Italian stock report - Finmeccanica

ITALY

Leonardo hits eleven-month high on spectacular volume January 15, 2018 17:30 CET

NEWS BITES - EUROPE

Leonardo Spa (MI:LDO), Italy's 3rd largest Industrial goods & services company by market cap, traded at its 320-day high of EUR11.05. The stock price has increased 15.0c (1.4%) from its last trading session of January 12 to close at EUR11.0. Compared with the FTSE MIB Index which rose 69.3 points (0.3%) in the day, the relative price increase was 1.1%. The rise has been propped up by spectacular volume of 5.1 times the average daily volume of 806,137 shares.

Highlights in today's Report:

SECTION 1 BULLISH SIGNALS

Fundamentals, Undervaluation [compared with sector average], Technicals, High Performance Indicators

SECTION 2 BEARISH SIGNALS

Fundamentals, Technicals, Overbought/Bearish/Resistance Signals, Low Performance Indicator, A negative finish to 2017

SECTION 3 PRICE VOLUME DYNAMICS

Technicals, Moving Annual Return, Turnover Rate & Turnover Period

SECTION 4 RANKING

Global, Independent Ratings

SECTION 5 FINANCIALS

Financials Summary, Annual Report for the year ended December 31, 2016 (year-on-year comparisons with previous corresponding period)-, Trailing 12 Months Dividends

SECTION 6 PROFILE

Activities, Industry & Sector, Top Management, Issued Capital

SECTION 1 LEONARDO BULLISH SIGNALS

1.1 Fundamentals:

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 0.3. Compared with the rest of the market the stock is undervalued and ranks in the top quartile of stock by value of Q Ratio.

+ As per the Du Pont analysis, Return on Equity of 11.6% is better than sector average of 0.5%. This is computed as net profit margin of 4.2% times asset turnover [sales/assets] of 0.53 times leverage factor [total assets/shareholders' equity] of 5.8.

1.2 Undervaluation [compared with sector average]:

+ Price/Earnings of 12.5 [30.7].

+ Price/Sales of 0.5 [1.0]. We estimate Leonardo stock is trading at a current year Price/Sales of 0.5 and a forward year Price/Sales of 0.5.

+ Return on Assets 2% [1.5%].

+ Return on Capital Employed 12.6% [9.5%].

1.3 Technicals:

Uptrend: The stock rose 1.4% on high volatility today and expanding price range.

+ The price climbed 4.1% in the last week and soared 10.0% in the last month.

+ Compared with the FTSE MIB Index which rose 2.9% for the week and 6.4% for the month, this represented a relative price increase for Leonardo stock of 1.0% for the week and 3.4% for the month.

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 10.59 minus the 26-day EMA of 10.36 is positive 0.23 suggesting a bullish signal. Both EMA prices are rising, another bullish signal.

+ The present value of EUR1,000 (PV1000) invested five years ago in Leonardo is EUR2,230, for a capital gain of EUR1,230.

+ 5 years Multiplier in EUR = 2.23x

+ Compound Annual Growth Rate (CAGR) in EUR = 17.4%

Present Value of USD1,000 invested 5 years ago:

+ The present value of USD1,000 (PV1000) invested five years ago in Leonardo is $US2,039, for a capital gain of $US1,039.

+ 5 years ago EUR 1 equalled USD 1.3337

+ 5 years Multiplier in USD = 2.039x

+ Compound Annual Growth Rate (CAGR) in USD = 15.3%

Jan 15, 2018: EUR 1 equals USD 1.22

1.4 High Performance Indicators:

DescriptionValueRank In Market
Today's TurnoverEUR45 million (US$54.9 million)In Top 6%
Price Change %1.4In Top Quartile
% Prem to Vol Wtd Price6.0In Top Quartile

SECTION 2 LEONARDO BEARISH SIGNALS

2.1 Fundamentals:

+ The relative yield of the stock, defined by its yield of 1.3%, divided by average yield of dividend yielding stocks in the FTSE MIB Index of 2.4% is 54.0%. This suggests the stock is overvalued in dividend yield terms.

