October 2, 2015

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VALUATION WATCH: Overvalued stocks now make up 36.96% of our

stocks assigned a valuation and 12.55% of those equities are calculated to
be overvalued by 20% or more. Three sectors are calculated to be
overvalued.
MARKET OVERVIEW
Index

Started week

Friday PM

Change

Change %

ytd

DJIA

16313.26

16284.7

-28.56

-0.18%

-8.63%

NASDAQ

4665.06

4652.58

-12.48

-0.27%

-1.57%

RUSSELL 2000

1121.87

1099.3

-22.57

-2.01%

-8.75%

S&P 500

1929.18

1930.7

1.52

0.08%

-6.23%

Summary of VE Stock Universe

Stocks Undervalued

67.77%

Stocks Overvalued

32.23%

Stocks Undervalued by 20%

31.96%

Stocks Overvalued by 20%

10.00%

SECTOR OVERVIEW
Sector

Change

MTD

YTD

Valuation

Last 12-M
Return

P/E
Ratio

Aerospace

-0.10%

-0.05%

-5.99%

2.25% overvalued

-10.84%

16.73

Auto-Tires-Trucks

-0.01%

0.02%

-9.95%

14.93% undervalued

-10.33%

14.37

Basic Materials

-0.06%

0.29%

-20.89%

23.87% undervalued

-31.85%

21.01

Business Services

0.21%

0.27%

-3.40%

3.42% undervalued

-2.94%

22.14

Computer and Technology

-0.64%

-0.57%

-6.33%

7.01% undervalued

-6.47%

27.66

Construction

-0.14%

-0.09%

-5.36%

11.16% undervalued

-4.96%

19.73

Consumer Discretionary

-0.18%

-0.10%

-1.80%

7.04% undervalued

-4.18%

24.96

Consumer Staples

-0.39%

-0.34%

-6.03%

2.26% undervalued

-3.84%

23.12

Finance

-0.03%

0.02%

-2.83%

3.47% undervalued

-3.58%

16.08

Industrial Products

-0.42%

-0.37%

-12.95%

16.29% undervalued

-15.91%

17.03

Medical

-0.39%

-0.23%

1.43%

3.98% undervalued

2.30%

28.85

Multi-Sector Conglomerates

-0.35%

-0.31%

-13.22%

8.14% undervalued

-6.98%

20.68

Oils-Energy

0.26%

0.39%

-25.72%

21.67% undervalued

-50.97%

23.9

Retail-Wholesale

-0.47%

-0.40%

-9.89%

6.92% undervalued

-4.25%

21.97

Transportation

-0.37%

-0.27%

-16.41%

16.44% undervalued

-15.58%

14.77

Utilities

-0.49%

-0.45%

-10.24%

5.12% undervalued

-8.14%

20.65

Sector TalkBusiness Services

Below, we present the latest data on leading Business Services Sector stocks
from our Professional Stock Analysis Service. These results were filtered by market
price and volume--no results below 3$/share or less than 100k shares/day volume.

Top-Five Business Services Sector Stocks--Short-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

CVG

CONVERGYS CORP

23

-5.01%

29.07%

VEC

VECTRUS INC

22.08

N/A

13.06%

WU

WESTERN UNION

18.21

-2.12%

13.53%

ASGN

ON ASSIGNMENT

36.59

-15.64%

36.28%

BBSI

BARRETT BUS SVS

41.78

-29.66%

5.80%

Top-Five Business Services Sector Stocks--Long-Term Forecast Returns

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

CVG

CONVERGYS CORP

23

-5.01%

29.07%

VEC

VECTRUS INC

22.08

N/A

13.06%

WU

WESTERN UNION

18.21

-2.12%

13.53%

ASGN

ON ASSIGNMENT

36.59

-15.64%

36.28%

BBSI

BARRETT BUS SVS

41.78

-29.66%

5.80%

Top-Five Business Services Sector Stocks--Composite Score

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

LAMR

LAMAR ADVER CO

52.04

-20.96%

5.66%

WU

WESTERN UNION

18.21

-2.12%

13.53%

ASGN

ON ASSIGNMENT

36.59

-15.64%

36.28%

CVG

CONVERGYS CORP

23

-5.01%

29.07%

BBSI

BARRETT BUS SVS

41.78

-29.66%

5.80%

Top-Five Business Services Sector Stocks--Most Overvalued

Ticker

Company Name

Market Price

Valuation

Last 12-M Retrn

ENOC

ENERNOC INC

7.88

300.00%

-53.54%

PFSW

PFSWEB INC

14.03

93.46%

28.95%

SFUN

SOUFUN HLDG-ADR

6.6

75.24%

-33.67%

HCKT

HACKETT GROUP

13.99

40.82%

134.73%

CORE

CORE-MARK HLDG

64.44

28.71%

21.49%

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Free Download for Readers

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we are offering a FREE DOWNLOAD of one of our Stock Reports
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Based on the information we have gathered and our resulting research, we feel that
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Read our Complete Detailed Valuation Report on Coca-Cola HERE.

