BAX

Bloomberg provides a score for companies within the S&P 500 based on an average of all analyst ratings from the street. Below is a table highlighting companies with the best analyst ratings, largest increase in rating, highest price targets, and worst analyst ratings and the valuation attractiveness of each of these companies based on The Applied Finance Group’s (AFG) valuation model.

Companies within each of these groups are ranked from most attractive from a valuation perspective to the least attractive. VE.com will actively track the performance of these recommendations and see how they stack up to the analyst recommendations in each group. AFGview.com, AFG’s professional investor website allows you to compare any company using their rating versus the consensus ratings of the sell side. If you are interested in an analysis on a specific company, contact afgsales@afgltd.com.

Best/Worst Analyst Rated Companies (Bloomberg)

AFG's Valuation Model – Using AFG’s modified discounted cash flow model to measure the intrinsic value of a firm compared to its peers. AFG's Value Score - A score which represents the ranked percent to target (deviation between stock’s current trading price and AFG’s current default target price) or attractiveness (upside) relative to the universe. A Value Score of 100 is the most undervalued and 0 is the most overvalued company in the universe.

Since March 9, 2009, the S&P 500 experienced quite a recovery, going from 676 to 813, or just over a 17% rebound. To put that into perspective, the market historically delivered 8% average annual returns. In the table below we provide a list of the top and bottom 10 performers since the March 9th rebound began, to give you an idea of who the new Bulls and Bears are. In the list you will find each company’s attractiveness from a valuation standpoint, as well as an analysis of sales growth expectations imbedded in these companies’ stock prices. Compare the expectations for sales growth to what they have delivered historically to see which stocks on this list are most likely to meet or exceed those expectations, and thus be more likely to out-perform. This list contains companies from the S&P 500 excluding all financial companies.

Top & Bottom Returns (S&P 500 excluding financials) Since March 9, 2009

*Scott Goto Arts

*AFG’s Value Expectation allows us to understand the imbedded Sales Growth, EBITDA Margins, and Asset Turnovers a company has to deliver in the future to justify its current trading price. In theory and in normal circumstances, if the imbedded future performance is very conservative relative to the company’s historical performance, the stock is regarded as undervalued. The table displays the implied future sales growth of companies assuming their EBITDA margins and Asset turnovers stay at the 5 year median levels.

According to Bespoke Investment Group, these ten companies have the highest percentage of Buy ratings from the analysts that follow them. This table shows the number of analysts covering each stock and the number of buy and sell ratings as well as the percentage of buy ratings on the top 10 companies from Bespoke. Also in the table is the achieved 5 year median sales growth and the VE Sales growth (Sales Growth expectations priced in to the stock at today’s price). Only the top 4 companies on the list LO, PM, TMO, and AYE have 100% buy ratings from all analysts. Of those four, only AYE has high expectations relative to what they have delivered in sales growth in the past. Six out of the twelve companies on the list LO, PM, TMO, GOOG, COV, and BLL have very realistic expectations for sales growth priced-in compared to what they have been able to achieve. With the high percentage of buy ratings on these stocks they all deserve a more in-depth look, but the six with low expectations look especially worthy of consideration as potential investments.

S&P 500 Stocks with the Highest Percentage of Analyst Buy Ratings.

*denotes company only has 2 years of historical sales growth
**denotes company only has 3 years of historical sales growth
VE Sales Growth was calculated for these companies on 12/12/08.