As part of a new series, each week we typically conduct a DCF on one of the companies in our screens. This week we thought we’d take a look at one of the stocks that is not currently in our screens, Moody’s Corporation ().  ProfileMoody’s Corporation operates as an integrated risk assessment firm worldwide. It operates in two segments, Moody’s Analytics and Moody’s Investors Services. The Moody’s Analytics segment develops a range of products and services that support the risk management activities of institutional participants in financial markets. It also offers credit research, credit models and analytics, economics data and models, structured finance solutions; data sets on companies and securities; and SaaS solutions supporting banking, insurance, and know your customer workflows. The Moody’s Investors Service segment publishes credit ratings and provides assessment services on various debt obligations, programs and facilities, and entities that issue such obligations, such as various corporate, financial institution, and governmental obligations, as well as structured finance securities. The company was formerly known as Dun and Bradstreet Company and changed its name to Moody’s Corporation in September 2000. Moody’s Corporation was founded in 1900 and is headquartered in New York, New York.  Recent PerformanceOver the past twelve months the share price is up 25.66%.Source: Google FinanceInputs Discount Rate: 10% Terminal Growth Rate: 2% WACC: 10% Forecasted Free Cash Flows (FCFs) Year FCF (billions) PV(billions) 2024 1.94 1.76 2025 2.05 1.69 2026 2.17 1.63 2027 2.29 1.56 2028 2.43 1.51 Terminal ValueTerminal Value = FCF * (1 + g) […]

Image Source:   Linked here is a detailed quantitative analysis of  (). Below are some highlights from the above linked analysis:Company Description: McDonald’s Corporation is the largest fast-food restaurant company in the world, with about 35,000 restaurants in 119 countries. In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:1. Avg. High Yield Price 2. 20-Year DCF Price 3. Avg. P/E Price 4. Graham NumberMCD is trading at a discount to only 3.) above. Since MCD’s tangible book value is not meaningful, a Graham number can not be calculated. When also considering the NPV MMA Differential, the stock is trading at a 14.0% premium to its calculated fair value of $247.68. MCD did not earn any Stars in this section. In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:1. Free Cash Flow Payout 2. Debt To Total Capital 3. Key Metrics 4. Dividend Growth Rate 5. Years of Div. Growth 6. Rolling 4-yr Div. > 15%MCD earned no Stars in this section. The company has paid a cash dividend to shareholders every year since 1976 and has increased its dividend payments for 47 consecutive years. Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the […]

December US manufacturing and industrial output data beat expectations and with upward revisions to November and lead surveys pointing to ongoing improvements there might finally be signs of a turn in the sector. Nonetheless, tariffs will present challenges for those with international supply chains and significant export exposure. 0.9% MoM December US industrial production Higher than expected  Encouraging data point to an upward turn in US industryUS industrial production jumped 0.9% month-on-month in December versus the 0.3% consensus while November’s growth rate has been revised up to +0.2% MoM from an initially reported -0.1%. The component breakdown shows manufacturing grew 0.6% after an upwardly revised 0.4% in November with utilities output up 2.1% and mining up 1.8%.Hours worked in the goods producing sector had fallen 0.3% MoM according to last Friday’s jobs report, which explains why economists had expected a weaker outcome, but the ISM report had suggested that new orders and production had finally returned to growth. The ending of the Boeing strike did help by boosting aerospace output by 6.3% MoM and there were also decent gains for apparel & leather (1.2%). Elsewhere the report was more mixed with machinery output, motor vehicle, furniture and miscellaneous production all falling. Industrial output component levels (2008=100)(Click on image to enlarge)Source: Macrobond, ING Awaiting President Trump’s trade planNonetheless, for now, year-on-year industrial production is only up 0.5% and manufacturing still flat on the year so we are only in the very early stages of a potential shift in trajectory with trade policy a […]

In my daily analysis of the USD/CHF pair, I recognize that we are drifting a little bit lower but it’s probably worth noting that the market is in the midst of a major hammer from the previous session. I do think that there’s a little bit of buying pressure in this region, but most certainly we will be paying close attention to interest rates, and what they are doing in America in order to grasp what happens next. (Click on image to enlarge)If the 10 year yield in America continues to drift a bit lower, and we break the bottom of this hammer from the Wednesday session, that could be a sign that we are about to see a bit of a breakdown in this pair. If that’s the case, then I would expect the  to go looking to the 0.90 level. This of course is a large, round, psychologically significant figure, and an area where we would be expecting to see a lot of noisy behavior. The 50 Day EMA is also racing toward that area as well, so it all comes together quite nicely. Uptrend RemainsAt this point in time, the uptrend most certainly remains in this currency pair, at least until we break above the 0.89 level. If we were to drop down below there, then I might start thinking that we are going to fall apart. That would probably also show a lot of negativity around the world when it comes to the US dollar, which of course […]

Industrial production, the now-deposed King of Coincident Indicators, rebounded strongly in December. I say “deposed” because before 2001 and especially before the Great Recession, any YoY decline in production *always* coincided with or at least immediately heralded a recession. But since the accession of China to regular trading status in 1999, downturns of even -5% or more, as in 2015-16 and 2018-19 have not necessarily meant recession.In December total industrial production rose 0.9%, while manufacturing production rose 0.6%. The November number for each was also revised higher by 0.3%. While this is obviously a big increase, mainly it just reverses the likely hurricane induced declines of the past few months. Total production made a 6 month high, while manufacturing production only made a 4 month high. Further, both remain down from their late 2022 peaks by -0.3% and -1.1% respectively:(Click on image to enlarge)With the big improvement this month, on a YoY basis total production is now up by 0.6%, and manufacturing production by 0.1%:(Click on image to enlarge)Despite the lackluster performance of manufacturing and production for the past two years, the economy has continued to be powered forward by consumption of services, and also by construction sector, and in particular construction employment, which as I pointed out earlier this morning has continued to increase.Residential Housing Construction Gives *Very* Mixed Signals In December; Recessionary Red Flags ContinueA Refresher On Why I Pay So Much Attention To Jobless Claims; And Why They Are Neutral Now Real Retail Sales Remain Positive For The […]