Question

Which of the following factor combination is best for selecting a stock that is likely to...

Which of the following factor combination is best for selecting a stock that is likely to outperform?

Low Earnings Yield, High Volatility & Low Free Cash Flow to EV

High Earnings Yield, Low Volatility & Low Free Cash Flow to EV

Low Earnings Yield, Low Volatility & Low Free Cash Flow to EV

High Earnings Yield, High Volatility & High Free Cash Flow to EV

High Earnings Yield, Low Volatility, & High Free Cash Flow to EV

Which of the following Bloomberg functions are all Relative Valuation Methods

ANR. Discounted Cash Flow, DDM

RV. PEBD, DDM

RV. EQRV, PEBD

RV. EQRV, DDM
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Answer #1

High Earnings Yield, Low Volatility, & High Free Cash Flow to EV.

This is best combination.

A high earnings yield signifies that earnings are high relative the market price. This also means that the PE ratio is low, since the earnings yield is the reciprocal of the PE ratio.

A high free cash flow signifies a health business, with adequate funds available for reinvestment and distribution.

Low volatility signifies that the risk is low.

Hence, this is the best combination.

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