New Constructs rates companies using five metrics: two quality-of-earnings measures and three valuation metrics. The platform shows buy, sell, or hold recommendations, index comparisons, and a five-year rating history. Reports detail how the firm converts accounting earnings to economic earnings through extensive adjustments.
Chapters
Welcome to the New Constructs tutorial for company ratings. Access to more than 3,000 company ratings is at your fingertips with Report Quick Search. Simply type a ticker and click Go to get an answer. You can also access our ratings through the Ratings tab. Type a ticker and click View Ratings to see our recommendation. For multiple stock ratings, use our Premium Stock Screener. Our ratings page begins with a breakdown of the 5 components that drive our overall rating. We break our ratings components into 2 types: quality of earnings and valuation. Our 2 quality of earnings components, economic versus reported earnings and return on invested capital, measure the company's business strength. Our 3 valuation components, free cash flow yield, Price-to-economic book value, and GAP, or growth appreciation period, measure expectations embedded in the current stock price. Valuation components can have a significant day-to-day impact on our rating depending on changes in the stock price. Below the company's ratings table is a breakdown for the S&P 500 and Russell 2000. This is a great table to compare the company you're examining between 2 of the most prominent indexes. You can also download a company report or generate a model from the ratings page. For more information on our company reports and valuation models, see the tutorials. After reviewing the rating details, scroll down to see our investment recommendation summary. Our investment recommendation distills thousands of pages and hours of analysis and research in order to give you one indication: buy, sell, or hold. The second bullet explains our overall rating for the company. The last bullet tells you how the company ranks among all the companies we cover in terms of the number of earnings and valuation adjustments we've made. Companies with lower ranking numbers have the most adjustments, and companies with higher ranking numbers have the least amount of adjustments. To the right of our investment recommendation is a chart depicting the company's stock price relative to its trading volume. Below our investment recommendation is the company's rating history for the past 5 years. Scroll down the page to see the details for how we adjust the company's reported financial statements into economic earnings. Accounting earnings were not designed for equity investors, but for debt investors. Economic earnings represent the true cash flows available to equity holders, unlike accounting earnings. A great deal of research and work is required to derive economic earnings. We analyzed over 3,000 annual reports and made over 73,000 adjustments in 2013 alone. Income statement adjustments showed the details on how we convert reported net income into NOPAT, or net operating profit after tax. Balance sheet adjustments showed the details on how we convert reported net assets into invested capital. At the bottom of the page, we show the adjustments for our discounted cash flow model, economic book value, and enterprise value calculations. Note the transparency we offer for all our adjustments. We want you to know how much work we do, unlike other firms that don't offer the same amount of transparency. If you would like to see even more detail for a company, we encourage you to download our report available at the top of this page underneath the ratings table. Thanks for watching this tutorial. If you have any questions, please leave a comment.
