We’ve updated the look and functionality of the screeners.
- Financials and Utilities: We’re including the Financials and Utilities sectors for the first time. To accommodate the new sectors, we’re making two additional changes.
- Expanding Number of Stocks: We’re expanding the number of stocks visible to the full dataset in the paid screeners. To increase the diversification of the screens, we’re showing the best six (6) opportunities in each industry. (If we don’t limit the opportunities to the top six in each category, there are too many stocks from some industries, particularly in the Financials sector, for example United States Banks, Investment Services, Specialty Finance and Insurance).
- Market Cap Cut-Off: We’re also increasing the Large Cap minimum market cap to $20 billion (The All Investable / Small and Micro cut-off is approximately $2 billion.)
- ROA (%): Five-year average operating income return on total assets. This shows the historical earning power of a stock’s assets.
- Incremental Growth (%): This is the reinvestment rate (capital expenditures less depreciation divided by total assets) multiplied by ROA. It can be positive–if cap ex exceeds depreciation–or negative–if cap ex falls short of depreciation. Companies with a high reinvestment rate and a high ROA will score higher on the Incremental Growth metric. Low or negative reinvestment rates and a low ROA will score lower on the Incremental Growth metric.
- Expected Return (%): This is a variation on Bruce Greenwald’s Expected Return calculation. It is calculated by summing Earning Power, Incremental Growth and Shareholder Yield.
- IV/P (%): Implied Value to Price (IV/P). IV/P is calculated by taking the value of the Expected Return implied for each stock by dividing it by the ten-year treasury yield and comparing it to the stock price. Numbers greater than 1 indicate more Implied Valued than Price. Think of it as an estimate of the value offered for each dollar invested.
Using the Screeners
- Acquirers Multiple: Ranking on this column shows the stocks with the lowest multiples in the universes. These are deep value stocks that may benefit from mean reversion in the underlying businesses. This is the traditional deep value screen.
- FCF Yield or Free Cash Flow Yield: Trailing Twelve-Month Free Cash Flow divided by Market Capitalization. Another traditional deep value screen. These stocks benefit from mean reversion in fundamentals and multiples.
- ROA or Return on Assets: Ranking on this column shows the stocks with the highest five-year average operating income returns on total assets. These are the most profitable companies in the universes over the last five years.
- Incremental Growth (%): Incremental Growth shows stocks with the highest sustainable growth rates over the last five years.
- E(r) or Expected Return (%): The sum of a stock’s Earning Power, Incremental Growth and Shareholder Yield. This is a variation of Bruce Greenwald’s calculation. It assumes no mean reversion in multiples or fundamentals.
- IV/P or Intrinsic Value to Price: This column compares the stock’s Implied Value (Earning Power, Incremental Growth plus Shareholder Yield)to the current price. The number represents the value offered for each dollar invested. IV/P greater than one (1) indicates that each dollar invested receives more than $1 of Intrinsic Value. IV/P less than one indicates less than $1 of Intrinsic Value for each dollar invested. The IV/P is necessarily a rough estimate. These stocks benefit from mean reversion in multiples, and no mean reversion in fundamentals. Where the market is applying a lower Acquirers Multiple to a stock’s Expected Return, it may indicate an undervalued opportunity. This is a profitability-at-a-reasonable price screen. Historically, getting more an IV/P lower than about 0.6–each dollar invested buys 60 cents or less of Intrinsic Value–is overvalued.
Buyback Yield, Dividend Yield, and Shareholder Yield show the stocks with the highest payout ratios.
- IV/P is Implied Value to Price. Any IV/P greater than one (1) might indicate the stock offers more than $1 of intrinsic value for each $1 of the stock price. IV/P lower than one (1) might indicate the stock offers less than $1 of intrinsic value for each $1 of the stock price.
- Implied Value converts Expected Return into a value. It is the sum of the value of each stock’s Earning Power, Incremental Growth and Shareholder Yield.
- Expected Return is Earning Power plus Incremental Growth plus Shareholder Yield
- Earning Power is a stock’s Return on Assets. To find the value we assume a perpetuity divided by the current Ten (10)-year Treasury Yield
- Return on Assets is the five (5)-year average Operating Income divided by Total Assets.
- Incremental Growth is the Reinvestment Rate multiplied by Return on Assets. It can be positive or negative. To find the value we assume a perpetuity divided by the current Ten (10)-year Treasury Yield
- Reinvestment Rate is the five (5)-year average of Capital Expenditures minus Depreciation divided by Total Assets. A negative figure indicates Depreciation exceeds Capital Expenditure. A positive figure indicates Capital Expenditure exceeds Depreciation.
- Shareholder Yield is the sum of a stock’s Buyback Yield and Dividend Yield. To find the value we assume a perpetuity divided by the current Ten (10)-year Treasury Yield
- Dividend Yield is the five (5)-year average Dividend divided by the Market Capitalization.
- Buyback Yield is the five (5)-year average Net Equity Repurchased (Equity Issued minus Equity Repurchased) divided by Market Capitalization
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