This new stock screen encompasses growth, value, profitability, and financial stability and I have called it the all-rounder screen. It’s really quite a tough screen, which is ideal for those who don’t have a lot of time each month, but want to get some good all-round stocks.
For this I have used Investing.com and the screener filters are:
Sales (MRQ) vs Qtr. 1 Yr. Ago > 15%
Sales (TTM) vs TTM 1 Yr. Ago (TTM) > 15%
EPS(MRQ) vs Qtr. 1 Yr. Ago > 15%
EPS(TTM) vs TTM 1 Yr. Ago > 15%
For me it’s really important that both sales and profits are growing. 15% is a very healthy figure. If looking for fast growing stocks you might like to up this to 25% or more.
P/E Ratio (TTM) < 30
Price to Free Cash Flow (TTM) < 30
Price to Book (MRQ) < 1.50
Price to Cash Flow (MRQ) < 30
I also really like my stocks to be of atleast reasonable value. I will do other calculations on intrinsic values after I have found the stocks, using the above figures does this but isn’t too restrictive. A real value investor might drop these to 20 or even 15.
Current Ratio (MRQ) > 1
Just the 1 ratio here on investing.com this time. Financial stability is very important in my opinion and this is just a quick filter. This ratio shows whether a company can meet it’s short term obligations.
Net Profit margin (TTM) > 10
Operating margin (TTM) > 10
Margins are very important for profitability and the ability to survive and grow. Ideally I would like these to be over 15 or even 20.
Dividend > 0.01
Although I believe it’s alright to buy stocks which don’t pay dividends, they really are a nice thing for an all-rounder stock to have. Not only do they provide some income, they are also key to the effects of compound interest in your portfolio.
Stocks that come up in this filter certainly won’t be a buy without further investigation, but this criteria certainly sets us on the right path.
Analysis of the December filter
Having done a quick analysis of all the stocks within this filter, there are too many doubts for most of them. Looking at the cash flow statements and financial statements has turned up a few concerns. That doesn’t mean that someone else won’t find these to be good buys, if they can justify declining cash flows or low returns on assets.
Out of the 6 my favourite would have to be Friedman Industries ($FRD). It is involved in steel processing and the production and distribution of steel products such as pipelines.
If we now look on Guru Focus we can see there are some real positives. It is a very profitable company at the moment with strong returns on assets and profit margins. It’s pretty financially stable. It certainly represents good value under various criteria, except for Price to Intrinsic value. However this depends upon the calculation of intrinsic value. The steel industry also surely has a strong foreseeable future.
However for me, it is not a buy. It’s profitability and share price performance is very linked to the price of steel.
So overall the screener is a strong one, but this time it didn’t come up with a stock I’d like to buy, although Friedman was a close call. You can try adjusting the filter figures, even just slightly and many more potential stocks will come through.
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In the video we referenced information from the following: