Based on the improved performance metrics, which we recently added to our stock screens, Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW) could be a great value stock:
Q1 2022 hedge fund letters, conferences and more
Atlas Air Worldwide Holdings Inc, together with its subsidiaries, is a leading global provider of outsourced aircraft and aviation operating services. The company owns a fleet of freighters and passenger aircraft and leases additional aircraft and engines to expand its portfolio. It gives customers access to new production aircraft and offers crew, maintenance, and insurance services. In addition, the company operates a charter division to provide air cargo and passenger aircraft charters. Atlas Air customers include airlines, express delivery providers, freight forwarders, the U.S. military, and charter brokers. It provides global services to regions in Africa, Asia, Australia, Europe, the Middle East, and the Americas.
A quick look at the share price history for the company (below) over the past twelve months shows that the price is up 4.27%.
Even though the company has a market cap of $2.03 Billion and a price of $69.61, here’s why the company could be a great value stock:
Bubble Map
Implied Value To Price
0.80
IV/P or Intrinsic Value to Price: This column compares the stock’s Implied Value (Earning Power, Incremental Growth plus Shareholder Yield)to the current price. The number represents the value offered for each dollar invested. IV/P greater than one (1) indicates that each dollar invested receives more than $1 of Intrinsic Value. IV/P less than one indicates less than $1 of Intrinsic Value for each dollar invested. The IV/P is necessarily a rough estimate. These stocks benefit from mean reversion in multiples, and no mean reversion in fundamentals. Where the market is applying a lower Acquirers Multiple to a stock’s Expected Return, it may indicate an undervalued opportunity. This is a profitability-at-a-reasonable price screen. Historically, getting more an IV/P lower than about 0.6–each dollar invested buys 60 cents or less of Intrinsic Value–is overvalued.
—
Acquirer’s Multiple
5.10
Acquirers Multiple: Ranking on this column shows the stocks with the lowest multiples in the universes. These are deep value stocks that may benefit from mean reversion in the underlying businesses. This is the traditional deep value screen.
—
Expected Return (%)
11.90
E(r) or Expected Return (%): The sum of a stock’s Earning Power, Incremental Growth and Shareholder Yield. This is a variation of Bruce Greenwald’s calculation. It assumes no mean reversion in multiples or fundamentals.
—
Return On Assets (5YAvg%)
11
ROA or Return on Assets: Ranking on this column shows the stocks with the highest five-year average operating income returns on total assets. These are the most profitable companies in the universes over the last five years.
—
Incremental Growth (%)
0.40
Incremental Growth (%): This is the reinvestment rate (capital expenditures less depreciation divided by total assets) multiplied by ROA. It can be positive–if cap ex exceeds depreciation–or negative–if cap ex falls short of depreciation. Companies with a high reinvestment rate and a high ROA will score higher on the Incremental Growth metric. Low or negative reinvestment rates and a low ROA will score lower on the Incremental Growth metric.
—
FCF Yield (%)
20.90
FCF Yield or Free Cash Flow Yield: Trailing Twelve-Month Free Cash Flow divided by Market Capitalization. Another traditional deep value screen. These stocks benefit from mean reversion in fundamentals and multiples.
—
Shareholder Yield (%)
0.40
Shareholder Yield is the sum of a stock’s Buyback Yield and Dividend Yield. To find the value we assume a perpetuity divided by the current Ten (10)-year Treasury Yield
For all the latest news and podcasts, join our free newsletter here.
Article by The Acquirer’s Multiple.