+ Total Liabilities/EBITDA of 29.9 which compares unfavourably with the Joseph Piotroski benchmark of 5.

+ Net profit margin has averaged 2.6% in the last 3 years. This suggests the company is less profitable with a low margin of safety.

2.2 Technicals:

+ The present value of EUR1,000 (PV1000) invested one year ago in Leonardo is EUR842, for a capital loss of EUR158.

PV10001-week1-month1-year
LDO.MI1,0411,100842
FTSE MIB Index1,0291,0601,206

2.3 Overbought/Bearish/Resistance Signals:

+ The Relative Strength Index (RSI) of 82.2 has penetrated the overbought line of 70, suggesting the price gain of 10.9% in the last 14 days is unusually high.

+ The stock is overbought according to the Williams % R indicator of -4.1, suggesting the price is close to its 14-day high of EUR11.05.

+ The Money Flow Index [MFI] is 86.9 suggesting an overbought 14-day trend, being above 80. The Money Ratio of 6.6 suggests positive money flow was 6.6 times negative money flow.

2.4 Low Performance Indicator:

DescriptionValueRank In Market
EPS Growth %4.3In Bottom 7%

2.5 A negative finish to 2017

The stock has tumbled EUR3.38 (or 25.4%) in FY 2017 to close at EUR9.92. This makes the stock the biggest decliner in the Industrial Goods & Services sector which is up 26.1% in FY 2017. The volume in FY 2017 equalled average trading of 2.8 million shares in the previous year.

SECTION 3 PRICE VOLUME DYNAMICS

3.1 Technicals:

+ Volume: there were 4,090,000 shares worth EUR45 million (US$54.9 million) traded today. In the past week, volume was 5.5 times average and the shares were up 4.1%.

+ Leonardo is at a discount of 19.2% to its 12-month high of EUR13.62 on March 01, 2017. It is also at a premium of 13.3% to the 12-month low of EUR9.71 on December 06, 2017.

3.2 Moving Annual Return

Based on a dynamic start date of 5 years ago, the Moving Annual Return has been positive in 4 out of 5 years.

LDOClose (EUR)Dividends (EUR)Capital Gain / (Loss) %% YieldAnnual Return %
Jan 15110.14(15.8)1.1(14.8)
1 Yr ago13.07-3.8-3.8
2 Yrs ago12.59-61.7-61.7
3 Yrs ago7.79-36.6-36.6
4 Yrs ago5.7-15.6-15.6

Close 5 years ago EUR4.93

3.3 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 130.9% (or a turnover period of 9 months). This average length of ownership of the stock at 0.8 times the average holding period of 11 months for stocks in the FTSE MIB Index suggests a larger number of speculators on the share register, making it less safe for long-term investors.

SECTION 4 RANKING

4.1 Global Rank [out of 47,409 stocks] and Rank in the Europe Region [out of 8,521 stocks]

DescriptionValueGlobal RankIn Eur Region
MCap (US$)7.8B1,974462
Total Assets (US$)30.6B1,262298
Revenue (US$)16.3B879219
Net Profit (US$)608.5M1,501340
Return on Equity %11.611,0232,118
Net Profit Margin %4.219,3803,089
Price/Earnings12.36,1911,274
Yield %1.315,0222,917
PV$1000 (1Year) US$*98128,9165,422
US$* Change (1Year) %-4.628,1625,355

* 1 year ago EUR 1 = USD 1.05

Jan 15, 2018: EUR 1 equals USD 1.22

4.2 Independent Ratings

+ Industryweek 1000:

It is a new entrant in the Industry Week list of the world's largest 1000 manufacturers by Revenues in 2016, ranked 279.

+ Forbes 2000:

Leonardo Spa is the 485th largest by revenue in the Forbes Global 2000.

+ BSS/News Bites:

It is placed 258/286 in BSS News Bites' ranking of Italian performers in the past year, a percentile ranking of 10.

+ Vanguard Total World Stock ETF 7457:

The stock was one of 7457 global stocks selected by Vanguard Total World Stock ETF (VT). As at November 30, 2017, the Vanguard Total World Stock ETF held 100,660 shares worth $US1,314,669 or 0.01% by value of the ETF's portfolio [Ranked 1643 out of 7457 by value and 17 out of 91 for Italy].

