PROFIT MARGIN: [FAIL]
This methodology seeks companies with a minimum trailing 12 month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. AA^'s profit margin of 0.99% fails this test.
RELATIVE STRENGTH: [FAIL]
The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. AA^, with a relative strength of 35, fails this test.
COMPARE SALES AND EPS GROWTH TO THE SAME PERIOD LAST YEAR: [FAIL]
Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for AA^ (55.56% for EPS, and -2.88% for Sales) are not good enough to pass.
INSIDER HOLDINGS: [FAIL]
AA^'s insiders should own at least 10% (they own 0.05%) of the company's outstanding shares. This does not satisfy the minimum requirement, and companies that do not pass this criteria are less attractive.
CASH FLOW FROM OPERATIONS: [PASS]
A positive cash flow is typically used for internal expansion, acquisitions, dividend payments, etc. A company that generates rather than consumes cash is in much better shape to fund such activities on their own, rather than needing to borrow funds to do so. AA^'s free cash flow of $0.10 per share passes this test.
PROFIT MARGIN CONSISTENCY: [FAIL]
The profit margin in the past must be consistently increasing. The profit margin of AA^ has been inconsistent in the past three years (Current year: 0.81%, Last year: 2.45%, Two years ago: 1.21%), which is unacceptable. This inconsistency will carryover directly to the company's bottom line, or earnings per share.
R&D AS A PERCENTAGE OF SALES: [NEUTRAL]
This criterion is not critically important for companies that are not high-tech or medical stocks because they are not as R&D dependant as companies within those sectors. Not much emphasis should be placed on this test in AA^'s case.
CASH AND CASH EQUIVALENTS: [FAIL]
Unfortunately, the data is unavailable for AA^. Hence, an opinion cannot be rendered.
INVENTORY TO SALES: [PASS]
This methodology strongly believes that companies, especially small ones, should have tight control over inventory. It's a warning sign if a company's inventory relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Inventory to Sales for AA^ was 11.62% last year, while for this year it is 11.92%. Although the inventory to sales is rising, it is below the max 30% that is allowed. The investor can still consider the stock if all other criteria appear very attractive.
ACCOUNT RECEIVABLE TO SALES: [PASS]
This methodology wants to make sure that a company's accounts receivable do not get significantly out of line with sales. It's a warning sign if a company's accounts receivable relative to sales increases significantly when compared to the previous year. Up to a 30% increase is allowed, but no more. Accounts Receivable to Sales for AA^ was 7.78% last year, while for this year it is 7.34%. Since the AR to sales is decreasing by -0.45% the stock passes this criterion.
LONG TERM DEBT/EQUITY RATIO: [FAIL]
AA^'s trailing twelve-month Debt/Equity ratio (57.71%) is too high, according to this methodology. You can find other more superior companies that do not have to borrow money in order to grow.
"THE FOOL RATIO" (P/E TO GROWTH): [FAIL]
The "Fool Ratio" is an extremely important aspect of this analysis. Unfortunately, AA^'s "Fool Ratio" is not available due to a lack of one or more important figures. Hence, an opinion cannot be given at this time.
The following criteria for AA^ are less important which means you would place less emphasis on them when making your investment decision using this strategy:
AVERAGE SHARES OUTSTANDING: [FAIL]
AA^ has either issued a significant amount of new shares over the past year or has been issuing more and more shares over the past five years. AA^ currently has 1,169.0 million shares outstanding. Neither of these are a good sign. Generally when a small-cap company issues more stock, the existing stock becomes devalued by the market, and hence diluted.
SALES: [FAIL]
Companies with sales less than $500 million should be chosen. It is among these small-cap stocks that investors can find "an uncut gem", ones that institutions won't be able to buy yet. AA^'s sales of $23,527.0 million based on trailing 12 month sales, are too high and would therefore fail the test. It is companies with $500 million or less in sales that are most likely to double or triple in size in the next few years.
DAILY DOLLAR VOLUME: [FAIL]
AA^ does not meet the Daily Dollar Volume (DDV of $0.0 million) test. It is required that this number be greater than $1 million and less than $25 million because these are the stocks that are liquid but remain relatively undiscovered by institutions. AA^ is too illiquid to be considered attractive at this time.
PRICE: [FAIL]
This is a very insignificant criterion for this methodology. But basically, low prices are chosen because "small numbers multiply more rapidly than large ones" and the potential for big returns expands. AA^'s price is not currently available. Therefore the current price cannot be evaluated at this time.
INCOME TAX PERCENTAGE: [PASS]
AA^'s income tax paid expressed as a percentage of pretax income this year was (50.00%) and last year (23.99%) are greater than 20% which is an acceptable level. If the tax rate is below 20% this could mean that the earnings that were reported were unrealistically inflated due to the lower level of income tax paid. This is a concern.
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