OPS Statistical Merits
A statistical OPS analysis was performed on 3,885 companies whose share price was above $6 in 1999. |
(Click on all graphs to enlarge) |
If a company had 4 quarters of positive OPS it has the highest rating of 1. A year later 91.67 % of those companies were trading above $6.
Companies which had 4 quarters of negative OPS were given the lowest ranking, an 8. A year later 46.7% of those companies were above $6 while 53.3% had seen share price decreases. This is understandable as these companies do not yet have a viable business model.
The numbers 2 thru 7 are the different combinations of quarterly cash flows combined with the yearly cash flows being positive or negative.
Statistically, these are significant results. As the cash flow weakens, the probability of the share price decreasing, increases. |
(Click on all graphs to enlarge) |
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This graph for J Comm will be used to illustrate how these rankings at the bottom of the graph should be read:
Prior to Q2/01 JCOMM is a development stage company. Statistically, at this point in time the business model is risky as it is not yet self sustaining. This corresponds to the OPS ranking of an 8.
You would not buy this stock now, the risk is too great. There is a 53.3% chance this stock price will be down a year from now.
In Q3/01 JCOMM for the first time achieves positive quarterly OPS. The statistical risk associated with this company has changed from an 8 to a 7. There is now a 47.46% chance this stock price will be lower a year from now.
In Q4/01 there is a substantial leap in quarterly OPS. The leap is so significant JCOMM is now OPS positive on a trailing twelve month basis. This is very significant statistically speaking as there is only a 26.88 % chance this stock price will be lower a year from now.
Note the Earnings per Share for JCOMM have never yet been positive MEANING WALL STREET ANALYSITS IN ALL PROBABILITY ARE NOT COVERING THIS STOCK YET.
As OPS is a precursor to EPS we know the EPS will in all probability show up shortly, equating to Wall Street coverage. Q4/01 is the time to purchase JCOMM at $7.36 and today it is in the $40 range.
This analysis will highlight stocks ahead of Wall Street's radar because they are waiting for the EPS to show up whereas the OPS analysis has indicated the EPS is coming.
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