer to the business results and prospects of the enterprise to have more basis for evaluation.

For example,

with BMW, this car company headquartered in Munich, Germany ended 2023 with cumulative sales of 2,253,835 vehicles, ranking first in the global luxury car industry. This is the third consecutive year that BMW has taken the throne in the world of luxury cars.

In particular, BMW's electric car models grew rapidly at a rate of up to 92%, reaching cumulative sales of 330,956 vehicles globally. BMW expects demand for its electric cars to continue to increase. At the same time, BMW also achieved its goal of selling half a million electric vehicles to customers around the world this year.

Based on analytical indicators combined with the business outlook, BMW stock may be undervalued.

In addition to the Zacks Rank, investors can also review the innovative style rating system to find stocks that fit specific criteria. For example, value investors might focus on the “Value” category. Stocks with high Zacks Ranks and A Grades for Value are good suggestions when choosing value investments.