Analysis Summary
TWX is fairly valued compared to its Price of $17.23 per share, has somewhat above average safety, and is currently rated a Hold.
In-Depth Analysis
Business: AOL TIME WARNER INC, (TWX) creates and delivers news and entertainment content worldwide in all possible formats. The co. provides a variety of services, including e-mail, online conferences, software, computing support, electronic magazines and newspapers, Internet access,
Price: TWX closed on 4/2/2004 at $17.23 per share
Value: Value is a measure of a stock's current worth. TWX has a current Value of $17.67 per share. Therefore, it is fairly valued compared to its Price of $17.23 per share. Value is computed from forecasted earnings per share, forecasted earnings growth, profitability, interest, and inflation rates. Value increases when earnings, earnings growth rate and profitably increase, and when interest and inflation rates decrease. VectorVest advocates the purchase of undervalued stocks. At some point in time, a stock's Price and Value always will converge.
RV (Relative Value): RV is an indicator of long-term price appreciation potential. TWX has an RV of 1.22, which is good on a scale of 0.00 to 2.00. This indicator is far superior to a simple comparison of Price and Value because it is computed from an analysis of projected price appreciation three years out, AAA Corporate Bond Rates, and risk. RV solves the riddle of whether it is preferable to buy High growth, High P/E stocks, or Low growth, Low P/E stocks. VectorVest favors the purchase of stocks with RV ratings above 1.00.
RS (Relative Safety): RS is an indicator of risk. TWX has an RS rating of 1.14, which is good on a scale of 0.00 to 2.00. RS is computed from an analysis of the consistency and predictability of a company's financial performance, debt to equity ratio, sales volume, business longevity, price volatility and other factors. A stock with an RS rating greater than 1.00 is safer and more predictable than the average stock in the VectorVest database. VectorVest favors the purchase of stocks of companies with consistent, predictable financial performance.
RT (Relative Timing): RT is a fast, smart, accurate indicator of a stock's price trend. TWX has a Relative Timing rating of 1.01, which is fair on a scale of 0.00 to 2.00. RT is computed from an analysis of the direction, magnitude, and dynamics of a stock's price movements over one day, one week, one quarter and one year time periods. Once a stock's price has established a strong trend, it is expected to continue in that trend for the short-term. If a trend dissipates, RT will gravitate toward 1.00. RT will explode from bottoms, dive from tops, and reflect changes in price momentum. VectorVest favors the purchase of stocks with RT ratings above 1.00.
GRT (Earnings Growth Rate): GRT reflects a company's one to three year forecasted earnings growth rate in percent per year. TWX has a forcasted Earnings Growth Rate of 19.00%, which VectorVest considers to be very good. GRT is computed from historical, current and forecasted earnings data. It is updated each week for every stock in the VectorVest database. GRT often foretells a stock's future price trend. If a stock's GRT trend is upward, the stock's price will likely rise. If GRT is trending downward, the stock's Price will probably fall. VectorVest favors the purchase of stocks whose GRT is rising and is greater than the sum of current inflation and interest rates, (7.13%).
Stop (Stop-Price): Stop is an indicator of when to sell a long position or cover a short position. TWX has a Stop of $16.42 per share. This is $0.81 below TWX's current closing Price. A stock's Stop is computed from a 13 week moving average of its closing prices, and is fine-tuned according to the stock's fundamentals. High RV, high RS stocks have lower Stops, and low RV, low RS stocks have higher Stops. In the VectorVest system, a stock gets a 'B' or 'H' recommendation if its Price is above its Stop and an 'S' recommendation if its Price is below its Stop.
EPS (Earnings per Share): EPS stands for leading 12 months Earnings Per Share. TWX has a forecasted EPS of $0.63 per share. VectorVest determines this forecast from a combination of recent earnings performance and traditional fiscal and/or calendar year earnings forecasts.
P/E (Price to Earnings Ratio): P/E is a popular measure of stock valuation which shows the dollars required to buy one dollar of earnings. TWX has a P/E of 27.35. This ratio may be deemed to be high or low depending upon your frame of reference. The average P/E of all the stocks in the VectorVest database is 37.03. P/E is computed daily using the formula: P/E = Price/EPS.
EY (Earnings Yield): EY reflects earnings per share as a percent of Price. EY is related to P/E via the formula, EY = 100 / (P/E), and may be used in place of P/E as a measure of valuation. EY has the advantages that it is always determinate and can reflect negative earnings. TWX has an EY of 3.67 percent. This is above the current average of 2.70% for all the stocks in the VectorVest database. EY equals 100 x (EPS/Price).
GPE (Growth to P/E Ratio): GPE is another popular measure of stock valuation. It compares earnings growth rate to P/E ratio. TWX has a GPE rating of 0.70. High growth stocks are believed to be able to justify high P/E ratios. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00. Unfortunately, this rule of thumb does not take into account the effect of interest rates on P/E ratios. The operative GPE ratio of 1.00 is valid when and only when interest rates equal 10%. With long-term interest rates currently at 5.43%, the operative GPE ratio is 0.29. Therefore, TWX may be considered to be undervalued.
AvgVol: AvgVol is the 50 day moving average of daily volume as computed by VectorVest. TWX has an AvgVol of 15,934,900 shares traded per day.
%Vol: %Vol reflects the percent change in today's trading volume as compared to the AvgVol. %Vol equals 100 x (Volume/AvgVol). TWX had a %Vol of -17.33% on 4/2/2004
Sales: TWX has annual sales of $42,054,000,000.00
Sales Growth: Sales Growth is the Sales Growth Rate in percent over the last 12 months. TWX has a Sales Growth of 6.00% per year. This is fair. Sales Growth is updated each week for every stock. It is often useful to compare Sales Growth to Earnings Growth to gain an insight into a company's operations.
Sales Per Share (SPS): TWX has annual sales of $9.27 per share. SPS can be used as a measure of valuation when comparing stocks within an Industry Group.
Price to Sales Ratio (P/S): TWX has a P/S of 1.86. This ratio is also used as a measure of valuation. Here, too, it is useful when comparing stocks within an Industry Group.
Shares: TWX has 4,536,000,000.00 shares of stock outstanding.
Market Capitalization: TWX has a Market Capitalization of $78,158,000,000.00. Market Capitalization is calculated by multiplying price times shares outstanding
Industry Group: TWX has been assigned to the Diversified Companies Industry Group
Business Sector: TWX has been assigned to the Diversified Companies Business Sector