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David Dreman Guru Analysis for Morgans Hotel Group Co.

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Exchange: NASDAQ
Industry: Consumer Services
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Assessments & Analysis Based on May 23, 2016 close price: $2.17

  for the Contrarian Investor based on the criteria of David Dreman. Return to MHGC Guru Analysis

All Star Guru Scorecard

Source Go Chart %
Peter Lynch 0%
Benjamin Graham 29%
Validea 21%
Motley Fool 21%
David Dreman 33%
Martin Zweig 23%
Kenneth Fisher 40%
James P. O'Shaughnessy 25%

Detailed Analysis

Guru Score: 33%


Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the protected eye. Furthermore, the investor is exposed to less risk of "accounting gimmickry", and companies of this size have more staying power. MHGC has a market cap of $75 million, therefore failing the test.


A company should show a rising trend in the reported earnings for the most recent quarters. MHGC's EPS for the latest quarter is not greater than the prior quarter, (from earliest to most recent quarter) 1.27, -0.38. Hence the stock fails this test, but the investor should evaluate this company qualitatively to see if it qual ifies under this methodology's "exception rule".


This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. Unfortunately, we do not have sufficient data available on MHGC at this time.

This methodology would utilize four separate criteria to determine if MHGC is a contrarian stock. In order to eliminate weak companies we have stipulated that the stock should pass at least two of the following four major criteria in order to receive "Some Interest".


The P/E of a company should be in the bottom 20% of the overall market. MHGC's P/E of 8.99, , meets the bottom 20% criterion (below 11.78), and therefore passes this test.


The P/CF of a company should be in the bottom 20% of the overall market. MHGC's P/CF of 2.42 meets the bottom 20% criterion (below 6.62) and therefore passes this test.


The P/B value of a company should be in the bottom 20% of the overall market. MHGC's P/B is not available, and hence an opinion cannot be rendered at this time.


The P/D ratio for a company should be in the bottom 20% of the overall market (that is the yield should be in the top 20%). MHGC's P/D is not available, and hence an opinion cannot be rendered at this time.

This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below.


A prospective company must have a strong Current Ratio (greater than or equal to the average of it's industry [1.11] or greater than 2). This is one ident ifier of financial strong companies, according to this methodology. MHGC's current ratio is not available. Hence no opinion can be given on this ratio.


A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for MHGC is 0.00%. Unfortunately, its historical payout ratio is not available. Nonetheless it passes the payout criterion, as this is a very low payout.


The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. MHGC's ROE is not available which means an opinion cannot be given at this time.


This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. MHGC's pre-tax profit margin is -11.13%, thus failing this criterion.


The company in question should have a yield that is high and that can be maintained or increased. MHGC's current yield is not available (or one is not paid) at the present time, while the market yield is 2.83%. Hence, this criterion cannot be evaluated.


The company must have a low debt to equity ratio, which indicates a strong balance sheet. We have determined a low Debt/Equity ratio to be below 20% or below the industry average. MHGC's Total Debt/Equity is not available. Hence no opinion can be given on this variable.

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