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Mgt for Business Sequential Screening

By:   •  October 20, 2012  •  Essay  •  776 Words (4 Pages)  •  1,392 Views

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mgt for businessSequential screening

Lakonishok screen

1. Market capitalization top 30%

2. P/B lowest 30%

3. ROA positive; D/E low

4. Liquidity; asset turnover ratio

Peter Lynch screen

1. P/E/ less than industry

2. Price-to-earnings-to growth (PEG) <1

3. Insider buying-to-selling ratio >1.5

Philip Fisher

1. Increase sales

2. Three-year compound growth rate greater than industry

3. PEG .1-.5

4. R&D expense %sales greater than industry

5. Growth in sales greater than growth in R&D expense

Bill Miller

1. Market cap <3times, estimate free cash flow for next 5 years

2. PEG<1.5

3. Long-term debt ratio < industry average


Fundamental valuation factors

1. Dividend yield P34

2. Enterprise value-to-EBITDA

3. Price-to-book lowest 30%

4. Price-to-cash flow per share

5. Price-to-equity P33 < industry

6. Price-to-earnings-to-growth <1 or 0.1-0.5

7. Price-to-sales

8. R&D-to-sales

Fundamental solvency factors

1. Cash-flow-from-operations ratio

2. Cash ratio

3. Current ratio

4. Quick ratio

Fundamental operating efficiency factors

1. Cash-conversion cycle

2. Cost management index

3. Fixed-asset-turnover

4. Total-asset turnover

5. Inventory turnover

6. Receivable turnover

Fundamental operating profitability factors

1. Gross profit margin

2. Net profit margin

3. Operating profit

4. Return on net operating assets

5. Return on asset P41 positive

6. Return on equity

7. Return on capital employed

Fundamental financial risk factors

1. Cash flow coverage ratio

2. Interest coverage ratio/times interest earned ratio

3. Debt-to-equity ratio low

4. Financial leverage ratio

5. Total debt ratio

Fundamental liquidity risk factors

1. Trading turnover

2. Float capitalization

3. Number of security ownersValuation factor Price / Earnings (P/E) Ratio

P/E ratio = (Price per share)/(Earnings per share)

This ratio measures how much investors are willing to pay per dollar of reported profits. P/E ratios are higher for firms with high growth prospects and lower for firms with greater risk, other things held constant. In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. In order to select the stocks with relatively high expected growth, we set the P/E ratio 8 as the minimum while 50 as the maximum, 201 companies in the industry meet the criteria.

Solvency factor Current Ratio

Current ratio = (Current assets)/(Current liabilities)

This ratio measures the dollars of current assets per dollar of current liabilities. The theory is that current liabilities will have to be paid off in the


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