VeriSign, Inc. (VRSN): How Significant Is the 1.045601 PI for the Shares?

VeriSign, Inc. (VRSN) presently has a 6 month price index of 1.380966. The price index is calculated by dividing the current share price by the share price six months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 1.648635 and the five year is 4.084874. Narrowing in a bit closer, the 3 month is 1.140277, and the 1 month is currently 1.045601.

There are plenty of different types of stocks that investors have to choose from. Some will opt to be more aggressive with their portfolios while others will choose to play it a bit safer. Blue chip stocks include companies that typically have a high market cap and have been profitable over a long period of time. Growth stocks are typically expected to have a high P/E ratio and a low dividend yield. The idea is that a growth stock will continue to expand and grow into the future. Many investors will be searching for value stocks. Value stocks are typically cyclical in nature and investors may be looking to buy and hold these types rather than try to squeeze out some short-term profits. 

Value Composite Three (VC3) is another adaptation of O’Shaughnessy’s value composite but here he combines the factors used in VC1 with buyback yield. This factor is interesting for investors who’re looking for stocks with the best value characteristics, but are indifferent to whether these companies pay a dividend.

VC3 is the combination of the following factors:

Price-to-BookPrice-to-EarningsPrice-to-SalesEBITDA/EVPrice-to-Cash flow

Buyback Yield

As with the VC1 and VC2, companies are put into groups from 1 to 100 for each ratio and the individual scores are summed up. This total score is then put into groups again from 1 to 100. 1 is cheap, 100 is expensive.

The scorecard also displays variants of the VC3 where the score is calculated for the selected company compared to peer companies in the same industry, industry group or sector.

Please note that we use Book-to-Market instead of P/B since it allows a more accurate sorting compared to P/B. Stocks with a high B/M show up at the top of the list, stocks with negative B/M are at the bottom of the list. For the same reason we use Earnings-to-Price instead of Price-to-Earnings and Cash flow-to-price instead instead of Price-to-cash flow.

Also important is that we always make sure that companies with the same score get added to the same percentile. For stock universes where the number of stocks is less than 100, we make sure that the stocks are still allocated to percentiles from 0 to 100 instead of 0 to the total number of stocks. This is particularly relevant for the industry, industry group or sector variants where if additional filters are used, the number of stocks often drops below 100.

VeriSign, Inc. (VRSN) has a VC3 of 59.

Free Cash Flow Growth (FCF Growth) is the free cash flow of the current year minus the free cash flow from the previous year, divided by last year’s free cash flow. The FCF Yield of VeriSign, Inc. (VRSN) is 0.031862. Free cash flow (FCF) is the cash produced by the company minus capital expenditure. This cash is what a company uses to meet its financial obligations, such as making payments on debt or to pay out dividends. The 5 Year FCF Yield of VeriSign, Inc. (VRSN) is 0.026342. Experts say the higher the value, the better, as it means that the free cash flow is high, or the variability of free cash flow is low or both.

Gross Margin

Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.

Market watchers may also be following some quality ratios for VeriSign, Inc. (VRSN). Robert Novy-Marx, a professor at the university of Rochester, discovered that gross profitability – a quality factor – has as much power predicting stock returns as traditional value metrics. He found that while other quality measures had some predictive power, especially on small caps and in conjunction with value measures, gross profitability generates significant excess returns as a stand alone strategy, especially on large cap stocks.The Gross profitability for (VRSN) is 0.537905.

Altman Z

VeriSign, Inc. (VRSN) currently has an Altman Z score of 5.376749. 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.

At the time of writing, VeriSign, Inc. (VRSN) has a Piotroski F-Score of 5. 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.

As we close in on the end of the calendar year, investors may be trying to visualize potential trades for the New Year. There are many professionals that believe that there is still plenty of room for stocks to run even at current levels. Preparing the game plan for the next few quarters may give the investor some new ideas. Staying focused and maintaining discipline may help guide the investor to unchartered territory in the coming months. Tracking market events from multiple angles may also help provide some enhanced perspective.