Are Hudson’s Bay Company (TSX:HBC), Bright Horizons Family Solutions Inc. (NYSE:BFAM) Generating Enough Return on Equity?

In reviewing some key ratios and quant data for Hudson’s Bay Company (TSX:HBC), we note that the mother of all ratios (Return on Equity) stands at -0.473898 for the firm.  ROE reveals what percentage of each investment dollar is returned as a profit.  Used in conjunction with a variety of other ratios, this indicator is a very important tool for investors in determining the effectiveness of a company to generate returns for investors.

Further, we can look at some other ratios and financial indicators in order to get an idea of the company’s valuation.  Hudson’s Bay Company (TSX:HBC) presently has a current ratio of 0.99. The current ratio, also known as the working capital ratio, is a liquidity ratio that displays the proportion of current assets of a business relative to the current liabilities. The ratio is simply calculated by dividing current liabilities by current assets. The ratio may be used to provide an idea of the ability of a certain company to pay back its liabilities with assets. Typically, the higher the current ratio the better, as the company may be more capable of paying back its obligations.

The FCF Yield 5yr Average is calculated by taking the five year average free cash flow of a company, and dividing it by the current enterprise value.  Enterprise Value is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.  The average FCF of a company is determined by looking at the cash generated by operations of the company.  The Free Cash Flow Yield 5 Year Average of Hudson’s Bay Company (TSX:HBC) is 0.002787. 

One of the most popular ratios is the “Return on Assets” (aka ROA).  This score indicates how profitable a company is relative to its total assets.  The Return on Assets for Hudson’s Bay Company (TSX:HBC) is -0.060604.  This number is calculated by dividing net income after tax by the company’s total assets.  A company that manages their assets well will have a higher return, while a company that manages their assets poorly will have a lower return.

The M-Score, conceived by accounting professor Messod Beneish, is a model for detecting whether a company has manipulated their earnings numbers or not. Hudson’s Bay Company (TSX:HBC) has an M-Score of -3.145892.  The M-Score is based on 8 different variables: Days’ sales in receivables index, Gross Margin Index, Asset Quality Index, Sales Growth Index, Depreciation Index, Sales, General and Administrative expenses Index, Leverage Index and Total Accruals to Total Assets.  A score higher than -1.78 is an indicator that the company might be manipulating their numbers.

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The VC1 of Hudson’s Bay Company (TSX:HBC) is 38.  A company with a value of 0 is thought to be an undervalued company, while a company with a value of 100 is considered an overvalued company.  The VC1 is calculated using the price to book value, price to sales, EBITDA to EV, price to cash flow, and price to earnings.  Similarly, the Value Composite Two (VC2) is calculated with the same ratios, but adds the Shareholder Yield.  The Value Composite Two of Hudson’s Bay Company (TSX:HBC) is 36.

The MF Rank (aka the Magic Formula) is a formula that pinpoints a valuable company trading at a good price.  The formula is calculated by looking at companies that have a high earnings yield as well as a high return on invested capital.  The MF Rank of Hudson’s Bay Company (TSX:HBC) is 13200.  A company with a low rank is considered a good company to invest in.  The Magic Formula was introduced in a book written by Joel Greenblatt, entitled, “The Little Book that Beats the Market”.

The Earnings to Price yield of Hudson’s Bay Company TSX:HBC is -0.457566.  This is calculated by taking the earnings per share and dividing it by the last closing share price.  This is one of the most popular methods investors use to evaluate a company’s financial performance.  Earnings Yield is calculated by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the company.  The Earnings Yield for Hudson’s Bay Company TSX:HBC is -0.055312.  Earnings Yield helps investors measure the return on investment for a given company.  Similarly, the Earnings Yield Five Year Average is the five year average operating income or EBIT divided by the current enterprise value.  The Earnings Yield Five Year average for Hudson’s Bay Company (TSX:HBC) is 0.030209.

Price Index

The Price Index is a ratio that indicates the return of a share price over a past period. The price index of Hudson’s Bay Company (TSX:HBC) for last month was 0.84957. This is calculated by taking the current share price and dividing by the share price one month ago. If the ratio is greater than 1, then that means there has been an increase in price over the month. If the ratio is less than 1, then we can determine that there has been a decrease in price. Similarly, investors look up the share price over 12 month periods. The Price Index 12m for Hudson’s Bay Company (TSX:HBC) is 0.81065.

Price Range 52 Weeks

Some of the best financial predictions are formed by using a variety of financial tools. The Price Range 52 Weeks is one of the tools that investors use to determine the lowest and highest price at which a stock has traded in the previous 52 weeks. The Price Range of Hudson’s Bay Company (TSX:HBC) over the past 52 weeks is 0.733000. The 52-week range can be found in the stock’s quote summary.

Today we are spotlighting shares of Bright Horizons Family Solutions Inc. (NYSE:BFAM) and looking at how the firm stacks up in terms of valuation by the numbers.  One of the most important ratios to look at when weighing an investment decision is the Return on Equity of the company.  At the time of writing Bright Horizons Family Solutions Inc. has an ROE of 0.209547. With ROE, Investors can see if they’re getting a good return on their money, while a company can evaluate how efficiently they’re utilizing shareholder’s equity.

