Value Estimates

Each worksheet we produce contains three information sections:

  • Short-Term Investment Information
  • Fundamental Investment Information
  • Growth Adjusted Investment Information

Short-Term Investment Information
The short-term investment information section provides:

  • The recent yield on an AAA corporate bond
  • The current resistance to the upward movement of the stock price
  • The current support for the downward movement of the stock price
  • Upward and downward change percentage
  • An initial trailing stop suggestion

Fundamental Investment Information
The fundamental investment information section provides:

  • Buy Target, the price point at which we would consider taking an initial position
  • First Sell Target, the price point at which we would consider reducing our position by half
  • Close Target, the price point at which we would consider closing the position

Risk and Reward
It is our belief that potential investment reward must outweigh potential investment risk by a factor of 5 or better, as a prerequisite to investment.

Each of our worksheets contains a Risk Reward Ratio determined using a proprietary formula and the following data.

  • the Buy Target
  • the Close Target
  • the Recent Price

Key Performance Indicator (KPI)
The fundamental investment section of our worksheets also includes our KPI multiplier.

Along with other financial information, we use the following information to determine a company’s KPI multiplier.

  • the Current Ratio
  • the Simple Free Cash Flow
  • Return on Invested Capital (ROIC)

We use KPIs to create a Risk Adjusted Buy Target, which is our original Buy Target adjusted to include out KPI factor.

Growth Adjusted Investment Information
Above all else, we are long-term value investors. Our goal is to determine the value of an entire company based on that company’s most recent ANNUAL financial information, without considering earnings growth.

But many investors are concerned with earnings growth. Accordingly each worksheet contains a growth adjusted value estimate determined by using:

  • the Price to Earnings Ratio based on the listed Recent Price
  • the Year-Over-Year earnings growth percentage
  • the spread between the Price to Earnings Ratio and the Earnings Growth percentage

Wax Ink is a baseline equity research company not licensed or registered with any government agency

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