SECTION 5 LEONARDO FINANCIALS

5.1 Financials Summary

Year endedDec 2016Dec 2015Dec 2014
Sales (USD B)16.317.417.7
Pretax (USD M)801.3556.760.2
Net (USD M)608.5586.8(37.4)
EPS (EUR)0.8790.843(0.0536)

Net profit was up 3.7% from US$586.8 million in 2015 to US$608.5 million in 2016. Earnings Per Share (EPS) was up 4.3% from 84.30c to 87.90c.

5.2 Annual Report for the year ended December 31, 2016 (year-on-year comparisons with previous corresponding period)-

Favourable Changes:

+ Net profit up 3.7% from EUR487.0m ($US531.2m) to EUR505.0m ($US532.6m)

+ EPS up 4.8% from 84.0c (US91.95c) to 88.0c (US92.71c).

+ EBIT Margin up from 9.6% to 12.3%.

+ Interest cover up 14.5% from 1.6 to 1.8.

+ EBIT to total assets up from 4.8% to 5.8%.

+ Profit before tax to Sales up from 3.6% to 5.5%.

+ Interest revenue to Sales up from 2.7% to 4.1%.

Unfavourable Changes:

+ Total revenue down 6.3% from EUR14.4b ($US15.8b) to EUR13.5b ($US14.3b).

+ Total revenue to total assets down from 0.6 to 0.5.

+ Interest expenses to Sales up from 6.1% to 6.8%.

+ Total Liabilities to EBITDA of 29.9 compares unfavourably with the Joseph Piotroski benchmark of <5. However, it has improved by 36.3% from the previous year's ratio of 47.0.

+ Total Liabilities to Operating Cash Flow of 25.5 compares unfavourably with the Joseph Piotroski benchmark of <4. However, it has improved by 27.3% from the previous year's ratio of 35.0.

Note:

+ Sales and marketing expenses to Sales down from 89.3% to 87.9%.

+ Tax expenses to Sales down from 1.5% to 1.3%.

+ Debt to Equity steady at 1.2.

+ Total liabilities to Total assets steady at 0.8.

+ Current ratio steady at 1.0.

+ Total current assets to Total Assets up from 51.6% to 52%.

+ Total non-current assets to Total Assets down from 48.4% to 48%.

+ Intangibles to Total Assets down from 26.7% to 26.5%.

+ Current Inventory to Total Assets down from 27.4% to 25.8%.

+ Current Debtors to Total Assets down from 14.6% to 14.5%.

5.3 Trailing 12 Months Dividends

Trailing 12 Months ToValue (c)
15 Jan 201814

SECTION 6 LEONARDO PROFILE

6.1 Activities

Leonardo SpA, formerly Leonardo Finmeccanica SpA, is a global high-tech player in Aerospace, Defence and Security. With headquarters in Italy and over 47,000 employees, Leonardo has a consolidated industrial presence in four main markets (Italy, the UK the U.S. and Poland), and an important network of strategic partnerships in the main high potential markets worldwide. Leonardo builds its competitiveness and success on two main pillars: first, continuous innovation, to be at the forefront of technology, and second, a customer-focused culture, an essential part of its commercial strategy.

6.2 Industry & Sector

Classification LevelName of Sector
Economic SectorBasic Materials
Business SectorChemicals
Industry GroupChemicals
IndustryCommodity Chemicals
ActivityIndustrial Gas

6.3 Top Management

The chairman is Giovanni De Gennaro and the chief executive officer is Alessandro Profumo.

6.4 Issued Capital

Based on 578,150,000 issued shares the market capitalisation is EUR6.4 billion (US$7.8 billion).

Contact: 39 06 324731

Physical Address: Piazza Monte Grappa, 4

00195 ROMA

Italy

State/Province/Country: Italy

Country of Incorporation: Italy

Exchange: Borsa Italiana

ISIN: IT0003856405

MI:LDO; BIT:LDO; IM:LDO; LDOF.MI

PermID: 4295875430

Source: www.BuySellSignals.com