The equity research analysts or strategists (“Research Analyst(s)”) principally responsible for the preparation of Noble Capital Markets, Inc. research report (“Research Report”) have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and overall Noble revenues. Research Analyst(s) compensation is not linked to specific investment banking or capital markets transactions performed by Noble Capital Markets, Inc. or the profitability, or revenues of Noble Capital Markets, Inc. trading desk.
The Research Report does not provide individually tailored investment advice. The Research Report has been prepared without regard to the circumstances and objectives of those who receive it. Noble Group recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of an investment or strategy will depend on an investor’s circumstances and objectives. The securities, instruments, or strategies discussed in the Research Report may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in some or all of them.
The Research Report is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy. The value of and income from your investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions.
Noble Group has not independently verified the information contained in these documents. Therefore, Noble Group does not explicitly or implicitly guarantee the balance, accuracy, completeness, or correctness of the information and opinions contained in these documents, nor will Noble Group have any liability for its use or distribution. The recipient of these documents should not rely on the information they contain. Neither Noble Group, the companies described in these documents, nor any other person is liable for any damages resulting from the usage of these documents or the information they contain, nor are they responsible for damages resulting in connection with these documents.
Past performance or simulated past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company’s securities/instruments.
Noble Capital Markets, Inc. may engage in transactions, for its own account or with customers, in a manner inconsistent with the views taken in an investment recommendation. Noble Capital Markets, Inc. may have positions (long or short), effect transactions or make markets in securities or financial instruments mentioned herein (or related instruments), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, the legal entities mentioned herein. As such, this material should not be relied upon as either objective or independent from the interests of Noble Group, which may conflict with your interests.
Research Analyst Certifications
The research analyst(s) listed on the cover of any report herein (or, where multiple research analysts are primarily responsible for any report, the research analysts listed on the cover or within the document individually) certifies, with respect to each security or issuer that the research analyst covers in this research that: (1) all of the views expressed in the relevant report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific views expressed by the research analyst(s) in this report.
Noble Capital Markets, Inc. will receive compensation from the micro and nano-cap companies that choose to be listed on the Channelchek platform. If the research analyst decides to initiate equity research coverage on one of these companies, compensation received by the analysts only relates to the costs associated with rendering their individual and unbiased opinion and is not by any means considered as payment for the opinion itself.
As such, the Companies are fully aware and understand that the opinion(s) of the analyst(s) may be contrary to the Company’s wishes, opinions, and recommendations or otherwise. The opinion(s) published by the Analyst(s) are independent and expressed exclusively by the Analyst(s) without bias, coercion, manipulation, or influence by any other Noble Group Person.
The research analysts responsible for the preparation of any report herein receive compensation based upon various factors, including the quality and accuracy of research, user feedback, competitive factors and overall Noble Group revenues. Noble Group’s overall revenues include revenues from its investment banking and fixed income business units.
Any research reports provided herein are prepared separately from any other activity of Noble Group. Research has no access to non-public information received by other units of Noble Group. Further disclaimers are provided on any research reports provided herein.
Analyst Price Target
Noble Capital Markets, Inc. research analysts price targets are the opinion of the individual Research Analyst, based on public and non-public information believed to be accurate and reliable. The Research Analyst price target is proprietary information and may not be reproduced, or discussed with another party, without the written consent of Noble Group and the Analyst.
The analyst price target should not be used or relied upon as investment advice or as a predictive in terms of future price.
Noble Ratings Definitions
- Outperform: potential return is >15% above the current price
- Market Perform: potential return is -15% to 15% of the current price
- Underperform: potential return is >15% below the current price
Fundamental Analysis
Noble Capital Markets, Inc. and its Analysts use a system to evaluate the fundamental aspects of a company with such analysis and evaluation detailed in each Research Report. The analyst fundamental analysis should not be used or relied upon as investment advice or considered as predictive in terms of the future fundamentals of the subject company.
The fundamental assessment rating system is designed to provide insights on the company’s fundamentals both on a macro level, which incorporates a company’s market opportunity and competitive position, and on a micro/company specific level. The micro/company specific attributes include operating & financial leverage, and corporate governance/management. The number of check marks that a company receives is designed to provide a quick reference and easy determination of the company’s fundamentals based upon the following equally weighted five attributes of the company: Corporate Governance/Management, Market Opportunity Analysis, Competitive Position, Operating Leverage, Financial Leverage.
