There's a newly developed Stock Screener at InvestDashboard.com.
There are many interesting filters there including Above Average Volume (for the day), Forward PE, EV to EBITDA Ratio, Beta as well as the PEGY Ratio.
The PEGY Ratio is an interesting way to evaluate whether or not a stock is growing at a reasonable price. For example, the PE might be high, but is there enough growth to justify paying for that price?
It is similar to the PEG Ratio but the PEGY Ratio includes the Yield. A PEGY Ratio of 1 or less is very good. Anything below 1.5 is still good.
PEG Ratio = (Price / Earnings) / ((5 Yr Growth %)*100)
PEGY Ratio = (Price / Earnings) / ((5 Yr Growth % + Yield %) * 100)
Here is the stock screener at InvestDashboard.com.
Showing posts with label Growth at a Reasonable Price. Show all posts
Showing posts with label Growth at a Reasonable Price. Show all posts
Monday, August 24, 2015
Tuesday, July 17, 2007
Results of 3 Portfolios: Cheap Growth Ready to Breakout (July 16, 2007)
In a previous article, I described the Cheap Growth Ready to Breakout Screen.
In this post, we will continue to track the performance of three portfolios. We are taking the snapshot as of Monday, July 16, 2007.
SPY is an ETF that represents that S&P 500 US Large Cap Index.
IWM is an ETF that represents the US Small Cap Russell 2000 index.
EFA is an ETF that represents the developed international market index covering Europe, Japan, and Australia.
Based on this, the three portfolios performed (until July 16, 2007)
So far, this screen seems to be performing very well. Let us continue to monitor.
In this post, we will continue to track the performance of three portfolios. We are taking the snapshot as of Monday, July 16, 2007.
==============================
Portfolio 1: February 23, 2007
==============================
=============================================
# Symbol Start End Return
=============================================
1 AMX 47.15 64.87 37.58%
2 TSM 10.91 11.68 7.06%
3 VIP 85.18 112.50 32.07%
4 IPR 74.30 89.00 19.78%
5 AYE 47.90 55.10 15.03%
6 WCRX 14.45 19.17 32.66%
7 BRP 43.42 72.89 67.87%
8 SCS 19.76 18.72 -5.26%
9 MLHR 39.54 33.37 -15.60%
10 AIR 30.61 34.10 11.40%
11 GRT 27.59 24.32 -11.85%
12 DVR 12.49 16.70 33.71%
13 TGI 55.02 70.25 27.68%
14 CRAI 53.88 49.08 -8.91%
15 TLF 7.99 7.10 -11.14%
16 APH 33.89 37.07 9.38%
17 GIL 26.80 35.24 31.49%
18 MIDD 58.88 62.79 6.64%
=========================================
= Total 15.53%
=========================================
SPY 144.10 154.83 7.45%
IWM 81.64 84.48 3.48%
EFA 76.68 83.37 8.72%
=========================================
===========================
Portfolio 2: March 14, 2007
===========================
=============================================
# Symbol Start End Return
=============================================
1 TSM 11.06 11.68 5.61%
2 DISH 42.50 43.92 3.34%
3 WFR 55.05 63.04 14.51%
4 ASX 5.95 7.23 21.51%
5 SPIL 9.18 11.64 26.80%
6 BRP 44.00 72.89 65.66%
7 LAUR 59.28 61.93 4.47%
8 KSU 33.65 40.67 20.86%
9 BEAV 30.73 43.09 40.22%
10 CVO 24.50 23.42 -4.41%
11 IART 43.45 50.30 15.77%
12 KNL 23.00 22.71 -1.26%
13 AIR 30.25 34.10 12.73%
14 MYE 18.24 22.16 21.49%
=============================================
= Total 17.66%
=============================================
SPY 138.13 154.83 12.09%
IWM 76.91 84.48 9.84%
EFA 72.83 83.37 14.47%
=============================================
==========================
Portfolio 3: May 16, 2007
==========================
=============================================
# Symbol Start End Return
=============================================
1 ESV 58.45 60.86 4.12%
2 GSF 65.98 72.07 9.23%
3 TDW 64.90 75.62 16.52%
4 KB 93.35 91.96 -1.49%
5 FCX 71.29 92.94 30.37%
6 VLO 72.03 76.08 5.62%
7 NBG 11.59 12.54 8.20%
8 ACGY 21.35 26.72 25.15%
9 AYR 35.98 38.78 7.78%
10 FTI 73.68 88.97 20.75%
11 HXM 62.29 61.50 -1.27%
12 SZE 57.58 57.11 -0.82%
13 SLB 76.50 90.54 18.35%
14 CLB 92.77 106.41 14.70%
15 CKR 20.38 19.51 -4.27%
16 CEPH 80.14 82.28 2.67%
17 TDK 87.55 92.02 5.11%
18 SNDA 26.65 33.04 23.98%
19 LKQX 24.30 25.38 4.44%
=============================================
= Total 9.96%
=============================================
SPY 150.95 154.83 2.57%
IWM 81.26 84.48 3.96%
EFA 80.14 83.37 4.03%
=============================================
SPY is an ETF that represents that S&P 500 US Large Cap Index.