ValuEngine Forecast
Target
Price*

Expected
Return

1-Month

39.76

-0.10%

3-Month

40.19

0.98%

6-Month

40.73

2.34%

1-Year

39.33

-1.17%

2-Year

44.01

10.58%

3-Year

42.85

7.67%

Valuation & Rankings

Valuation

0.30% undervalued

Valuation Rank(?)

1-M Forecast Return

-0.10%

1-M Forecast Return Rank

12-M Return

-6.70%

Momentum Rank(?)

Sharpe Ratio

0.50

Sharpe Ratio Rank(?)

5-Y Avg Annual Return

6.83%

5-Y Avg Annual Rtn Rank

Volatility

13.68%

Volatility Rank(?)

Expected EPS Growth

-0.98%

EPS Growth Rank(?)

Market Cap (billions)

174.33

Size Rank

Trailing P/E Ratio

19.41

Trailing P/E Rank(?)

Forward P/E Ratio

19.61

Forward P/E Ratio Rank

PEG Ratio

n/a

PEG Ratio Rank

Price/Sales

3.81

Price/Sales Rank(?)

Market/Book

68.07

Market/Book Rank(?)

Beta

0.53

Beta Rank

Alpha

-0.05

Alpha Rank

33
43
55
80
68
86
21
100
57
27
n/a
23
2
66
48

What's Hot
Valuations Dive Again Due To China/Commodities Worries
ValuEngine tracks more than 7000 US equities, ADRs, and foreign stock which
trade on US exchanges as well as @1000 Canadian equities. When EPS estimates are
available for a given equity, our model calculates a level of mispricing or valuation
percentage for that equity based on earnings estimates and what the stock should
be worth if the market were totally rational and efficient--an academic exercise to be
sure, but one which allows for useful comparisons between equities, sectors, and
industries. Using our Valuation Model, we can currently assign a VE valuation
calculation to more than 2800 stocks in our US Universe.
We combine all of the equities with a valuation calculation to track market
valuation figures and use them as a metric for making calls about the overall state of
the market. Two factors can lower these figures-- a market pullback, or a significant
rise in EPS estimates. Vice-versa, a significant rally or reduction in EPS can raise the
figure. Whenever we see overvaluation levels in excess of @ 65% for the overall
universe and/or 27% for the overvalued by 20% or more categories, we issue a
valuation warning.
We now calculate that less than a third of the stocks we can assign a valuation
are overvalued--32.23%--and just 10% of those stocks are overvalued by 20% or more.
These figures continue to fluctuate, and of late they are stuck below the 40% we
consider to be "normal."
We did our last valuation study on August 18th, and since then we have seen a
market slide and lots of volatility with the S&P dropping from @2100 down to the 18002000 range. This pull back was initially driven by the Chinese sell off and currency
devaluation. Since then, we have found shock waves from that drop and related
events impacting equity pricing across the globe.
We saw one day with levels this low near the end of August, but prior to that,
you would have to go back to mid-November 2012, to find overvaluation levels
below 30%. At that time, the S&P 500 was at 1353. So, from our perspective, with the
market now at 1883 or so as of this writing, stocks are "cheap" and oversold. But the
market is always right, so what we think does not trump that trend.

In addition, we now have the recent FOMC decision to leave short-term rates
unchanged to consider. Fed officials noted that turmoil in China and other emerging
markets may have a negative spillover effect for the underlying US economy. Indeed,
as we have noted lately, news from companies such as Caterpillar indicates a global
slow down. Anything dealing with global commodities and construction can play a
role.
And, to throw in random events, seemingly unrelated, you had the boneheaded greed of a pharma CEO and the shady practices of an auto giant causing
turmoil in bio-tech and the auto industry and more selling.
But, as always, we note a stronger US economy, with the labor situation
improving by the day, some upward wage pressures, continued recovery for housing,
a strong rental market, decent auto sales--but probably NOT for VW moving
forward!-- etc. US equities remain standing as the last bastion of decent yield for
scared investors the world over.
What we fear more now is some sort of shut down scare--or actual shut down-or perhaps additional austerity measures from misguided right-wing politicians in
Washington DC. Or, a Fed that raises rates not in relation to its twin-mandate--control
inflation and ensure full employment--but as some sort of sop to some bankers, who
want a rate increase for their own needs, or to "send a message" that rates can be
raised merely because the economy is strong enough to absorb an increase.
This is not what the Fed is supposed to be about. And hitting the brakes right
now, in the face of the Chinese issues and other emerging market concerns vis-a-vis
commodities and such, makes no sense. Today's weaker than expected jobs report
should also help the Fed make the right decision in the short term--eg, do NOT raise
rates.
We believe the market slide will be temporary, driven by events over seas, not
any sort of underlying weakness in the US economy. But, we live in an ever-more
interdependent world. One cannot ignore events overseas. But, one also should
realize that our models see a buying opportunity here. That does not mean things
cannot decline further, just that from their perspective equities are far cheaper than
they were over much of the past three years.

The chart below tracks the valuation metrics from January 2015. It shows levels in
excess of 40%.

This chart shows overall universe over valuation in excess of 40% vs the S&P 500 from
January 2013

This chart shows overall universe under and over valuation in excess of 40% vs the S&P
500 from March 2007*

*NOTE: Time Scale Compressed Prior to 2011.

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