Can UBS See Its Stock Move Higher?

With shares of UBS (NYSE:UBS) trading around $18, is UBS an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

UBS, a financial services firm, provides wealth management, asset management, and investment banking products and services worldwide. Its Wealth Management division provides financial services to high net worth individuals worldwide. Its Investment Bank division offers products and services in equities, fixed income, foreign exchange, and commodities to corporate and institutional clients, sovereign and government bodies, financial intermediaries, alternative asset managers, and its wealth management clients. UBS Asset Management division offers investment solutions to various asset classes.

Citing informed persons, the Wall Street Journal reports that UBS has reached an immunity arrangement with European Union authorities that will guard the Swiss bank from additional penalties for alleged manipulation of key interest rates. Under the terms, UBS is being rewarded for cooperating with investigators and relinquishing information regarding other banks, according to the Journal.

T = Technicals on the Stock Chart Are Strong

UBS stock has remained in a range over the last five years. The stock is currently surging higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, UBS is trading between its rising key averages, which signal neutral price action in the near-term.

UBS

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of UBS options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

UBS options

22.15%

6%

4%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

December Options

Average

Average

January Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on UBS’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for UBS look like and more importantly, how did the markets like these numbers?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

-127.10%

31.29%

-8.15%

-658.46%

Revenue Growth (Y-O-Y)

1.98%

17.92%

14.54%

9.54%

Earnings Reaction

-8.04%

2.57%

N/A

N/A

UBS has seen decreasing earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings about UBS’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has UBS stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC), and sector?

UBS

JPMorgan Chase

Goldman Sachs

Wells Fargo

Sector

Year-to-Date Return

18.93%

31.36%

31.73%

29.62%

28.91%

UBS has been a poor relative performer, year-to-date.

Conclusion

UBS, a financial services firm, provides wealth management, asset management, and investment banking products and services worldwide. The company has reached an immunity arrangement with European Union authorities that will guard the Swiss bank from additional penalties for alleged manipulation of key interest rates. The stock has been in a range over the last five years and is currently surging higher. Over the last four quarters, earnings have been decreasing while revenues have been increasing, which has produced mixed feelings among investors. Relative to its peers and sector, USB has been a poor relative performer year-to-date. WAIT AND SEE what UBS does next.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.