Peeling Back the 3767 Magic Formula & Quant Scores For Hostess Brands, Inc. (NasdaqCM:TWNK)

Hostess Brands, Inc. (NasdaqCM:TWNK) has Magic Formula Rank of 3767. Developed by hedge fund manager Joel Greenblatt, the intention of the formula is to spot high quality companies that are trading at a price attractive to investors. The formula combines ROIC and earnings yield ratios to find solid, undervalued stocks. In general, companies with the lowest combined rank may be the higher quality picks.

One of the most important factors that investors look at when examining stocks is the consistency of earnings results. When the quarterly earnings report is released, investors watch closely to see if the company is performing up to expectations. A company that fails to meet projections may see large price swings following the report. Of course one bad quarter may not signal trouble, but a company that continually disappoints during earnings season may need to be further examined to help figure out what is going on. Experienced investors will closely watch stock price movements before and after earnings events in order to gain a truer understanding of how the market is reacting to the reports.

Checking in on some valuation rankings, Hostess Brands, Inc. (NasdaqCM:TWNK) has a Value Composite score of 19. Developed by James O’Shaughnessy, the VC score uses five valuation ratios. These ratios are price to earnings, price to cash flow, EBITDA to EV, price to book value, and price to sales. The VC is displayed as a number between 1 and 100. In general, a company with a score closer to 0 would be seen as undervalued, and a score closer to 100 would indicate an overvalued company. Adding a sixth ratio, shareholder yield, we can view the Value Composite 2 score which is currently sitting at 20.

Hostess Brands, Inc. (NasdaqCM:TWNK) has a Price to Book ratio of 1.018144. This ratio is calculated by dividing the current share price by the book value per share. Investors may use Price to Book to display how the market portrays the value of a stock. Checking in on some other ratios, the company has a Price to Cash Flow ratio of 7.767376, and a current Price to Earnings ratio of 5.243879. The P/E ratio is one of the most common ratios used for figuring out whether a company is overvalued or undervalued.

Shifting gears, we can see that Hostess Brands, Inc. (NasdaqCM:TWNK) has a Q.i. Value of 33.00000. The Q.i. Value ranks companies using four ratios. These ratios consist of EBITDA Yield, FCF Yield, Liquidity, and Earnings Yield. The purpose of the Q.i. Value is to help identify companies that are the most undervalued. Typically, the lower the value, the more undervalued the company tends to be.

Watching some historical volatility numbers on shares of Hostess Brands, Inc. (NasdaqCM:TWNK), we can see that the 12 month volatility is presently 34.981800. The 6 month volatility is 22.709900, and the 3 month is spotted at 24.578800. Following volatility data can help measure how much the stock price has fluctuated over the specified time period. Although past volatility action may help project future stock volatility, it may also be vastly different when taking into account other factors that may be driving price action during the measured time period. 

At the time of writing, Hostess Brands, Inc. (NasdaqCM:TWNK) has a Piotroski F-Score of 5. The F-Score may help discover companies with strengthening balance sheets. The score may also be used to spot the weak performers. Joseph Piotroski developed the F-Score which employs nine different variables based on the company financial statement. A single point is assigned to each test that a stock passes. Typically, a stock scoring an 8 or 9 would be seen as strong. On the other end, a stock with a score from 0-2 would be viewed as weak.

Investors may be interested in viewing the Gross Margin score on shares of Hostess Brands, Inc. (NasdaqCM:TWNK). The name currently has a score of 50.00000. This score is derived from the Gross Margin (Marx) stability and growth over the previous eight years. The Gross Margin score lands on a scale from 1 to 100 where a score of 1 would be considered positive, and a score of 100 would be seen as negative.

The Shareholder Yield is a way that investors can see how much money shareholders are receiving from a company through a combination of dividends, share repurchases and debt reduction.  The Shareholder Yield of Hostess Brands, Inc. (NasdaqCM:TWNK) is 0.000720.  This percentage is calculated by adding the dividend yield plus the percentage of shares repurchased.  Dividends are a common way that companies distribute cash to their shareholders.  Similarly, cash repurchases and a reduction of debt can increase the shareholder value, too.  Another way to determine the effectiveness of a company’s distributions is by looking at the Shareholder yield (Mebane Faber).  The Shareholder Yield (Mebane Faber) of Hostess Brands, Inc. NasdaqCM:TWNK is 0.00907.  This number is calculated by looking at the sum of the dividend yield plus percentage of sales repurchased and net debt repaid yield.

Price Index

We can now take a quick look at some historical stock price index data. Hostess Brands, Inc. (NasdaqCM:TWNK) presently has a 10 month price index of 0.85523. The price index is calculated by dividing the current share price by the share price ten months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 0.98295, the 24 month is 0.78281, and the 36 month is 1.24205. Narrowing in a bit closer, the 5 month price index is 1.02453, the 3 month is 1.09197, and the 1 month is currently 1.02889.

Individual investors often strive to create a solid strategy before trying to take on the market. Setting up realistic, attainable goals, may be a good place for the amateur to start. There are many different approaches that the investor can take when getting into the stock market. Some investors will try to follow strategies that have worked for others in the past. Sometimes this will work, and sometimes it will not. Markets and economic landscapes are constantly changing. A strategy that worked yesterday may not work again tomorrow. Investors who put in the time to do the necessary homework may find themselves much better off when the market decides to rear its ugly head at some point down the road.