UPDATE

Winter Weather

By The MARK IT. Team

🌤️ Good morning, and happy Tuesday. We hope you’re staying warm heading into this week. On Monday morning, around 40 million Americans were under winter weather alerts due to precipitation and icy conditions. Stay safe out there, and have a productive week.

WEEKLY WATCHLIST

Large-Cap Companies To Report Earnings

Trafigura Images, via flickr

This week, we don’t have specific companies to report on based on our discounted cash flow calculations. However, we wanted to bring a list of companies we’ve previously talked about that are reporting earnings Thursday after market close (4 p.m. ET).

• Earnings season is a critical time for current investors and prospective investors because a solid earnings report can prove that a company is worth financial investment. If a company misses earnings, the stock can often drop sharply, prompting value investors to buy up shares at a discounted price. Read more about this in our Earnings Explained article below.

STOCK #1

Apple (AAPL)

✅ Increasing cash flows: Apple’s cash flows have been increasing by 9.41% on average since 2013, which slightly outperforms the overall market. While Apple has smaller jumps in growth compared to other stocks we’ve reported on, Apple instead seems to have consistency on its side.

⚠️ Low dividend: With a 0.71% dividend yield, Apple is well under the average for the market. Dividend investors might want to weigh their need for a large dividend vs. a consistent one.

⚠️ Trading at intrinsic value according to DCF: Based on our discounted cash flow model, a single Apple stock as of Monday’s market close price of $143.00 would be at intrinsic value.

✅ Low debt: Of Apple’s current Enterprise Value (EV), market cap accounts for 94.7% compared to 5.3% in debt.

STOCK #2

Amazon (AMZN)

✅ Increasing cash flows: Within the past 10 years, Amazon’s free cash flows have increased steadily year after year except for a COVID time drop-off.

🛑 No dividend: Amazon does not pay a dividend. Those looking for a consistent dividend from a tech giant will want to look elsewhere.

✅ Undervalued according to DCF: Based on our discounted cash flow model, a single Amazon stock at Monday’s market close price of $100.55 would be greater than 30% undervalued.

✅ Low debt: Similar to other tech giants, of the total Enterprise Value (EV) of Amazon, debt accounts for approximately 11.5% compared to a market cap of 88.5%.

STOCK #3

Ford (F)

🛑 Decreasing cash flows: Ford's cash flows seem to increase and decrease in waves. As of right now, Ford seems to have decreasing cash flows—something value investors should be cautious of.

✅ Healthy dividend: Those looking for high-paying dividend stocks for passive income or a reinvestment plan may want to keep an eye on Ford with a 4.27% yield. However, the dividend yield is subject to change as the amount paid out has decreased in the past.

✅ Undervalued according to DCF: According to our discounted cash flow calculation, a single Ford stock priced at Monday's close of $12.89 is around 20% below its intrinsic value.

🛑 High debt: Of Ford’s total Enterprise Value (EV), the company has 71.4% in debt but 28.6% in total market cap. With higher debt than market cap, value investors might want to do more research before buying—despite the attractive price.

STOCK #4

Alphabet/Google (GOOGL)

✅ Increasing cash flows: Google’s cash flows have been increasing by 23.8% on average since 2013, with 28% per year for the past five years.

🛑 No dividend: Those looking for a consistent dividend from a tech giant will want to look elsewhere.

⚠️ Slightly undervalued according to DCF: According to our discounted cash flow calculation, a single Google stock priced at Friday's close of $96.94 is between 12-15% below its intrinsic value.

✅ Low debt: Of Google's total Enterprise Value (EV), 97.5% is market cap compared to 2.5% in debt.

MARK IT. EXPLAINED

Why do Earnings Reports Exist and What’s Being Reported?

By Rahul Kannam

Scott Beale, via flickr

Earnings season occurs four times a year for publicly traded companies that you see in multiple stock indexes, exchanges, and funds. These earnings reports exist because publicly traded companies are responsible for reporting to shareholders about their financial condition and overall economic health; without the information provided during earnings reports, shareholders and investors would be in the dark. They wouldn't know key indicators (profitability, valuation, etc.) that could influence buying and selling shares.

To go into more detail, companies cover factors such as debt, the amount of cash they have on hand, and how much quarterly expenses totaled. Earnings season also allows companies to forecast the future and prepare their shareholders. The reports are usually specific, such as the success of various divisions in a company. One such example is the Amazon Web Services (AWS) division from Amazon reporting its growth year-over-year.

In a sense, earnings season is a snapshot of the progress of various companies and their view of the future. They report various financial factors such as equity, debt, liabilities, assets, growth, valuation, and forecasted earnings. Source: Forbes

ONE MORE THING

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