The volatility.

The volatility is an important parameter in the financial markets. 

It is useful to : 

• measure the underlying risk of an asset or portfolio (higher the volatility, higher the risk);
• set the market orders, stop loss, take profit, limit orders and so on (higher the volatility, "wider" the market orders) ;
• set the trading profile (higher the volatility with pure trader strategy and lower the volatility with pure investor strategy) ;  
• measure the market mood (higher the volatility with an important event price-sensitive ; "stock market fever", see also the VIX indicator). 

As there are so many purposes, in the same way, there are so many methods of measuring and indentifying it. At first, the classical measure is the deviation standard. To calculate it, it needs to import the historical returns of an asset to an Excel spreadsheet and then applying the following formula :

=  DEV.ST.POP (historical returns).

Historical data from Investing.com

Here, we have an image that clearly explains the case. The time-period can be daily, weekly, monthly etc, in the analyst's discretion and based on the purpose of the analysis (it means also holding period and investor perspectives). The ticker is APPLE. The time-frame is daily. 

Another measure is that provided by the graph (indicators).  

In this sense, it means respectively : 

• width of the real bodies and of the shadows (candlesticks chart ; wider the bodies and the shadows, higher the volatility) ;
• width of the Bollingers Bands (wider the bands, higher the volatility) ;
• magnitude of the volumes and so market interest (higher the volumes, higher the volatility). 

As shown in the following chart, there is the silmultaneous presence of more detectors (read the notes inside the graph). 

Chart from Investing.com

Indeed, BBW and HV are useful indicators to measure the volatility. There is a peak compared to the historical series (circled ellipses). The Envelopes (EV) have the same meaning of the BB : if the stock price is above or below the envelopes, there is high volatility in both directions.

Envelopes (EV) ; chart from Investing.com

To conclude, once measured and identified the volatility, every trader/investor should set his trading strategy accordingly, pursuing own profit and loss targets, of course. 

IMA S.p.A. : chart framework.

About the chart of IMA, we can notice a strong uptrend that began on October 2014 and it is still valid, from area 25 EUR to area 85 EUR. The great fundamentals of the firm have supported the good stock performance : it means good management and good shareholders remuneration, anti-cyclical business, good (geographical) diversification and uncorrelation from macro-events and italian economy (low beta). 

For further info, visit the official website (section investor-relations).

Of course, we got some breaks but we can consider them as small retracements that didn't damage the bullish trend. As shown in the chart, we have a primary trend with a parallel channel broke in area 70 EUR that brought the stock to the secondary trend with its parallel channel. The uptrend is also confirmed by the overcoming of the resistances (and of the resistance trasformed into the support).

Chart from Investing.com

Only with a break of area 85 EUR, it will be a continuation of the uptrend and only with a break of area 70 EUR, it will be a change in the trend : as usual, it needs other confirmations and volumes to more validate the signal. For this purpose, see also the chart with the FIBO levels.

Chart from Investing.com

With a LOG scale, we can appreciate clearly the chart framework (it is substantially the same as the previous chart). Indeed, the LOG scale is reccomended with long-term analysis and with great price excursions (it suits our case). Otherwise, the LINEAR scale is used for indentifying price levels, focusing on the absolute values and not on the relative values of the prices, like the LOG scale.

Chart from Investing.com

In other words, the LOG scale smoothes the market excesses. 

To know more about it, consult the following link : 

http://www.borsaitaliana.it/notizie/sotto-la-lente/analisitecnicascalalineareelogaritmica.en.htm

The slope and the structure of the EMA bundle certify the uptrend, too.

Chart from Investing.com

Anyway, in my opinion, I would await for the next market movements, in one direction or another : see the following chart. The overcoming of the BB allows only a trading range between area 75 EUR and 85 EUR (in this sense, in the short-term, it lacks a consolidated trend setting, of course). The uptrend is strong and it is almost immaculate, in the long-term.

Chart from Investing.com

COVER 50 S.p.A. : a good firm with low visibility.

With regard to the FY 2016 results (consult the link http://www.cover50.it/wp-content/uploads/2017/04/cover-50-comunicato-stampa-130417.pdf), the business increases.

The profitability is strong (from 12% to 48%, from the net income to the contribution margin). 

The cash is high and the cash generation, too (see the cash flow statement) : we speak about a net financial position of about 11.9 EUR millions. The financial structure is excellent with low dependence on debt ("the company mostly finances itself with equity") and the EBIT interest coverage is very good (aka EBIT/net financial charges). 

However, the growth rates are really tight. The business increases at a rate of  2% / 3%. 

