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By the Book For Blucora, Inc. ($BCOR):: ROA Reaches 0.05055

{csv|m:251|id:21|s:Company}} (BCOR) is boasting an Return on Assets number of 0.05055. ROA tells an investor how much after-tax profit a company generated for each $1 in assets. In other words, ROA measures a company’s net earnings in relation to all of the resources it had at its disposal—the shareholders’ capital plus short and long-term borrowed funds. Thus, return on assets is the most stringent test of return to shareholders. 

New investors may be trying to figure out the best way to build a solid foundation with which to make future investing decisions. There are many different paths that an investor can take once they become familiar with the territory. Some investors will choose to study professional analyst research and recommendations. This can be very useful, but many investors may feel more comfortable doing their own research. Conducting stock research may involve looking at the fundamentals of a certain company. Understanding what kind of competitive advantage a company might have compared to others in their industry may help weed out some of the more undesirable stocks. Because there is no one way to properly conduct stock research, investors may need to try a few different methods in order to determine the best individual course of action.

FCF on Debt

Another ratio S&P Analyst Richard Tortoriello recommends to use is ‘Free Cash Flow to debt’. (‘Quantitative Strategies for Achieving Alpha’) This ratio shows how long it would take a company to pay back its debt using its current level of free cash flow. In his study, Tortoriello found that investing in the top 20% companies with the highest FCF/debt ratio generated substantially higher returns compared to the market.

Formula:

FCF on Debt = (Cash Flow from Operations−Capital Expenditure) / Total Debt

The FCF on debt number for Blucora, Inc. (BCOR) stands at 0.376032.

Net Debt to Market Cap

This ratio gives a sense of how much debt a company has relative to its market value. Companies with high debt levels compared to their peers can be volatile. We calculate it as follows:

Net Debt to Market Cap = (Total Debt−Cash and ST Investments) / Market Cap

Blucora, Inc. (BCOR) has a net debt to market cap ratio of 0.376032.

FCF

Free Cash Flow Growth (FCF Growth) is the free cash flow of the current year minus the free cash flow from the previous year, divided by last year’s free cash flow. The FCF Yield of Blucora, Inc. (BCOR) is 0.062413. Free cash flow (FCF) is the cash produced by the company minus capital expenditure. This cash is what a company uses to meet its financial obligations, such as making payments on debt or to pay out dividends. The 5 Year FCF Yield of Blucora, Inc. (BCOR) is 0.042784. Experts say the higher the value, the better, as it means that the free cash flow is high, or the variability of free cash flow is low or both.

Most investors are more familiar with P/B or Price-to-book. This is just the inverted value.

Price-to-Book Ratio = Market Cap divided by Common Shareholders Equity

Market watchers may also be following some quality ratios for Blucora, Inc. (BCOR). Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.The Gross profitability for (BCOR) is 0.297513.
M-Score (Beneish)

The M-Score, conceived by accounting professor Messod Beneish, is a model for detecting whether a company has manipulated their earnings numbers or not. Blucora, Inc. (BCOR) has an M-Score of -2.329828. The M-Score is based on 8 different variables: Days’ sales in receivables index, Gross Margin Index, Asset Quality Index, Sales Growth Index, Depreciation Index, Sales, General and Administrative expenses Index, Leverage Index and Total Accruals to Total Assets. A score higher than -1.78 is an indicator that the company might be manipulating their numbers.

Checking in on some valuation rankings, Blucora, Inc. (BCOR) has a Value Composite score of 30. Developed by James O’Shaughnessy, the VC score uses five valuation ratios. These ratios are price to earnings, price to cash flow, EBITDA to EV, price to book value, and price to sales. The VC is displayed as a number between 1 and 100. In general, a company with a score closer to 0 would be seen as undervalued, and a score closer to 100 would indicate an overvalued company. Adding a sixth ratio, shareholder yield, we can view the Value Composite 2 score which is currently sitting at 39.

Diversification can be an important aspect of any investor’s portfolio. Investors may choose to spread out stock holdings between foreign stocks and stocks with different market capitalizations. Investors may have to first become aware of the risk associated with owning a wide variety of stocks. Owning stocks that belong to different industries may also be a help to the success of the portfolio. Often times, sectors may trade off being market leaders. Owning all one sector may leave too much risk exposed if the sector suddenly tanks and falls out of favor with investors. Investors may need to occasionally do a strategic review of the equity portion of the portfolio. Knowing exactly what is held may help the investor when the time comes to make some adjustments.