Are Investors Finding Value in Meridian Energy Limited (NZSE:MEL)?

Here we will take a look into some valuation metrics for Meridian Energy Limited NZSE:MEL shares.

Price-To-Cash-Flow-Ratio is a term that indicates the degree of cash flow valuation of the enterprise in the securities market. It is derived from the P/E – Price Earnings Ratio, in which the profit is replaced by cash flow. Unlike P/E, the ratio isn’t affected by the chosen depreciation methods, making it suitable for geographic comparison.  Meridian Energy Limited currently has a P/CF ratio of 17.677195.


Watching some historical volatility numbers on shares of Meridian Energy Limited (NZSE:MEL), we can see that the 12 month volatility is presently 15.7303. The 6 month volatility is 17.6645, and the 3 month is spotted at 18.0076. 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. 

We can now take a quick look at some historical stock price index data. Meridian Energy Limited (NZSE:MEL) presently has a 10 month price index of 1.11281. 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 1.11869, the 24 month is 1.20447, and the 36 month is 1.44173. Narrowing in a bit closer, the 5 month price index is 1.03802, the 3 month is 1.07844, and the 1 month is currently 1.02778.

Valuation Ratios

Looking at some ROIC (Return on Invested Capital) numbers, Meridian Energy Limited (NZSE:MEL)’s ROIC is 0.044414. The ROIC 5 year average is 0.048051 and the ROIC Quality ratio is 13.900464. ROIC is a profitability ratio that measures the return that an investment generates for those providing capital. ROIC helps show how efficient a firm is at turning capital into profits.  In terms of EBITDA Yield, Meridian Energy Limited (NZSE:MEL) currently has a value of 0.067352. This value is derived by dividing EBITDA by Enterprise Value.

The Price to Book ratio (Current share price / Book value per share) is a good valuation measure you can use to find undervalued investment ideas.  A low Price to Book could indicate that the shares are undervalued in their industry.  Generally speaking a P/B ratio under 1 is considered low and is best used in relation to asset-heavy firms.  At the time of writing Meridian Energy Limited (NZSE:MEL) has a price to book ratio of 1.537303.

The Leverage Ratio of Meridian Energy Limited (NZSE:MEL) is 0.166618. Leverage ratio is the total debt of a company divided by total assets of the current and past year divided by two. Companies take on debt to finance their day to day operations. The leverage ratio can measure how much of a company’s capital comes from debt. With this ratio, investors can better estimate how well a company will be able to pay their long and short term financial obligations.

There are many different tools to determine whether a company is profitable or not.  One of the most popular ratios is the “Return on Assets” (aka ROA).  This score indicates how profitable a company is relative to its total assets.  The Return on Assets for Meridian Energy Limited (NZSE:MEL) is 0.021863.  This number is calculated by dividing net income after tax by the company’s total assets.  A company that manages their assets well will have a higher return, while a company that manages their assets poorly will have a lower return.

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The VC1 of Meridian Energy Limited (NZSE:MEL) is 44.  A company with a value of 0 is thought to be an undervalued company, while a company with a value of 100 is considered an overvalued company.  The VC1 is calculated using the price to book value, price to sales, EBITDA to EV, price to cash flow, and price to earnings.  Similarly, the Value Composite Two (VC2) is calculated with the same ratios, but adds the Shareholder Yield.  The Value Composite Two of Meridian Energy Limited (NZSE:MEL) is 34.

At the time of writing, Meridian Energy Limited (NZSE:MEL) 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.
The Price to book ratio is the current share price of a company divided by the book value per share.  The Price to Book ratio for Meridian Energy Limited NZSE:MEL is 1.537303.  A lower price to book ratio indicates that the stock might be undervalued.  Similarly, Price to cash flow ratio is another helpful ratio in determining a company’s value.  The Price to Cash Flow for Meridian Energy Limited (NZSE:MEL) is 17.677195.  This ratio is calculated by dividing the market value of a company by cash from operating activities.  Additionally, the price to earnings ratio is another popular way for analysts and investors to determine a company’s profitability.  The price to earnings ratio for Meridian Energy Limited (NZSE:MEL) is 41.897883. This ratio is found by taking the current share price and dividing by earnings per share.

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