GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
Not Rated
[5]$ 16.01
GF Score: 16/100Market Cap: $ 98 Mil
Industry: Financial Services - Asset Management
GF Value Rank
Rank: 0 /10CurrentIndustry MedianHistorical Median
PE Ratio8.167.66Loss
Forward P/EN/A10.46N/A
PB Ratio0.690.85N/A
PS Ratio8.125.07N/A
P/FCF3.9514.01N/A
Shiller P/EN/A11.51N/A
PEG RatioN/A0.96N/A
Valuation Analysis
Current% of Price
Price16.01
Tangible Book23.17145
Graham Number32.04200
Dividend & Ownership
Dividend Yield (TTM) %13.78
Dividend Yield (Forward) %7.96
Dividend Payout Ratio1.06
Dividend Growth (5Y) %N/A
Yield on Cost (5Y) %13.78
Continuous Div. since0
Insider Ownership %0.05
Institution Ownership %0.38
Financial Strength
Rank: 3 /10CurrentIndustry MedianHistorical Median
Cash-to-Debt0.0011.250.00
Equity-to-Asset0.670.830.65
Piotroski F-ScoreN/A50
Profitability Rank
Rank: 1 /10CurrentIndustry MedianHistorical Median
Net Margin %99.6593.0699.89
ROE %8.2510.5113.66
ROA %5.456.808.56
Growth Rank(* per share data)
Rank: 0 /1010-Yr5-Yr1-Yr
Revenue Growth %N/AN/A151.8
EPS w/o NRI Growth %N/AN/A151.7
FCF Growth %N/AN/AN/A
Book Value Growth %N/AN/A14.8
Momentum Rank
Rank: 0 /10CurrentIndustry MedianHistorical Median
5-Day RSI13.1843.54N/A
9-Day RSI17.0841.14N/A
14-Day RSI20.2441.16N/A
6-1M Momentum %-22.53-9.09N/A
12-1M Momentum %-23.94-5.04N/A
Quarterly
--Jun20Dec20Jun21Dec21
Revenue------11.380.67
Net Income------11.360.65
EPS---0.412.581.850.12
Revenue YoY %----------
Net Income YoY %----------
EPS YoY %----------
Warning Signs
SEVEREFinancial Strength: Poor
MEDIUMDividend Payout Ratio: Too high
MEDIUMTax Rate: Tax Rate is too low
Good Signs
GOODPrice: Close to 3-year low
Insider Trades
InsiderPositionDateTradesCur. Shares
Rivernorth Capital Management,Advisor02/03/22-220073,552
Rivernorth Capital Management,Advisor01/11/22-440075,752
Rivernorth Capital Management,Advisor12/23/21-128380,152
Rivernorth Capital Management,Advisor12/16/21-220081,435
Rivernorth Capital Management,Advisor12/07/21-220083,635
Rivernorth Capital Management,Advisor11/30/21-220085,835
Rivernorth Capital Management,Advisor11/29/21-220088,035
Rivernorth Capital Management,Advisor11/19/21-10090,235
Rivernorth Capital Management,Advisor11/18/21-220090,335
Rivernorth Capital Management,Advisor11/17/21-220092,535
As of 05-20-2022
* All financial numbers are in millions except for per share data, ratios and percentage change.
%GainSP500
1W-3.44-0.73
1M-10.22-12.49
3M-19.36-10.03
6M-23.63-16.39
YTD-24.50-17.75
1Y-22.38-3.96
3Y--12.66
5Y--12.26
10Y--13.75
24.63
4.33
15.98
58262
29131
2012201320142015201620172018201920202021CurrentPerformance
--------------------24.77Highest Stock Price
--------------------15.76Lowest Stock Price
--------------------98Market Cap
----------------6.16.15.4Shares Outstanding-Diluted
----------------N/AN/A8.16PE Ratio
--------------------0.69PB Ratio
--------------------8.12PS Ratio
--------------------13.75EV-to-Revenue
----------------20202021TTMPer Share Data
----------------1.764.441.98Revenue per Share
----------------1.764.431.97Earnings per Share
-----------------33.464.07--Free Cash Flow per Share
------------------0.422.09Dividends per Share
----------------21.5524.7323.17Tangible Book per Share
----------------------Median PS Value
----------------29.2149.6532.04Graham Number
----------------20202021TTMIncome Statement
----------------10.7627.1512.05Revenue
----------------------Credit Losses Provision
----------------0.010.040.04Total Noninterest Expense
----------------10.7527.1112.01Pretax Income
----------------10.7527.1112.01Net Income
----------------99.9299.8699.65Net Margin %
----------------23.32225.33272.25Net Interest Margin-Bank %
----------------8.1619.168.25ROE %
----------------4.9012.225.45ROA %
----------------20202021Dec21Balance Sheet
----------------0.030.200.06Cash & Equivalents
----------------219.25224.65210.57Total Assets
----------------------Short-Term Debt & CLO
----------------84.8967.4867.48Long-Term Debt & CLO
----------------87.4773.4068.91Total Liabilities
----------------131.77151.24141.66Total Stockholders Equity
----------------131.77151.24141.66Total Equity
----------------20202021TTMCashflow Statement
-----------------204.4324.9310.13Cash Flow from Operations
----------------------Cash Flow from Investing
----------------205.81-25.06-10.24Cash Flow from Financing
----------------1.38-0.13-0.11Net Change in Cash
----------------1.481.341.23Ending Cash Position
----------------------Capital Expenditure
-----------------204.4324.93--Free Cash Flow
Competitor
TickerCompanyMarket Cap
($M)
PE RatioGF Score
/100
Financial
Strength /10
Profitability
Rank /10
GF Value
Rank /10
Growth
Rank /10
Momentum
Rank /10
LSE:MHNMenhaden Resource Efficiency PLC1004.374382008
XTER:SVEShareholder Value Beteiligungen AG1002.545176009
LSE:MATEJPMorgan Multi-Asset Growth & Income PLC9812.284181008
NYSE:RFMRiverNorth Flexible Municipal Income Fund Inc988.161631000
NYSE:VGIVirtus Global Multi-Sector Inc9842.943432004
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Financial Strength[2] (Quarterly data, as of Dec. 2021) : Poor (3/10)