The main weakness is the low visibility explained by :

1. Low growth rates ;
2. Low volumes of the stock (COVER 50 is listed on AIM that is notoriously known for those features) ;
3. Free float 25.77% (http://www.cover50.it/azionisti/) with the significant shareholder Fhold S.p.A. with a share of 74.23% (this factor with the previous point could really represent an obstacle for the market liquidity) ; 
4. The mono-product (the company specializes in the designing, manufacturing and selling men's as well as women's trousers, under the PT Pantaloni Torino brand name) and  the high dependance on the domestic market (the revenues in italian market are still about 43% of the total revenues). 

To improve the business and the visibility (with positive effect on market prices), they should invest more (with a cash of 12 EUR millions, the growth throught M&A could be an opportunity).  At the same time, the development to the high-potential markets should be greater (in particular, with a product differentiation). The subsidiary PT Corp in USA is an example (http://www.cover50.it/wp-content/uploads/2015/04/COMUNICATO-STAMPA-23-SETTEMBRE-2015-rev-BIM.pdf).

As announced in the last press release, the yield is about 4.4% and the payout is about 71%. I would have preferred a reinvestment of the profits rather than a (good) shareholders remuneration, to finance the growth. In this sense, the higher growth attracts the visibility. 

Indeed, the market multiples could be cheaper compared to the peers (on average, fashion and luxury stocks have excessive valuations, due to the brand perception/visibility and due to the high profitability). 

At the current prices, the multiples of COVER 50 (FY 2016 results) are the following : 

• P/S = 2.28 
• EV/EBITDA = 8.12
• P/E = 18.52

The market probably discounts the lack of the visibility and of the liquidity, the lower size and the lower growth expectations (adjusted market multiples). 

About the chart and with regard to the last performance, we have a renewed interest of the investors : the volumes are increasing and the stock is out of the rectangle (accumulation area) with a stop in area 13.7 EUR. 

See the link https://twitter.com/michele_finance/status/773242796425768961/photo/1 and compare it with the current situation (the updated chart is below). 

Chart from Investing.com

Cement industry : Cementir Holding S.p.A. and the value map.

Here we have a classic value map that relates the market multiple P/S (price to sales) to its intrinsic profitability (EBIT/sales or EBIT margin or ROS) and then the mentioned multiple to the expected growth, from the year 2017 to the year 2019 (data source estimates : www.4-traders.com). 

The expected growth is the CAGR, aka cumulative average growth rate. 

The formula is the following : 

[(expected revenues fiscal year 2019/revenues fiscal year 2016)]^(1/3)-1

It is expressed as a percentage. 

The meaning of the relationships (P/S-ROS and P/S-CAGR) is that higher the multiple (P/S), higher the margin (ROS) and higher the multiple (P/S), higher the expected growth (CAGR) and viceversa. 

Obviously, the market generally rewards the firms with higher profitability and with higher growth, with a major market price. 

The relationships can be shown as a value map, particularly through a regression line. 

We have two equations : 

1) P/S = a + b*ROS

P/S = y ; ROS = x

2) P/S = a + b*CAGR

P/S = y ; CAGR = x

In both cases, the intercept (a) was removed for the reason of the low statistical relevance. 

The RSQ is high (0.9070 and 0.8488), which means the strenght of the model.

Graphically, we can note that the relations are clear, substantially : higher the market multiple, higher the profitability and the expected growth.

The stocks above the regression line (dashed line) are overvalued, the stocks below the regression line are undervalued. In this way, for Cementir Holding, we get a "value gap" that is equal to :

[P/S (effective)-P/S(calculated from the market model)] : [P/S(calculated from
the market model)]

The P/S (effective) is 0.72.
The P/S (calculated from the market model) is equal to (9.10%*12.54).

There are also some "outsiders" (Vulcan Materials, Eagle Materials). The profitability is very high compared to the peers. Indeed, we have a multiple P/S of about 4X.

Likewise, for the relationship P/S-CAGR : see the following chart.

The discount ("value gap") is much greater, 71.94% vs 36.91%. The "growth adjusted market multiple" is preferable to the "multiple adjusted for the profitability".

If we remove the two outsiders from the sample, the statistical models are stronger : RSQ is higher, the relations are more even significative. However, the discounts are lower : 10.36% vs 36.91% and 57.16% vs 71.94%.

Finally, Cementir Holding is cheaper than the peers. Secondly, in my opinion, the stock is much more attractive in the area 3.80-4.80 : we could benefit more so from the discount prices and from a possible graphic retracement (see the chart), event if the current prices and expectations are interesting.

Chart from Investing.com

For further information, consult the following links:
http://michelecarollo.blogspot.it/search?q=cementir ;
https://stocktwits.com/michele_finance/message/75068152 ;
https://stocktwits.com/michele_finance/message/79046330.