Nomad Foods Limited ($NOMD): Price to Cash of 11.622819 Suggests Moves are coming

Price to cash flow ratio is a very helpful ratio in determining the valuation of a company. The Price to Cash Flow for Nomad Foods Limited $NOMD is 11.622819. This ratio is calculated by dividing the market value of a company by cash from operating activities. Additionally, the price to earnings ratio is another popular way for analysts and investors to determine a company’s profitability. The price to earnings ratio for Nomad Foods Limited (NOMD) is 24.777928. This ratio is found by taking the current share price and dividing by earnings per share.

At times, investors may be prone to making impulsive or irrational decisions when it comes to the stock market. Finding a way to leave emotions out of important investing decisions can greatly assist the investor in achieving their goals. Investors who stay committed to a plan may be able to fight off emotional urges when certain situations arise. Investors may find it useful to rebalance the portfolio as opposed to chasing market performance when adjustments need to be made. Making sure the stock portfolio is aligned to suit the goals of the individual investor may play an important role in being able to consistently sustain profits well into the future.

Looking at some ROIC (Return on Invested Capital) numbers, Nomad Foods Limited (NOMD)’s ROIC is 0.483237. The ROIC 5 year average is 0.494032. ROIC is a profitability ratio that measures the return that an investment generates for those providing capital. ROIC helps show how efficient a firm is at turning capital into profits. 

External Financing Ratio

This factor was introduced by Richard Tortoriello, a senior quantitative analyist for S&P Capital IQ. He authored a book on quantitative analysis: Quantitative Strategies for Achieving Alpha (2009, McGraw Hill). In this book, he identified the External Financing Ratio as a factor that is very good at predicting investment underperformance.

Formula:

External finance ratio = (Total Assets−Total Assets y-1−Cash Flow from Operations) / Total Assets

Nomad Foods Limited (NOMD) has an external finance ratio of 0.054729.

Cash Flow on Capex

Another ratio S&P Analyst Richard Tortoriello recommends to use is ‘Operating Cash Flow to capital expenditure’. (‘Quantitative Strategies for Achieving Alpha’) This ratio is used by analysts to determine a company’s ability to fund operations. It helps to get a better understanding of whether a company is able to buy more assets without having to issue debt or equity.

A rising cash flow to capital expenditures ratio might indicate that the company is in a position to grow.

Please note that some industries are more capital intensive than others, which should be taken into account when evaluating companies.

Formula:

Cash flow on Capex = Cash Flow from Operations / Capital Expenditure

The Cash Flow on Capex for Nomad Foods Limited (NOMD) is 8.132212.

EBITDA/EV

EBITDA/EV stands at 0.076715 for Nomad Foods Limited (NOMD). This multiple is similar to Earnings Yield, but here we use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as Nominator). By doing this, we can compare companies with a different capital structure and capital expenditures. This way it gives a much better idea of the value of a company compared to the popular P/E ratio. As O’Shaughnessy explaines:

” Stocks that have very high debt levels often have low PE ratios, but this does not necessarily mean that they are cheap in relation to other securities. Stocks that are highly leveraged tend to have far more volatile PE ratios than those that are not. A stock’s PE ratio is greatly affected by debt levels and tax rates, whereas EBITDA/EV is not. To compare valuations on a level playing field, you need to account for how a company is financing itself and then compare how relatively cheap or expensive it is after accounting for all balance sheet items.” – James P. O’Shaugnessy in What works on Wall Street

You can think of it as the taking all the revenue and subtracting the costs that solely go into running the business. The downside of EBITDA is that it can be abused by companies declaring as “one-off” costs things that should really be considered normal costs. We use the EBITDA of the last 12 months.

Altman Z

Nomad Foods Limited (NOMD) currently has an Altman Z score of 1.918391. The Z-Score for predicting bankruptcy was published in 1968 by Edward I. Altman, who was assistant professor of finance at New York University at that time. It measures the financial health of a company based on a set of income and balance sheet values. The Altman Z-Score predicts the probability that a firm will go bankrupt within 2 years. In its initial test, the Altman Z-Score was found to be 72% accurate in predicting bankruptcy two years before the event. In a series of subsequent tests, the model was found to be approximately 80%–90% accurate in predicting bankruptcy one year before the event.

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