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12/05/2017

Treasury Wine Estates share price at all time high

twe

On 11 May, investment commentary website, The Motley Fool published an article summarising three shares that had hit 52 week high's. One of them being Treasury Wine Estates Ldt. 

"The Treasury Wine Estates Ltd (ASX: TWE) share price rose to an all-time high of $12.98 this week, which means that the global wine company has seen its shares rise a massive 21% year-to-date. Investors appear to have been very impressed with its half-year results which revealed a stunning 132% increase in net profit after tax to $132 million. "

The author, James Mickleboro, goes on to add his opinion on investing at thsi time stating: "Much like Cochlear, I think Treasury Wine Estates is a fantastic company, but after such a strong rally I would be hesitant to buy its shares today. I think investors may be better off waiting for a better entry point."

This statement runs in conjunction with another report published by Lenox Ledger on the same day, summarising carefully calculated statistics on Treasury Wine Estates' performance and place in the stock market.

"The Piotroski F-Score is a scoring system between 1–9 that determines a firm’s financial strength. The score helps determine if a company’s stock is valuable or not. The Piotroski F-Score of Treasury Wine Estates Limited (ASX:TWE) is 7. A score of nine indicates a high value stock, while a score of one indicates a low value stock.

The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings. It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue. The score is also determined by change in gross margin and change in asset turnover.

The Gross Margin Score is calculated by looking at the Gross Margin and the overall stability of the company over the course of 8 years.  The score is a number between one and one hundred (1 being best and 100 being the worst).  The Gross Margin Score of Treasury Wine Estates Limited (ASX:TWE) is 50.  The more stable the company, the lower the score.  If a company is less stable over the course of time, they will have a higher score."

Considering these scores, it seems that right now might not be such a bad entry point for those looking to invest as the company has a reasonably stable outlook and good financial strength.

The article goes on to add that the Magic Formula rating for TWE is 6174, however provides no context in to where this rating sits on a scale — is it /10,000 or /100,000.

"Looking further, 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 Treasury Wine Estates Limited (ASX:TWE) is 6174.  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”."

Content for this piece originally appeared at The Motley Fool and Lenox Leger.

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