Drilling down into some additional metrics, we note that Bright Horizons Family Solutions Inc. (NYSE:BFAM) has a Price to Book ratio of 7.408313. This ratio is calculated by dividing the current share price by the book value per share. Investors may use Price to Book to display how the market portrays the value of a stock. Checking in on some other ratios, the company has a Price to Cash Flow ratio of 23.486791, and a current Price to Earnings ratio of 35.354007. The P/E ratio is one of the most common ratios used for figuring out whether a company is overvalued or undervalued.

After a recent scan, we can see that Bright Horizons Family Solutions Inc. (NYSE:BFAM) has a Shareholder Yield of 0.019191 and a Shareholder Yield (Mebane Faber) of 0.01143. The first value is calculated by adding the dividend yield to the percentage of repurchased shares. The second value adds in the net debt repaid yield to the calculation. Shareholder yield has the ability to show how much money the firm is giving back to shareholders via a few different avenues. Companies may issue new shares and buy back their own shares. This may occur at the same time. Investors may also use shareholder yield to gauge a baseline rate of return.

The Return on Invested Capital (aka ROIC) for Bright Horizons Family Solutions Inc. (NYSE:BFAM) is 0.330899.  The Return on Invested Capital is a ratio that determines whether a company is profitable or not.  It tells investors how well a company is turning their capital into profits.  The ROIC is calculated by dividing the net operating profit (or EBIT) by the employed capital.  The employed capital is calculated by subrating current liabilities from total assets.  Similarly, the Return on Invested Capital Quality ratio is a tool in evaluating the quality of a company’s ROIC over the course of five years.  The ROIC Quality of Bright Horizons Family Solutions Inc. (NYSE:BFAM) is 5.999116.  This is calculated by dividing the five year average ROIC by the Standard Deviation of the 5 year ROIC.  The ROIC 5 year average is calculated using the five year average EBIT, five year average (net working capital and net fixed assets).  The ROIC 5 year average of Bright Horizons Family Solutions Inc. (NYSE:BFAM) is 0.334342.

The Earnings to Price yield of Bright Horizons Family Solutions Inc. NYSE:BFAM is 0.028285.  This is calculated by taking the earnings per share and dividing it by the last closing share price.  This is one of the most popular methods investors use to evaluate a company’s financial performance.  Earnings Yield is calculated by taking the operating income or earnings before interest and taxes (EBIT) and dividing it by the Enterprise Value of the company.  The Earnings Yield for Bright Horizons Family Solutions Inc. NYSE:BFAM is 0.030512.  Earnings Yield helps investors measure the return on investment for a given company.  Similarly, the Earnings Yield Five Year Average is the five year average operating income or EBIT divided by the current enterprise value.  The Earnings Yield Five Year average for Bright Horizons Family Solutions Inc. (NYSE:BFAM) is 0.018664.

Bright Horizons Family Solutions Inc. (NYSE:BFAM) currently has a Montier C-score of 1.00000. This indicator was developed by James Montier in an attempt to identify firms that were cooking the books in order to appear better on paper. The score ranges from zero to six where a 0 would indicate no evidence of book cooking, and a 6 would indicate a high likelihood. A C-score of -1 would indicate that there is not enough information available to calculate the score. Montier used six inputs in the calculation. These inputs included a growing difference between net income and cash flow from operations, increasing receivable days, growing day’s sales of inventory, increasing other current assets, decrease in depreciation relative to gross property plant and equipment, and high total asset growth.

At the time of writing, Bright Horizons Family Solutions Inc. (NYSE:BFAM) has a Piotroski F-Score of 8. The F-Score may help discover companies with strengthening balance sheets. The score may also be used to spot the weak performers. Joseph Piotroski developed the F-Score which employs nine different variables based on the company financial statement. A single point is assigned to each test that a stock passes. Typically, a stock scoring an 8 or 9 would be seen as strong. On the other end, a stock with a score from 0-2 would be viewed as weak.

Shifting gears, we can see that Bright Horizons Family Solutions Inc. (NYSE:BFAM) has a Q.i. Value of 47.00000. The Q.i. Value ranks companies using four ratios. These ratios consist of EBITDA Yield, FCF Yield, Liquidity, and Earnings Yield. The purpose of the Q.i. Value is to help identify companies that are the most undervalued. Typically, the lower the value, the more undervalued the company tends to be.

Volatility

Watching some historical volatility numbers on shares of Bright Horizons Family Solutions Inc. (NYSE:BFAM), we can see that the 12 month volatility is presently 13.849600. The 6 month volatility is 14.614500, and the 3 month is spotted at 14.519600. Following volatility data can help measure how much the stock price has fluctuated over the specified time period. Although past volatility action may help project future stock volatility, it may also be vastly different when taking into account other factors that may be driving price action during the measured time period.

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