If Customers Can't Get Satisfaction, Can Investors?

By
A A A
Share |

Does customer satisfaction matter to a stock's performance?

The American Customer Satisfaction Index says it tends to correlate, though two of the three stocks with the best scores last year (H.J. Heinz ( HNZ ) 89,Clorox ( CLX ) 88 andApple ( AAPL ) 87) were slow-moving dividend stocks rather than big gainers.

Another factor to consider is improvement on the 0-100 scale.

In 2012,Time Warner Cable ( TWC ) increased its score in the satisfaction index from 59 to 63, up about 7% from 2011.

Out of more than 230 companies that the Ann Arbor, Mich.-based ACSI tracks, only a handful improved their score by a higher percentage than Time Warner Cable.

So far this year, Time Warner Cable's stock is up about 40% vs. a 4% decline last year. The stock is No. 11 in IBD's Big Cap 20.

While improvement in customer satisfaction has to help in the long run, the key factors for a stock are the sort of considerations behind a strong Composite Rating. Time Warner's is a 97.

The Composite Rating combines all five IBD ratings into a single number.

Time Warner's earnings increased 15%, 40%, 29% and 23% in the past four quarters. Revenue advanced 4%, 4%, 6% and 9% in the same period. The Street expects EPS to jump 28% on a 10% revenue gain in the third quarter.

Operating cash flow per share was more than three times EPS, an extremely strong number.

Pretax margin was the highest since 2005. After-tax margin has been running in the 8% to 9% range in recent quarters, also near a high.

The Accumulation-Distribution Rating is A. The up-down volume ratio is a bullish 1.6, according to Stock Checkup at Investors.com.

Drawbacks include heavy debt, a good but not great 15% three-year growth rate and a lackluster three-year sales growth rate of 5%. Also, funds have lightened their stake by 7% over the past nine months, even as the number of funds holding shares rose.

The quarterly dividend is 56 cents a share, up 40% since late 2010. Time Warner Cable separated fromTime Warner ( TWX ) in 2009.

Time Warner Cable's annualized dividend yield is 2.5%.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: AAPL , CLX , HNZ , TWC , TWX

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos

Stocks

Referenced

Most Active by Volume

89,970,926
  • $16.15 ▲ 0.12%
77,131,582
  • $58.94 ▼ 1.31%
67,336,935
  • $26.56 ▲ 1.68%
48,814,124
  • $86.20 ▲ 0.02%
47,526,126
  • $23.21 ▲ 0.78%
44,660,424
  • $23.91 ▲ 6.36%
38,799,699
  • $4.289 ▲ 4.36%
36,199,890
  • $40.01 ▼ 0.97%
As of 4/17/2014, 04:07 PM