PE ratio and event-driven scoring  – the apparel manufacturers case study

Apparel production, also known as garment production is a process where the fabric is being converted into garments. The term apparel production is basically used when garments are manufactured in a factory. Traditionally apparel manufacturing factories have been divided into two sectors as domestic and export.

In this case study, we compared companies in the US apparel manufacturers industry by their PE ratio vs the event-driven scoring based on extracted events for each company within the industry.

The sample:

  • Market: US
  • Sector: Consumer Cyclical
  • Industry: Apparel manufacturers
  • Market cap > $5B

We generate a event-driven score for each company based on the past 90 days included all the events that each company had during this period.

(event-driven score is scaled between 0-1 where bellow 0.5 consider as bearish sentiment based on events during the filtered period, above 0.5 consider bullish) clicking here for our interactive dashboard trial

The dashboard and the table below presents the companies news sentiment score and PE ratio

We can see that companies that have an event-driven score above 0.5  tend to have a PE ratio above 15, which is the lower PE benchmark and vice-versa.

According to our research, the 90 days event-driven score predicts the PE ratio above or below the 15 benchmarks with 66% accuracy (based on 3,000 companies sample). The remained 34% of cases can be described as alpha capture as the event-driven score correlation to the companies performance is solid while the correlation to the PE ratio which considers the stronger indicator for stock returns is not initially correlated. This test was conducted on 90 days period, the next case study on this topic will cover 180 days period

To summarize: ongoing events tracking and scoring can be a very useful alpha source as it correlated to performance but not initially correlated to PE  ratio

Using big data and NLP technologies to capture alpha by collecting, structuring, and revealing events from news articles, press releases, and financial social media.

(Views and recommendations given in this section are for research purposes only. Please consult your financial adviser before taking any position in the stock/s or currencies mentioned.) Neither First to invest. nor any of its officers, employees, representatives, agents or independent contractors are, in such capacities, licensed financial advisors, registered investment advisers or registered broker-dealers. First to invest does not provide investment or financial advice or make investment recommendations. Nothing contained in this communication constitutes a solicitation, recommendation, promotion, endorsement or offer by First to invest of any particular security, transaction or investment.)
By | 2019-08-11T14:46:32-04:00 August 26th, 2018|case studies, Uncategorized, Use case|Comments Off on PE ratio and event-driven scoring – the apparel manufacturers case study