IWM is an ETF that represents the US Small Cap Russell 2000 index.
EFA is an ETF that represents the developed international market index covering Europe, Japan, and Australia.
Based on this, the three portfolios performed (until July 16, 2007)
- February 23, 2007: 15.53% return, outperforming all three indices by 8.94% to 14.19%.
- March 14, 2007: 17.66% return, outperforming all three indices by 3.19% to 7.82%
- May 16, 2007: 9.96% return, outperforming all three indices from 13.63% to 15.09%
So far, this screen seems to be performing very well. Let us continue to monitor.
Cheap Growth Ready to Breakout Screen
In order to get more consistent results in the market, I've been trying to find good quantitative stock screens.
I managed to find one screen that seems to be working well:
1. Forward PE < 20
2. 5 Years Growth > 20%
3. Price above 200 day moving average
4. Price between 0 to 5% above 50 Day moving average
5. Price within 5% of 52 Week High.
My theory is to buy stocks that have great growth but are undervalued in the market. In addition, the stocks should be making higher highs, be within reach of a breakout, and yet be at a good accumulation point (slightly above the 50 day moving average).
In a question regarding whether to buy 52 week highs or 52 week lows, Jim Cramer on Stockpickr.com) says that:
Part of the screen I developed seems to match what Lee Cooperman of Goldman Sachs has found out. It is good to buy 52 week highs especially on a 5% pullback.
Also, rather than using pure PE to Growth ratio, I prefer to use a PE of less than 20, and 5 year growth rate of greater than 20, guaranteeing us a PEG of less than one. Since the 5 year growth rate is less reliable than the forward PE, by choosing stocks with a low PE, we'll have a greater level of safety if a companies 5 year estimate starts going down.
I managed to create three portfolios using this screen in the past and in another article (here), I will check on the performance of all three portfolios.
I managed to find one screen that seems to be working well:
1. Forward PE < 20
2. 5 Years Growth > 20%
3. Price above 200 day moving average
4. Price between 0 to 5% above 50 Day moving average
5. Price within 5% of 52 Week High.
My theory is to buy stocks that have great growth but are undervalued in the market. In addition, the stocks should be making higher highs, be within reach of a breakout, and yet be at a good accumulation point (slightly above the 50 day moving average).
In a question regarding whether to buy 52 week highs or 52 week lows, Jim Cramer on Stockpickr.com) says that:
"They dont get on the 52-week-high list for nothing.
Companies that get on it get there because they are in
the right sector and have the best execution. That's a
better list to buy on than just about anyone i know,
particularly on a 5% pullback.
Source(s):
I like IBD for this and Lee Cooperman, one of the great
investors, who emphasized this view to me when he was
running research at Goldman."
Part of the screen I developed seems to match what Lee Cooperman of Goldman Sachs has found out. It is good to buy 52 week highs especially on a 5% pullback.
Also, rather than using pure PE to Growth ratio, I prefer to use a PE of less than 20, and 5 year growth rate of greater than 20, guaranteeing us a PEG of less than one. Since the 5 year growth rate is less reliable than the forward PE, by choosing stocks with a low PE, we'll have a greater level of safety if a companies 5 year estimate starts going down.
I managed to create three portfolios using this screen in the past and in another article (here), I will check on the performance of all three portfolios.
Friday, June 22, 2007
Improved Version of the PEG Ratio
In a previous article, we used the PEG ratio to evaluate a stock. While the PEG ratio is a good method, I've decided to create my own variation of the PEG ratio which I'll call MyPEG.
The Formula is this:
What this does is take into consideration the dividend yield of a stock. It also takes into consideration how much cash is in the stock. As legendary investor Peter Lynch said, by taking cash per share into the equation, we might be able to find great bargains out there.
We will still use MyPEG the same way as PEG. A MyPEG < 1 means the stock is cheap, while a MyPEG > 2 is very expensive. We can compare stocks using MyPEG, but it's better to compare stocks in the same industry.
How to find the numbers through Finance.Yahoo.com
Go to Finance.yahoo.com and enter your stock symbol. You get a nice summary page with basic information and news. A very useful page is the Key Statistics Tab.
You can find this information there:
Another useful tab is the Analysts Estimates Tab.
