In my piece last week on BAE Systems, a subscriber asked whether basing my assessment of stocks on backward-looking measures was still a valid approach. With much of the world economy at a halt, it seems a fair question. For many companies – perhaps even most – 2020’s financial results will not look like 2019’s.
This week I want to try and explain why I am still placing a lot of trust in historical data.
I also want to take a look at a company which almost qualifies for my Stock in Focus screen. Bingo and gaming group Rank (LON: RNK) was enjoying a resurgence until the COVID-19 pandemic shut down the consumer economy. The shares have retreated to a level that looks fairly cheap to me on an historic basis. Could this be a buying opportunity?
Why I’m still using historical data
I’m continuing to rely quite heavily on companies’ historical financial performance. Broadly speaking, I’m trying to find companies that were profitable, well-run, and on a positive trajectory before the pandemic. My hope is that by buying these firms at a discount to their previous valuations, they will offer better-than-average recovery prospects.
For example, last week’s…
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