0
1
2
3
4
5
6
7
8
9

Cash-to-Debt : 0.00

Cash-to-Debt Ratio measures the financial strength of a company. It is calculated as a company's cash, cash equivalents, and marketable securities divide by its debt. A high ratio indicates that a company is better able to pay back its debt, and is thus able to take on more debt if necessary.


Equity-to-Asset : 0.67

Equity-to-Asset ratio is calculated as total stockholders equity divided by its total assets. Equity-to-Asset ratio can vary greatly across different industries, as they have different capital structure. A company with smaller Equity-to-Asset ratio (more leveraged) may have higher ROE % because of the leverage.


Debt-to-Equity : 0.48

A high Debt-to-Equity ratio generally means that a company has been aggressive in financing its growth with debt.


Piotroski F-Score : N/A

The Piotroski F-Score is used to determine the strength of a firm's financial position, with 9 being the best and 0 being the worst.


WACC : 5.15% vs ROIC : N/A%

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business.


Dividend Yield : 9.07%

Dividend yield is a way to measure how much cash flow you are getting for each dollar invested in an equity position.

GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Profitability[3] (Annual data, as of Jun. 2021) : Poor (1/10)

0
1
2
3
4
5
6
7
8
9

Revenue : $1 Mil vs Net Income : $1 Mil

Revenue is the amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. Net Income is a company's total profit. Net income is calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses.


Cash & Equivalents : $0 Mil vs Long-Term Debt* : $67 Mil

Cash & equivalents are the most liquid assets on the balance sheet. Cash equivalents are assets that are readily convertible into cash. Long-Term Debt* consists of loans and obligations lasting over one year.


Net Margin % : 97.32%

Net margin % measures the percentage of revenue remaining after all operating expenses, interest, taxes, etc have been deducted from a company's total revenue. Net Margin % is calculated as Net Income divided by its Revenue.


EPS without NRI : $0.12

Earnings Per Share without Non-Recurring Items is the amount of earnings without non-recurring items per outstanding share of the company's stock. In calculating earnings per share without non-recurring items, the dividends of preferred stocks and Non Operating Income need to subtracted from the total net income first.