You can find this information there:
So to calculate the MyPEG of General Electric (GE):
Note regarding Banks and Brokers
You shouldn't use items like Cash Per Share in companies such as Banks or Brokers. It won't be accurate. Just see the Cash Per Share of Goldman Sachs (GS): 1,769. Not a valid number to use in the MyPEG formula.
Credits
I came up with adding Yield to the 5 Yr. Growth Rate by myself. I was inspired to use the cash per share method by reading Peter Lynch's One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
, an excellent book. I definitely recommend it. (Other Book Recommendations in the link or to the section to the right).
I combined both methods and created the MyPEG.
Note on PEG and Growth Rates
In other posts such as this analysis of Computer and Video Game Stocks, I often put in this section regarding PEG and Growth Rates because Growth Rates are estimates and may not be as reliable:
"When choosing between a stock that has a PE of 15 and a growth rate of 15% vs. a stock that has a PE of 30 and a growth rate of 30% (both have a PEG ratio of 1), I'll prefer the former. The reason is that high PE's are often priced to perfection. Any miss and high PE stocks can get hit very hard. Stocks with Lower PEs have less expectations and have a greater margin of safety. Another reason is that I have more confidence in the forward PE than the 5 yr. estimated growth rate. So the results are better by preferring the lower PE stock given an equivalent PEG or MyPEG because the 5 year growth rate is given less importance. Lastly, stocks can't maintain 30% plus growth for long periods of time, so growers from 15-30% might be preferred."
The Formula is this:
MyPEG = ((Current Price - Cash Per Share) / Forward Earnings) /
(Yield + 5 Yr Estimated Growth Rate).
What this does is take into consideration the dividend yield of a stock. It also takes into consideration how much cash is in the stock. As legendary investor Peter Lynch said, by taking cash per share into the equation, we might be able to find great bargains out there.
We will still use MyPEG the same way as PEG. A MyPEG < 1 means the stock is cheap, while a MyPEG > 2 is very expensive. We can compare stocks using MyPEG, but it's better to compare stocks in the same industry.
How to find the numbers through Finance.Yahoo.com
Go to Finance.yahoo.com and enter your stock symbol. You get a nice summary page with basic information and news. A very useful page is the Key Statistics Tab.
You can find this information there:
- Market Cap: Top Part of Page
- Trailing PE: Top Part of Page
- Forward PE: Top Part of Page
- Price: Very Top of Page
- Cash per Share: Bottom Left side under Balance Sheet.
- Yield: Lower right corner under Dividends and Splits
Another useful tab is the Analysts Estimates Tab.
You can find this information there:
- Trailing 12 months Earnings: Top part of Page, look at Year Ago EPS under Current Year (Dec-07).
- Current Year Earnings: Top part of Page, look at Avg. Estimate under Current Year (Dec-07).
- Future Earnings: Top part of Page, look at next Year, Avg. Estimate
So to calculate the MyPEG of General Electric (GE):
MyPEG = ((Current Price - Cash Per Share) / Forward Earnings) /
(Yield + 5 Yr Estimated Growth Rate).
- Current Price (June 22, 2007): 38.24
- Cash Per Share: 1.872
- Forward Earnings: 2.49
- Forward Yield: 2.90%
- 5 Yr. Estimated Growth: 10%
MyPEG = ((38.24 - 1.872) / 2.49) / (2.9 + 10)
= 1.13
Note regarding Banks and Brokers
You shouldn't use items like Cash Per Share in companies such as Banks or Brokers. It won't be accurate. Just see the Cash Per Share of Goldman Sachs (GS): 1,769. Not a valid number to use in the MyPEG formula.
Credits
I came up with adding Yield to the 5 Yr. Growth Rate by myself. I was inspired to use the cash per share method by reading Peter Lynch's One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
, an excellent book. I definitely recommend it. (Other Book Recommendations in the link or to the section to the right).I combined both methods and created the MyPEG.
Note on PEG and Growth Rates
In other posts such as this analysis of Computer and Video Game Stocks, I often put in this section regarding PEG and Growth Rates because Growth Rates are estimates and may not be as reliable:
"When choosing between a stock that has a PE of 15 and a growth rate of 15% vs. a stock that has a PE of 30 and a growth rate of 30% (both have a PEG ratio of 1), I'll prefer the former. The reason is that high PE's are often priced to perfection. Any miss and high PE stocks can get hit very hard. Stocks with Lower PEs have less expectations and have a greater margin of safety. Another reason is that I have more confidence in the forward PE than the 5 yr. estimated growth rate. So the results are better by preferring the lower PE stock given an equivalent PEG or MyPEG because the 5 year growth rate is given less importance. Lastly, stocks can't maintain 30% plus growth for long periods of time, so growers from 15-30% might be preferred."
