Linked here’s a detailed quantitative evaluation of United Parcel Service, Inc. (UPS). Beneath are some highlights from the above linked evaluation:
Firm Description: United Parcel Service, Inc. is the world’s largest categorical supply firm, UPS has established itself as a facilitator of e-commerce.
Fair Value: In calculating truthful worth, I take into account the NPV MMA Differential Truthful Worth together with these 4 calculations of truthful worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Worth
2. 20-12 months DCF Worth
3. Avg. P/E Worth
4. Graham Quantity
UPS is buying and selling at a reduction to 1.) and three.) above. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 50.9% premium to its calculated truthful worth of $96.01. UPS didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three doable Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Movement Payout
2. Debt To Whole Capital
3. Key Metrics
4. Dividend Development Price
5. Years of Div. Development
6. Rolling 4-yr Div. > 15%
UPS earned one Star on this part for 3.) above. UPS earned a Star for having a suitable rating in at the least two of the 4 Key Metrics measured. The corporate has paid a money dividend to shareholders yearly since 2000 and has elevated its dividend funds for 15 consecutive years.
Dividend Income vs. MMA: Why would you assume the fairness danger and put money into a dividend inventory when you may earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes skill of this inventory with a high yield MMA. Two objects are thought-about on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $281 is beneath the $2,000 goal I search for in a inventory that has elevated dividends so long as UPS has. The inventory’s present yield of 4.5% exceeds the three.75% estimated 20-year common MMA fee.
Friends: The corporate’s peer group consists of: FedEx Company (FDX) with a 1.9% yield, Deutsche Put up AG (DHL.DE) with a 4.8% yield and Air T, Inc. (AIRT) with a 0.0%.
Conclusion: UPS didn’t earn any Stars within the Truthful Worth part, earned one Star within the Dividend Analytical Information part and didn’t earn any Stars within the Dividend Revenue vs. MMA part for a complete of 1 Star. This quantitatively ranks UPS as a 1-Star Very Weak inventory.
Utilizing my D4L-PreScreen.xls mannequin, I made up my mind the share worth would wish to lower to $78.95 earlier than UPS’s NPV MMA Differential elevated to the $2,000 minimal that I search for in a inventory with 15 years of consecutive dividend will increase. At that worth the inventory would yield 8.3%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend development fee wanted to generate the goal $2,000 NPV MMA Differential, the calculated fee is 6.9%. This dividend development fee is increased than the 0.6% used on this evaluation, thus offering no margin of security. UPS has a risk rating of two.00 which classifies it as a Medium danger inventory.
UPS is geographically diversified with an increasing income base and a observe report of rising its earnings. Its Free Money Movement Payout of 110% (up from 61%) is a above my acceptable stage, and its Debt To Whole Capital of 61% (up from 54%) can be above my desired most. As well as, it is buying and selling at a major premium to its calculated truthful worth of $96.01. With all these elements thought-about, I’ll await a extra opportune time earlier than initiating a place within the firm.
Disclaimer: Materials introduced right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star ranking, is mechanically calculated and relies on historic info. The evaluation assumes the inventory will carry out sooner or later because it has previously. That is usually by no means true. Earlier than shopping for or promoting any inventory you ought to do your personal analysis and attain your personal conclusion. See my Disclaimer for extra info.
Full Disclosure: On the time of this writing, I held no place in UPS (0.0% of my Dividend Development Portfolio).
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