Johnson Controls International plc operates as a diversified technology and multi industrial company worldwide. The company operates through Building Technologies & Solutions and Power Solutions segments. The company designs, sells, installs, and services heating, ventilating, and air conditioning systems, controls systems, integrated electronic security systems, and integrated fire detection and suppression systems for commercial, industrial, retail, small business, institutional, and governmental customers; and energy efficiency solutions and technical services, including inspection, scheduled maintenance, and repair and replacement of mechanical and control systems, to non-residential building and industrial applications.
Johnson Controls Intl (JCI) reported its 3rd Quarter earnings on July 31st 2019. The company reported an EPS of $0.65 per share on a revenue of $6.5B beating the consensus estimate by $0.02. Consensus revenue estimate was $6.4B. JCI raised its estimate by $0.02 for the year ending September, 2019. JCI had a spectacular upward run since December 2018. The stock price increased by 50% and as of September 13th, JCI closed at $44.04.
Where is the stock heading from here? Would the same upward momentum continue?. While the stock is bullish and has demonstrated a strong upward trend, here are some parameters we can use to determine its future direction.
Book value of equity per share is calculated as follows: (total assets - total liabilities) / (total number of outstanding shares). When a stock is undervalued, the book value per share will be higher as compared to its current stock price in the market. On the contrary, if a stock is overvalued, the book value per share will be lower as compared to its stock price. For Johnson Controls Intl, the book value per share for the most recent quarter is $25.59. In other words, this stock is trading 1.72 times higher than its book value. Further, the stock is trading close to its 52 week high of $44.50.
One of the commonly used technical indicator is the price levels, referred as Support and Resistance levels. The former helps the stock to stabilize in a downward trend and the latter decelerates its upward price movement in an upward trend. JCI has a strong resistance at $44.5 and $47.
The Relative Strength Index (RSI), a momentum oscillator developed by J. Welles Wilder, measures the speed and change of price movements. The RSI has a range between 0 and 100. Traditionally, the stock is considered overbought when RSI is above 70 and oversold when it is below 30. Most recent entry of Johnson Controls International plc into the oversold territory was on 07/09/2007 and overbought territory was on 07/09/2007
A closer look at the RSI chart, indicates a possible reversal from the overbought zone towards oversold.
"Buy/Sell" volume ratio is a proprietary indicator that measures the buy and sell volume of a security. This represents the strength of the move in either direction. This oscillator ranges between 0 and 100, however the characteristics widely differ based on the trading volume and momentum. For Johnson Controls International plc the oversold and overbought is fixed at 60 and 22
A closer look at the "Buy/Sell" volume chart, indicates a possible reversal from the overbought zone towards oversold.
Another important volatility indicator to consider is the 14 day ATR (Average True Range). Average True Range is not a directional indicator and it represents the energy behind the move. Beta coefficient (β) measures the volatility of a stock with respect to the market. Beta for Johnson Controls International plc is (3Y Monthly) 1.04.
The current ratio is a liquidity ratio that measures whether or not a firm has enough resources to meet its short-term obligations. It compares a firm's current assets to its current liabilities, and is expressed as follows: Current ratio = Current Assets/Current Liabilities. If the value is less than 1, it means that the current liabilities exceed current assets and vice versa. As of June 2019, Current Ratio of JCI is 1.04
For reasons explained above, we believe this stock has a higher probability to change its course and move towards the oversold region. Technical analysts may expect a 10% price drop in the next 90 days. Johnson Controls International plc has strong fundamentals and its earning surprise the last three quarters is 8.33%, 6.67% and 3.17% respectively. If JCI demonstrates another strong quarter, it can easily surpass its resistance levels and continue its upward trend. The company has scheduled its IVth quarter earnings on October 30, 2019.
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Financial information cited in this article are taken from Yahoo Finance (http://www.yahoo.com/finance); EPS data is taken from Zacks Research (http://www.zacks.com); some of the definitions have been taken from Wikipedia (www.wikipedia.com)