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eyeQ: a £2bn stock about to deliver?

interactive investor has teamed up with the experts at eyeQ who use artificial intelligence and their own smart machine to analyse macro conditions and generate actionable trading signals. This time it analyses a stock that could be cheap.

26th June 2024 11:12

by Huw Roberts from eyeQ

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"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ

Deliveroo

Trading signal: long-term strategic model
Model value:139.31p
Fair Value Gap: -6.02% discount to model value
Model relevance: 54% 

Data correct as at 26 June 2024. Please click glossary for explanation of terms.

Delivering opportunity?

2024 has seen a spate of takeover bids for UK companies from overseas buyers. This is an investment theme that has legs.

UK companies look cheap on several metrics relative to their international peers. And there are growing hopes that the worst of the Brexit fall-out is behind us and a new Labour government can bring in a new sense of optimism. If so, then UK companies could continue to attract interest from global players.

This morning there is renewed speculation that an old target – Deliveroo (LSE:ROO) – could be back in play. There are reports that US food delivery company DoorDash Inc Ordinary Shares - Class A (NASDAQ:DASH) are back after talks last year failed. Whether the deal gets done will be all about company fundamentals – price negotiations, how Amazon respond (they own 13% of Deliveroo) etc.

As readers know, however, there is also a macro angle. There is always a macro story at work in investing - economic growth, inflation, the Bank of England policy stance all matter.  

On eyeQ, Deliveroo is 6.02% cheap to macro conditions. That’s the cheapest level the stock has been on our models since the first week of January.

It’s also notable that macro conditions are improving. Model value has risen 4% in the last month. So two boxes on our checklist have been ticked – the stock is cheap and model value is rising.

Sadly, the third box to get a bullish signal is missing. Our macro relevance score is 54%, i.e. the macro environment explains just over half of moves in the share price. Our threshold is 65% - macro relevance needs to be above that for that stock to be in a “macro regime” (i.e. the big picture stuff is the most important driver of price action) and a signal to be fired.

For now, Deliveroo looks interesting, the eyeQ smart machine is favouring the upside, but no signal has been delivered yet.

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Source: eyeQ. Past performance is not a guide to future performance.

Useful terminology:

Model value

Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.

Model (macro) relevance

How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.

Fair Value Gap (FVG)

The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.

Long Term model

This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.

These third-party research articles are provided by eyeQ (Quant Insight). interactive investor does not make any representation as to the completeness, accuracy or timeliness of the information provided, nor do we accept any liability for any losses, costs, liabilities or expenses that may arise directly or indirectly from your use of, or reliance on, the information (except where we have acted negligently, fraudulently or in wilful default in relation to the production or distribution of the information).

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser. 

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

Related Categories

    The Big PictureETFsUK sharesNorth America

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