Dividends per Share : $1.68

Dividends per Share is the amount of dividends that the shareholders of a company receive on a per-share basis. It is calculated using the total dividends paid out to shareholders over one fiscal year and the number of shares outstanding.


Free Cash Flow per Share : $1.86

Free Cash flow per Share is the amount of Free cash flow per outstanding share of the company's stock.

GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Valuation (Quarterly data, as of Dec. 2021)

These valuation metrics should give you a sense of reasonable prices, but be careful with them. Always seek to understand why a valuation is changing over time.


Valuation Chart (Current stock price : $16.01)


PE Ratio without NRI : At Loss

The price-to-earnings ratio can be affected by Non Operating Income such as the sale of part of businesses. This may increase for the current year or quarter dramatically. But it cannot be repeated over and over. Therefore PE Ratio without NRI is a more accurate indication of valuation than regular PE Ratio.


PB Ratio : 0.00

The price-to-book ratio measures the valuation of the stock relative to the underlying asset of the company.


PS Ratio : 0.00

The price-to-sales ratio is a valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the value placed on each dollar of a company’s sales or revenues.


Price-to-Free-Cash-Flow : 0.00

Price-to-free-cash-flow is very similar to the valuation metric of price-to-operating-cash-flow but is considered a more exact measure, owing to the fact that it uses free cash flow, which subtracts capital expenditures from a company's total operating cash flow, thereby reflecting the actual cash flow available to fund non-asset-related growth.


EV-to-Revenue : 0.00

Enterprise value of a company divided by its trailing 12 months revenue.

GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Valuation Bands

In these charts the 10-year valuation bands of the price-to-earnings ratio (PE Ratio), price-to-book ratio (PB Ratio), price-to-sales ratio (PS Ratio) and price-to-operating-cash-flow ratio (POCF) are drawn together with the historical stock prices. For example, the upper line of the PE band is where the stock price would have been if it were always traded at the maximum PE ratio of the past 10 years. The lower line of the PE band is where the stock price would have been if it were always traded at the lowest PE ratio of the past 10 years. It is always better if the stock price is close to the lower line, which indicates a lower valuation.


Historical Price and PE Band


Historical Price and PS Band


Historical Price and PB Band


Historical Price and Price-to-Operating-Cash-Flow (POCF) Band

GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Warning Signs

GuruFocus conducted a thorough checkup using a checklist of 32 items that cover the areas of financial strength, profitability, growth, and valuation of each company. The purpose of Warning Signs is to warn you that the company may have red flags in certain areas, helping to avoid overlooking them. These warning signs do not necessarily mean you should not invest in the stock. But you should be aware of them before you invest.


Severe Warning Signs

Financial Strength : Poor

RiverNorth Flexible Municipal Income Fund Inc displays poor financial strength. Usually this is caused by too much debt for the company.

Good Signs

Price : Close to 3-year low

RiverNorth Flexible Municipal Income Fund Inc stock Price is close to 3-year low

Medium Warning Signs

Dividend Payout Ratio : Too high

If a company dividend payout ratio is too high, its dividend may not be sustainable. The dividend payout ratio of RiverNorth Flexible Municipal Income Fund Inc is 1.06, which seems too high.

Tax Rate : Tax Rate is too low

Company seems to be paying lower tax, which may boast earnings, and may not be sustainable.
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Competitive Comparison


5 Year Price Change Comparison


Financial Strength

CompanyFinancial StrengthCash-to-DebtEquity-to-AssetDebt-to-EquityInterest CoveragePiotroski F-ScoreAltman Z-ScoreBeneish M-ScoreWACC %ROIC %
LSE:FENFrenkel Topping Group PLC10/10No Debt0.780.0012.1547.89-1.396.77N/A
LSE:GIFGulf Investment Fund PLC8/10No Debt1.000.00N/A80.000.006.91N/A
LSE:LBOWICG-Longbow Senior Secured UK Prop Debt Inv Ltd8/10No Debt0.990.00N/A90.000.006.81N/A
LSE:MATEJPMorgan Multi-Asset Growth & Income PLC8/10No Debt0.980.00N/A80.000.005.16N/A
LSE:AXIAxiom European Financial Debt Fund Ltd7/1011.130.890.01N/A80.000.004.25N/A
XTER:SVEShareholder Value Beteiligungen AG7/10No Debt1.000.00N/A70.00-2.062.36N/A
ASX:EP1E&P Financial Group Ltd4/101.820.590.20N/A60.00-3.235.93N/A
NYSE:KSMDWS Strategic Municipal Income Trust3/100.000.630.10N/A70.000.003.67N/A
NYSE:RFMRiverNorth Flexible Municipal Income Fund Inc3/100.000.670.48N/AN/A0.000.005.15N/A
NYSE:VGIVirtus Global Multi-Sector Inc3/100.010.710.40N/A30.000.005.15N/A

