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On Friday, February 15, 2019, CTL stock closed at $13.74, up by +7.51% from previous close. This upward move was in sharp contrast with the stock’s long term decline, -19.4% in the last one year, -35.4% in the last six months and -15.1% in the last month.
This was also a big rebound after plummeting to 2-decade low on Thursday after the company chopped dividend in half. https://www.marketwatch.com/story/centurylinks-stock-plummets-to-2-decade-low-after-dividend-chopped-in-half-2019-02-14?siteid=yhoof2&yptr=yahoo
TheStreet.com’s article quoted Jim Cramer saying: “CenturyLinks Slashed Dividend Is Hardly a Big Surprise”
Reaching for yield is one of the dumbest things a person can do. If a dividend produces a yield that’s well in excess of what’s out there in the marketplace, you should be skeptical of that payout and question whether it is sustainable, rather than being opportunistic and believing you may have a real bargain on your hands.
Thus, we have the cautionary tale of CenturyLink ( CTL ) , the hodgepodge of a telecommunications company that last night cut its dividend, despite the fact that management had stood by it in previous presentations — and some very good analysts believed the company would continue to support it, too. https://realmoney.thestreet.com/investing/stocks/jim-cramer-centurylinks-slashed-dividend-is-hardly-big-surprise-14866561?puc=yahoo&cm_ven=YAHOO&yptr=yahoo
According to Barron’s, CenturyLink’s Dividend Cut Was a Long Time Coming, but It Still Took the Market By Surprise: https://www.barrons.com/articles/look-what-happened-to-centurylink-stock-after-its-dividend-was-slashed-51550158066?siteid=yhoof2&yptr=yahoo
Uptick in Market Rumors Trends
No surprise that Arizet’s Market Rumors Analytics recorded sharp increase in market discussions trends both in the financial news and on Twitter.
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With 5.9x P/E, 11.7x Forward P/E and 0.7x P/Book ratios, the stock looks reasonably priced. Wall-Street analyst rating is at 2.82 (average rating), with price upside estimated to be at +54.2%. However, analysts estimate the company to have a negative -1.5% long term growth rate.
Margins look healthy, with Gross Margin at 54.1% and Operating Margin at 15.4%. Returns on Equity, Assets and Investment are positive, 1.2%, 0.37% and 0.46% respectively.
Total sales were $17.7B in the last fiscal year. Over the 6 years, the revenues were flat or slightly down, with only very modest 1.1% growth from FY’16 to FY’17.
Net Profit of $1.4B in the last fiscal year was an impressive 122% growth fro the previous year. That being said, the company’s income has been rather volatile over the last several years.
Earnings per Share (EPS) was 2.21 in FY’17, again a substantial increase from the previous year and the highest since FY’11.
Operating Cash Flows have been decreasing since 2012, from $6B to $3.9B in the last fiscal year, while the free cash flow recovered to $2.3B from the previous year’s $1.7B, or by 39%.
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With all the fundamentals and financials in mind, let’s now look at Quantitative Data from QuantumStocks strategies and A.I. system.
The Combined Sentiment Score is +43, indicating a short-term BUY with MEDIUM CONFIDENCE.
Quant Signals Heatmap shows 14 strategies having a BUY signal for the Friday’s closing price. All 14 strategies are rated as “Good”.
No strategies with significant predictive power have SELL signals on CTL.
Expected Gain/Loss analytics shows probabilities skewed towards upside price targets. 1×1 ATR upside/downside pair has 53.4% vs. 46.6% probabilities, meaning the probability of price reaching the upside $14.28 level being 6.8% higher than reaching the downside $13.10 level.
Probability distributions for 2×2 ATR (Average True Range) and 3×3 ATR pairs are similarly skewed to the right.
The Gain/Loss Analytics is consistent with Quant Sentiment Score as they both indicate upside prediction.
Strategy Signals and Back-Tests
Among the strategies with highest success rates and BUY signals are
- Support/Resistance Counter-Trend, with 100 and 50 day lags
- Relative Strength Index Back-Crossing 80/20 levels
- Commodity Channel Index Back-Crossing 100/-100 levels
Let’s take a loot at SR_counter_trend strategy back test and signal details.
Among thousands of CTL-related back-tests, the one on Large Cap stocks, with 1×3 ATR entry/exit configuration has the highest success rate of 82.7%. Testing period was 24 months (2 years)
Recommended price to BUY shows at $13.74, with Take-Profit level at $14.38 and Stop-Loss level at $11.83. Probability of success is estimated to be 83%.
Strategy back testing has a “Good” rating (historical success rate is between 67% and 87%).
Back tested on all large cap stocks in the universe for the last two years, the strategy generated 1455 trades of which 82.7% were profitable.
With 10.2 T-Score, 1.2% average gain, the models appears to have quite significant predictive power on large cap stocks generally and on CTL particularly.
The historical trades lasted from 1 trading day to 32 trading days, on average having 8.4 day duration.
Like with SR strategy, similar detailed analytics is provided for all strategies and their corresponding signals on Friday, 16 FEB, 2019 closing price.
Combining all the signals and strategies, applying them by the strategy scoring weights, which are based on QuantumStocks self-learning A.I. powered system, the overall Sentiment is a BUY with MEDIUM CONFIDENCE, potentially creating a short-term buying opportunity for stock traders.
Arizet’s QuantumStocks platform provides similar analysis and signals for ~3,500 U.S. stocks. The A.I. powered self-learning system constantly sifts through more than 3 million model back tests and rates them to find the quantitative strategies with highest probabilities of success.
To find out more, please visit: Arizet QuantumStocks Platform