Hi again,
Which Fundamental criteria does everyone prefer? Let's try to keep it simple. We know some of the F/Analysts love the number crunching, and pouring over the statistics, etc. But traders who have little interest in F/A need a quick and easy way to do this.
My preferred three criteria are below. I only want three to keep it simple. No need to over-complicate this.
How do they compare with your own?
And how much do we have to pay to get this information? Either from a broker, or software, or a data service, or whatever?
#1 - ROE > 10% year on year for at least 3 years. - This is a "Performance" measure.
This is a good gauge of the success of a company at making profits.
#2 - D:E < 50% - that is - Debt/Equity ratio (This is a "Risk" metric). For companies to grow, it helps if they can borrow money. The more money they borrow, then potentially the faster they can grow. One of the problems with a fast growing company is to keep up with the expanding needs for cash. Many growing businesses that go bust do so because they can't service the cash flow. But, if a company has taken on too much debt, they might one day get to the point where they have trouble servicing the debt. It seems that a ratio of debt to equity of about 50% is about the tipping point - any more and they run the risk of blowing up down the track (like ABC Learning Centres).
#3 - PE/Growth < 1 - (This is a "Value" metric"). Just looking at PE is simplistic. A company with a high PE might be considered over-price; but if they have future earnings growth potential, then the high PE can be justified. The way to even this out is to divide PE by the one year estimate for earnings growth. This brings the PE back to a more useful number.
How to get these values? What software etc?
Well, I use CommSec, and these values can be used in search criteria to identify the list of stocks - too easy.
Other brokers should have similar tools available to search for stocks.
Software like Lincoln Indicator's Stock Doctor might also be able to scan for these criteria.
how do these compare with everyone else's preferences?
Cheers