Profitability

CompanyProfitability RankOperating
Margin %
Net Margin %ROE %ROA %Price-to-Free-Cash-FlowROC (Joel Greenblatt) %3-Year Revenue Growth %3-Year EBITDA Growth %3-Year EPS w/o NRI Growth %
LSE:FENFrenkel Topping Group PLC9/10N/A12.728.737.00155.00N/A14.40N/A24.10
XTER:SVEShareholder Value Beteiligungen AG6/10N/A87.6050.3348.800.00N/A0.00N/A0.00
LSE:GIFGulf Investment Fund PLC5/10N/A95.3420.9220.850.00N/A70.30N/A74.60
LSE:LBOWICG-Longbow Senior Secured UK Prop Debt Inv Ltd4/10N/A86.556.055.910.00N/A4.10N/A4.80
LSE:AXIAxiom European Financial Debt Fund Ltd3/10N/A96.5115.8613.650.00N/A0.00N/A0.00
NYSE:KSMDWS Strategic Municipal Income Trust2/10N/A97.416.253.9116.08N/A0.00N/A0.00
NYSE:VGIVirtus Global Multi-Sector Inc2/10N/A79.451.691.208.32N/A0.00N/A0.00
ASX:EP1E&P Financial Group Ltd1/10N/A-9.97-11.46-6.984.82N/A-22.80N/A0.00
LSE:MATEJPMorgan Multi-Asset Growth & Income PLC1/10N/A91.087.717.170.00N/A0.00N/A0.00
NYSE:RFMRiverNorth Flexible Municipal Income Fund Inc1/10N/A99.658.255.453.95N/A0.00N/A0.00

Valuation

CompanyPE RatioPB RatioPS RatioPrice-to-Intrinsic-Value-Projected-FCFPrice-to-Intrinsic-Value-DCF (Earnings Based)Price-to-Median-PS-ValuePrice-to-Peter-Lynch-Fair-ValuePrice-to-Graham-NumberEarnings Yield (Joel Greenblatt) %Forward Rate of Return (Yacktman) %
ASX:EP1E&P Financial Group LtdAt Loss0.760.640.000.000.000.000.00N/A0.00
XTER:SVEShareholder Value Beteiligungen AG2.541.002.210.000.000.000.210.33N/A12.16
LSE:GIFGulf Investment Fund PLC5.341.175.170.740.000.000.630.53N/A6.66
LSE:AXIAxiom European Financial Debt Fund Ltd5.560.845.360.000.000.000.000.46N/A-0.54
NYSE:RFMRiverNorth Flexible Municipal Income Fund Inc8.160.698.120.000.000.000.000.50N/A0.00
LSE:LBOWICG-Longbow Senior Secured UK Prop Debt Inv Ltd11.340.709.840.000.000.000.000.59N/A-0.79
NYSE:KSMDWS Strategic Municipal Income Trust11.500.7211.140.000.000.000.000.61N/A0.00
LSE:MATEJPMorgan Multi-Asset Growth & Income PLC12.280.9311.180.000.000.000.000.71N/A0.00
LSE:FENFrenkel Topping Group PLC36.912.994.672.350.000.002.983.37N/A14.07
NYSE:VGIVirtus Global Multi-Sector Inc42.940.7533.670.000.000.000.001.19N/A0.00
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Peter Lynch Chart[4]

GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Per Share Data


Per Share Data

Jun20
Jun21
TTM Fiscal Period
1.76
4.44
1.98
Revenue per Share
1.76
4.43
1.97
Earnings per Share (Diluted)
1.76
4.43
1.97
EPS without NRI
-33.46
4.07
-- Free Cash Flow per Share
-33.46
4.07
1.86
Operating Cash Flow per Share
0.01
0.03
0.01
Cash per Share
--
0.42
2.09
Dividends per Share
21.55
24.73
23.17
Book Value per Share
21.55
24.73
23.17
Tangible Book per Share
13.88
11.04
11.04
Total Debt per Share