For each attribute, the analysts score the company from a low of zero to a high of ten based upon the analysis described below. The final rating and resulting check marks is a result of dividing the overall score (out of 100%) by ten.
| Rating | Score | Checks |
|---|---|---|
| Superior | 9.1 to 10 | Five Checks |
| Superior | 8.1 to 9 | Four & A Half Check |
| Above Average | 7.1 to 8 | Four Checks |
| Above Average | 6.1 to 7 | Three & A Half Checks |
| Average | 5.1 to 6 | Three Checks |
| Average | 4 to 5 | Two & A Half Checks |
| Below Average | 3 to 3.9 | Two Checks |
| Below Average | 2 to 2.9 | One & A Half Checks |
While these are the attributes currently used for the analyst’s fundamental analysis, the attributes and weighting may be reviewed, updated with additional attributes, and/or changed in the future based on discussions with the analysts and recommendations from the Director of Research.
Following is the description of each attribute in the fundamental analysis.
Corporate Governance/Management
We believe that a review of corporate governance and assessment of the senior management are important tools to determine investment merit. Good corporate governance aligns management with the interests of stakeholders. As such, analysts are to rank the company on the basis of good corporate governance principles that may include rules and procedures, board composition and staggered term limits, rights and responsibilities, corporate objectives, monitoring of actions and policies, and accountability. In addition, analysts will assess issues with controlling shareholders and whether decisions have been made in the past that were in the interests of all shareholders. In addition, management will be assessed based on industry experience, expertise, and/or track record.
- High ranking example: Board and management that is aligned with the interests of shareholders with incentives based on stock price appreciation and with an experienced management team known for exceptional shareholder returns.
- Low ranking example: Concentrated ownership without independent directors that do not necessarily align with all shareholders’ interests.
The Market Opportunity Analysis
In this review, the analyst assesses the company’s macro environment as a measure of understanding the industry. Factors considered include the size and growth potential of the industry under various economic conditions, the emerging demands in the market, technological benefits/disruptions, competition, geographical opportunities, and customer demands/needs, and an assessment of supply and distribution channels. In addition, the analyst will review legal and regulatory trends, as well as potential shifts in consumer or social behavior and natural environment changes.
- High rank example: A company in an industry that is growing revenues well above GDP rates (which are on average 2% plus) and/or may have unmet or under-served needs in a rapidly growing market opportunity.
- Low rank example: A mature industry that is in secular decline and likely to grow below GDP rates.
Competitive Position
The evaluation of the company’s competitive position is another macro environment attribute designed to measure the relevance, market share, position and value proposition, and sustainable differentiations of the company and its products/services within its industry. Ease of entry into the industry and the ability of other well-funded players to potentially enter the market would be determined. As such, the assessment would consider the company’s strengths and advantages of its products/services against weaknesses and limitations. This may include the company’s current brand awareness, pricing and cost structure, current market strategies and geographic penetration that may affect demand for its products/services. In addition, the company’s competitors would be evaluated.
- High rank example: An analyst would consider the company’s product to be superior to its competitors and that should allow the company to gain market share.
- Low rank example: A company with a “me-too” product that does not have any significant technology advantages in an industry that has low barriers to entry.
Operating Leverage
Simplistically, operating leverage is determined by the operating income relative to changes in revenue. The analyst will calculate the impact on sensitivity on gross margins and variable costs to determine operating leverage. The analyst will take into account the ability of the company to cut fixed and variable costs in a challenged revenue environment and technological changes that may impact operating expenses. In addition, the analyst is to assess corporate strategies that include capital investment, which may be required for sustainable revenue growth, marketing expenses, and the company’s ability to attract and retain talent and/or employees. The analyst should focus on the revenue opportunity and determine the price elasticity of demand for the company’s products or services. In other words, the analyst is to rank the company based on improved operating margins going forward on an absolute and relative basis.
- High rank example: A company that has improving margins for the foreseeable future, with significant price elasticity.
- Low rank example: A company that is in a challenged revenue environment with a fixed cost structure and limited ability to cut costs, indicating an outlook for declining margins.
Financial Leverage
A strict definition of financial leverage is total debt divided by total shareholder’s equity. Financial leverage analysis is to determine the company’s ability to improve shareholder value by means of utilizing its balance sheet to grow organically or to acquire assets. Analysts may look at the company’s debt to cash flow leverage ratio, interest coverage ratios, or debt to equity ratios. In addition, the interest rate environment and the outlook for interest rates are a factor in determining the company’s ability to manage financial leverage. Finally, the analyst is expected to determine the ability to service the debt given the industry and/or company profile, such as cyclicality, barriers to entry, history of bankruptcy, consistency in revenue and profit growth, or predictability in sales and profits and large cash reserves. The analyst is expected to take into account capital intensity of the company and the anticipated of capital allocation decisions.
- High rank example: A company with predictable and growing revenue and cash flow with modest debt levels. This may indicate that the company could improve shareholder value through growth investments, including acquisitions, using debt financing.
- Low rank example: A company in a cyclical industry in a late stage economic cycle that has above average debt leverage and is in an industry that has a history of financial challenges, including bankruptcies.