Mashup MagicFormula with Rule #1
So I took stocks from MagicFormulaInvesting.com and ran them through the Rule #1 formula to calculate the Margin of Safety (MOS) price. I got the EPS growth rates estimates from MoneyCentral.msn.com. I used current P/E ratios in the Future Value (FV) calculation of the stock’s price.
| Company | Symbol | Est EPS growth |
Sticker | MOS | 5/8/06 close |
% of MOS |
| Patterson-UTI Energy Inc | PTEN | 42.30% | $284.06 | $142.03 | $33.63 | 24% |
| Orckit Communications Ltd | ORCT | 30.00% | $55.37 | $27.69 | $15.65 | 57% |
| Pinnacle Airlines Corp | PNCL | 30.00% | $24.68 | $12.34 | $7.45 | 60% |
| Freeport-McMoran Copper & Gold Inc. | FCX | 25.00% | $152.66 | $76.33 | $66.65 | 87% |
| Resources Connection Inc | RECN | 23.20% | $55.69 | $27.84 | $28.41 | 102% |
| PortalPlayer Inc | PLAY | 21.80% | $19.94 | $9.97 | $11.18 | 112% |
| Allied Healthcare International Inc. | AHCI | 20.00% | $7.21 | $3.61 | $4.65 | 129% |
| Aspreva Pharmaceuticals Corp | ASPV | 20.00% | $48.70 | $24.35 | $31.51 | 129% |
| Rimage Corp | RIMG | 20.00% | $34.85 | $17.42 | $22.77 | 131% |
| Caremark Rx Inc | CMX | 19.90% | $71.77 | $35.89 | $48.17 | 134% |
| Syneron Medical Ltd | ELOS | 20.00% | $39.41 | $19.71 | $25.80 | 131% |
| bebe stores Inc | BEBE | 19.50% | $24.99 | $12.50 | $17.23 | 138% |
| Aeropostale Inc. | ARO | 19.70% | $42.76 | $21.38 | $29.48 | 138% |
| Medicis Pharmaceutical Corp | MRX | 19.30% | $49.15 | $24.57 | $34.26 | 139% |
| Lincoln Educational Services Corp | LINC | 18.80% | $23.46 | $11.73 | $16.82 | 143% |
| Lincare Holdings Inc. | LNCR | 18.50% | $52.07 | $26.04 | $38.61 | 148% |
| Navigant Consulting Inc. | NCI | 18.80% | $27.52 | $13.76 | $20.27 | 147% |
| ViroPharma Inc | VPHM | 19.00% | $13.08 | $6.54 | $9.78 | 150% |
| Phillips-Van Heusen Corp | PVH | 18.30% | $53.03 | $26.51 | $39.49 | 149% |
| SpectraLink Corp | SLNK | 18.30% | $15.88 | $7.94 | $11.99 | 151% |
| Kinetic Concepts Inc | KCI | 18.50% | $54.96 | $27.48 | $41.76 | 152% |
| Biovail Corp | BVF | 18.20% | $34.41 | $17.21 | $26.13 | 152% |
| Labor Ready Inc. | LRW | 18.10% | $35.23 | $17.61 | $27.21 | 154% |
| USANA Health Sciences Inc | USNA | 18.00% | $49.11 | $24.56 | $38.13 | 155% |
| Kos Pharmaceuticals Inc | KOSP | 17.60% | $58.76 | $29.38 | $46.70 | 159% |
| Ulticom Inc | ULCM | 17.00% | $12.14 | $6.07 | $10.15 | 167% |
| Comtech Telecommunications Corp. | CMTL | 17.00% | $34.53 | $17.26 | $29.14 | 169% |
| Quest Diagnostics Inc | DGX | 16.50% | $64.57 | $32.28 | $56.60 | 175% |
| Pacific Sunwear of California Inc | PSUN | 16.70% | $28.62 | $14.31 | $25.12 | 176% |
| Abercrombie & Fitch Co. | ANF | 16.50% | $72.08 | $36.04 | $64.91 | 180% |
| Career Education Corp | CECO | 16.00% | $34.75 | $17.37 | $32.47 | 187% |
| Dell Inc. | DELL | 16.00% | $28.02 | $14.01 | $26.53 | 189% |
| Claire’s Stores Inc. | CLE | 15.70% | $32.90 | $16.45 | $31.06 | 189% |
| ExpressJet Holdings Inc. | XJT | 17.00% | $6.67 | $3.33 | $6.12 | 184% |
| Hampshire Group Ltd | HAMP | 15.00% | $20.90 | $10.45 | $20.24 | 194% |
| Great Northern Iron Ore Properties | GNI | 15.00% | $132.47 | $66.23 | $131.50 | 199% |
| Korn/Ferry International | KFY | 15.10% | $21.60 | $10.80 | $20.94 | 194% |
| Vaalco Energy Inc | EGY | 15.00% | $7.05 | $3.53 | $6.98 | 198% |
| Bausch & Lomb Inc | BOL | 15.80% | $45.84 | $22.92 | $44.73 | 195% |
| Fair Isaac Corp | FIC | 15.30% | $39.17 | $19.59 | $38.60 | 197% |
| US Physical Therapy Inc | USPH | 15.00% | $14.89 | $7.45 | $15.00 | 201% |
| Vertrue Inc | VTRU | 15.00% | $44.35 | $22.17 | $43.97 | 198% |
| New York & Company Inc | NWY | 15.10% | $17.59 | $8.80 | $17.42 | 198% |
| New Frontier Media Inc | NOOF | 15.10% | $9.10 | $4.55 | $8.99 | 198% |
| Deb Shops Inc | DEBS | 15.00% | $29.55 | $14.77 | $29.53 | 200% |
| Fording Canadian Coal Trust | FDG | 15.00% | $36.21 | $18.10 | $35.81 | 198% |
| Deckers Outdoor Corp | DECK | 15.00% | $43.29 | $21.65 | $43.25 | 200% |
| CCA Industries Inc. | CAW | 15.00% | $10.61 | $5.31 | $10.60 | 200% |
Methodology: I used two different inputs into MagicFormulaInvesting.com: min of 50 million and min of 1000 million market caps. I took the two results, combined them, plopped them into a spreadsheet, and used the Excel Stock Quote plug-in to get the current EPS and P/E numbers (not shown) and price as of 8 May. I manually entered the estimated EPS growth rates from moneycentral.msn.com (note these are five-year estimates, not ten-year). From there the spreadsheet does the calculating of the Sticker, MOS, and % of MOS.
Commentary: PTEN looks severely undervalued, if and only if you believe a 42.3% growth rate each year for 10 years! If we knock PTEN back to a 23% growth rate, then it works out to be right at the MOS price.
Caution: I’m not a financial advisor, accountant, broker, investment planner, actuary, salesman, or much of anything really. I’m just a guy with a website and a spreadsheet. Do your own investigating before doing any investing.
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