Ratios

Jun20
Jun21
TTM Fiscal Period
8.16
19.16
8.25
ROE %
4.90
12.22
5.45
ROA %
8.16
19.16
8.25
Return-on-Tangible-Equity
4.90
12.22
5.45
Return-on-Tangible-Asset
0.12
0.79
0.71
Effective Interest Rate on Debt %
23.32
225
272
Net Interest Margin (Bank Only) %
99.92
99.86
99.65
Net Margin %
-1,899
91.81
-- FCF Margin %
0.64
0.45
0.48
Debt-to-Equity
0.60
0.67
0.67
Equity-to-Asset
0.39
0.30
0.32
Debt-to-Asset
0.40
0.33
0.33
Liabilities-to-Assets
0.05
0.12
0.05
Asset Turnover
--
0.09
1.06
Dividend Payout Ratio
* All financial numbers are in millions except for per share data, ratios and percentage change. When Return-on-Tangible-Equity displays Neg. E, it means the the tangible equity is negative.
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Financial Statement

Income Statement

Jun20
Jun21
TTM Fiscal Period
0.44
3.52
3.71
  Interest Income
-0.10
-0.60
-0.51
  Interest Expense
0.34
2.92
3.20
Net Interest Income (for Banks)
10.43
24.23
8.85
Non Interest Income
10.76
27.15
12.05
Revenue
0.01
0.04
0.04
Selling, General, & Admin. Expense
0.00
0.00
0.00
Other Noninterest Expense
0.01
0.04
0.04
Total Noninterest Expense
10.75
27.11
12.01
Pre-Tax Income
10.75
27.11
12.01
Net Income (Continuing Operations)
10.75
27.11
12.01
Net Income
99.92
99.86
99.65
Net Margin %
1.76
4.43
1.97
EPS (Basic)
1.76
4.43
1.97
EPS (Diluted)
6.11
6.12
5.45
Shares Outstanding (Diluted Average)
* All financial numbers are in millions except for per share data, ratios and percentage change.
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Financial Statement

Cashflow Statement

Jun20
Jun21
TTM Fiscal Period
10.75
27.11
0.65
Net Income From Continuing Operations
-1.05
0.25
0.15
  Change In Receivables
--
--
-0.00
  Change In Prepaid Assets
0.39
0.15
-0.11
  Change In Other Working Capital
-0.67
0.41
0.04
Change In Working Capital
-215
-2.59
9.43
Cash Flow from Others
-204
24.93
10.13
Cash Flow from Operations
122
--
-- Issuance of Stock
84.89
--
5.00
  Issuance of Debt
--
-5.00
-7.29
  Payments of Debt
84.89
-5.00
-2.29
Net Issuance of Debt
-1.27
-7.65
-10.24
Cash Flow for Dividends
--
-12.42
2.29
Other Financing
206
-25.06
-10.24
Cash Flow from Financing
0.10
1.48
1.34
Beginning Cash Position
1.38
-0.13
-0.11
Net Change in Cash
1.48
1.34
1.23
Ending Cash Position
-204
24.93
-- Free Cash Flow
* All financial numbers are in millions except for per share data, ratios and percentage change.
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Financial Satement

Balance Sheet

Jun20
Jun21
TTM Fiscal Period
0.03
0.20
0.06
Cash and cash equivalents
1.45
1.15
1.18
Money Market Investments
1.19
3.66
0.65
  Other Current Receivables
1.19
3.66
0.65
Total Receivables
217
220
209
Other Assets for Banks
219
225
211
Total Assets
2.58
5.93
1.43
Accounts Payable & Accrued Expense
--
--
-- Short-Term Debt & Capital Lease Obligation
84.89
67.48
67.48
Long-Term Debt & Capital Lease Obligation
0.64
0.45
0.48
Debt-to-Equity
--
--
0.00
Other Liabilities for Banks
87.47
73.40
68.91
Total Liabilities
122
122
122
Common Stock
9.66
29.25
19.66
Retained Earnings
--
0.00
-- Other Stockholders Equity
132
151
142
Total Stockholders Equity
132
151
142
Total Equity
0.60
0.67
0.67
Equity-to-Asset
* All financial numbers are in millions except for per share data, ratios and percentage change.
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Valuation Ratios

