Tuesday, February 28, 2012

Value Screen - Feb 28


Feb 28 value screen results in .csv format (on google docs) available here.  See below for background and how to use.



I didn't like the free stock screens available online so decided to develop my own screener - it currently screens stocks on the Amex, Nasdaq and NYSE.  The screener is actually a bunch of perl scripts that play with source data derived from Morningstar and Yahoo Finance.  I have found results of this screen to be quite useful in finding value companies so will try to share my screen results on a regular basis.

Most of the field headings in the csv file are self-explanatory but here is a description of some that might not be obvious:

- G&D PE: Graham & Dodd PE.  This is a PE based on average earnings over the past 10 years

- FCF_ttm Yield: Trailing Twelve Months (TTM) Free Cash Flow Yield = TTM Free Cash Flow per Share / Share price

- FCF_avg Yield: ((Average Free Cash Flow of last 5 years) / # of Shares) / Share Price

- G&D PE IV: Intrinsic value estimate using G&D PE = Average earnings over past 10 years * 10.  Ben Graham recommended buying stocks trading below 10x multiple of their 10 year average earnings.

-  FCF_avg IV: Intrinsic value estimate using average free cash flow of last 5 years = ((Average Free Cash Flow of last 5 years) / # of Shares) / Share Price.  Again, I use a 10x multiple here.

- FCF_0% IV: Intrinsic value estimate using a Discounted Cash Flow (DCF) model with 0% Revenue growth assumption over the next 10 years.

- Reverse DCF: Growth rate needed in DCF calculation to get the current share price.

- Discount to IV: Share price / lowest of G&D PE IV, FCF_avg IV, FCF_0% IV


Stocks are first ranked according to the following fields:
- G&D PE
- FCF_ttm Yield
- FCF_avg Yield
- EV/EBIT
- 5 Year Average ROIC (Return on Invested Capital)

The ranks above for each field are added up, and then the screener sorts all the stocks in increasing order of this rank sum.  So this basically represents stocks that are trading cheap, but have relatively high returns on capital.

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