Valuation Ratios

Jun20
Jun21
TTM Fiscal Period
N/A
N/A
8.16
PE Ratio
N/A
N/A
8.16
PE Ratio without NRI
--
1.32
13.78
Dividend Yield %

Valuation and Quality

Jun20
Jun21
TTM Fiscal Period
-14.30
-11.97
-11.26
Net Cash per Share
-14.30
-11.97
-11.26
Net-Net Working Capital
29.21
49.65
32.04
Graham Number
0.99
1.00
0.93
Scaled Net Operating Assets
--
152
-- YoY Rev. per Sh. Growth
--
152
-9.22
YoY EPS Growth
6.11
6.12
5.45
Shares Outstanding (Basic Average)
6.11
6.11
6.11
Shares Outstanding (EOP)
09/09/20
09/07/21
  Filing Date
09/09/20
09/07/21
  Restated Filing Date
* All financial numbers are in millions except for per share data, ratios and percentage change.
GuruFocus Manual of Stocks™  |  May 20, 2022
RiverNorth Flexible Municipal Income Fund Inc (NYSE:RFM)
www.gurufocus.com/stock/NYSE:RFM

Explanation

1. Predictability Rank

GuruFocus Predictability Rank is a proprietary ranking of the consistency of a business. We rank the predictability of companies based on the consistency of their revenue per share and EBITDA (earnings before interest, tax, depreciation and amortization) per share over the past 10 fiscal years. Our study found that there is a strong correlation between the stock performance and the predictability of a business. Over the long term, companies with higher predictability also have better stock performance.

The rank is from 1-star to 5-star, with 5-star as the best.

2. Financial Strength

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors:

  1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.
  2. Debt to revenue ratio. The lower, the better.
  3. Altman Z-Score.

The rank is from 1 to 10, with 10 as the highest.

A Financial Strength rank of 8 or above indicates good financial strength; between 4-7 indicates fair financial strength; 3 or below means poor financial strength.

3. Profitability Rank

GuruFocus Profitability Rank indicates how profitable a company is and how likely it is that the company's business will stay that way. It is based on these factors:

  1. Operating Margin %.
  2. Piotroski F-Score.
  3. Trend of the Operating Margin percentage (five-year average). A company with an uptrend in profit margin will have a higher rank.
  4. Consistency of the profitability.
  5. Predictability Rank.

The rank is from 1 to 10, with 10 as the highest.

A Profitability Rank of 8 or above indicates good profitability; between 4-7 indicates fair profitability; 3 or below means poor profitability.

4. Peter Lynch Chart

In Peter Lynch's excellent book, "One Up on Wall Street," he used many charts to illustrate the valuation of stocks. “A quick way to tell if a stock is overpriced is to compare the price line to the earnings line. If you bought familiar growth companies – such as Shoney’s, The Limited, or Marriott – when the stock price fell well below the earnings line, and sold them when the stock price rose dramatically above it, the chances are you’d do pretty well.”

The original Peter Lynch Chart does have limitations due to the right side price scale is pre-set at 15 times the earnings scale on the left side. When the stock price and earnings line coincide, the price-to-earnings ratio is always 15 times. Instead of using the fixed PE Ratio of 15, our approach is using 15-year historical median PE without NRI Ratio for each stock.

The Peter Lynch Chart with earnings line at median PE without NRI ratio works well for the companies with steady growth and earnings trends, or the stalwarts, as coined by Lynch. These companies tend to be found in sectors such as consumer staples, healthcare, and utilities, where the consumption of the product or service is relatively independent of economic conditions. It does not work well with the sectors that are cyclical: industrials, chemicals, durable goods, and so forth.

5. GF Value

Based on the relationship between the current stock price and the GF Value, GuruFocus provides the following 6 evaluations:

  1. Possible Value Trap, Think Twice
  2. Significantly Overvalued
  3. Modestly Overvalued
  4. Fairly Valued
  5. Modestly Undervalued
  6. Significantly Undervalued
There is only a sufficient margin of safety when the stock is undervalued.

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