Evaluating stock using the PEG Ratio.
P/E Ratios
In evaluating stocks, many people look at the P/E multiple, or the Price to Earnings multiple. This is found by dividing the stock's current price by a companies trailing or expected future earnings.
For example, if we look at the stock of General Electric (GE) as of June 22, 2007, we see the trailing P/E ratio is 18.95, and the forward or estimated P/E ratio is 15.36.
Difference between Trailing and Forward PE
You might ask, what is the difference between the Trailing and Forward PE ratio? The trailing PE ratio refers to the price divided by the previous twelve months earnings. Those earnings were already reported, so the trailing PE can't be debated. Trailing PE is a way to see how the company did in the last twelve months.
Now the Forward PE ratio is calculated by dividing the current stock price by the estimated 12 months future earnings. There are analysts out there who predict how much a company will make in the next twelve months. Using the Forward PE is a way of seeing how a company will do in the future.
I personally prefer looking at Forward PE because I prefer looking at where a company will be going more than where a company's been in the last 12 months.
Is it better to buy a stock with a low PE or high PE?
Looking at the PE multiple by itself, it is hard to judge whether it is better to buy the stock. A company with a high PE might be justified in having a high PE because it is growing at a very fast rate. A company with a low PE might be priced correctly because it is growing at a very slow rate. However, what if a company has a high PE but the company is growing at a very slow rate? Or what if a company has a low PE but the company is growing at a very fast rate? With the former, you would say that the company is greatly overvalued. With the latter, you would say that this is a bargain!
PEG Ratio
Based on this, we can't look at the PE ratio to judge a company. We want to buy a company that is reasonably priced with respect to its growth rate. So that's where we come up with the PEG ratio, or the PE ratio divided by the companies growth rate.
Using GE again, we find, that GE has a forward PE of 15.36, and the 5 yr growth rate of 10%. So that means the PEG of GE is: 15.36/10 = 1.536.
So how do we use this number?
In general, if the PEG of a company is less than 1, the company is considered a very good value. If the company has a PEG greater than two, the stock is considered very expensive and it is best that it be avoided. With GE above having a PEG of 1.53, it is reasonable, but not extremely cheap.
Comparing PEGs
We could compare stocks and compare PEGs and choose the lower ones, but we could do better. It's better to compare the PEG of a company with its competitors or its industry because each sector might have a different range of good PEGs. You can use the PEG to choose the best stock in a sector.
Finding the information through Yahoo Finance
Now, you might want to know how to find the information in Yahoo finance. Go to finance.yahoo.com and enter your stock. You can see a nice summary page and find news stories about the stock, a companies market cap, and the Trailing PE ratio.
To find more details about the stocks, go to the Key Statistics tab. You can find the Trailing PE and the Forward PE. The PEG Ratio is also mentioned, but I prefer to calculate the PEG ratio myself.
If you want to manually calculate the PEG ratio yourself, you can find the forward PE, and then find the 5 yr estimated growth rate through the Analysts Estimates Tab. Go to the bottom part of the page and look for the 5 yr Estimated Growth. The Growth Rate of GE in this page is 10%.
So Forward PE = 15.36, Growth = 10%, so PEG is 1.536.
This investing style (by using PEG ratio) is called Growth At a Reasonable Price or GARP.
Improved Version of PEG incorporating Yield and Cash Per Share
The PEG ratio above is biased against slower growers with lots of cash and a good yield. So in order to incorporate this fact, I've developed the MyPEG. More information in this link.
In evaluating stocks, many people look at the P/E multiple, or the Price to Earnings multiple. This is found by dividing the stock's current price by a companies trailing or expected future earnings.
For example, if we look at the stock of General Electric (GE) as of June 22, 2007, we see the trailing P/E ratio is 18.95, and the forward or estimated P/E ratio is 15.36.
Difference between Trailing and Forward PE
You might ask, what is the difference between the Trailing and Forward PE ratio? The trailing PE ratio refers to the price divided by the previous twelve months earnings. Those earnings were already reported, so the trailing PE can't be debated. Trailing PE is a way to see how the company did in the last twelve months.
Now the Forward PE ratio is calculated by dividing the current stock price by the estimated 12 months future earnings. There are analysts out there who predict how much a company will make in the next twelve months. Using the Forward PE is a way of seeing how a company will do in the future.
I personally prefer looking at Forward PE because I prefer looking at where a company will be going more than where a company's been in the last 12 months.
Is it better to buy a stock with a low PE or high PE?
Looking at the PE multiple by itself, it is hard to judge whether it is better to buy the stock. A company with a high PE might be justified in having a high PE because it is growing at a very fast rate. A company with a low PE might be priced correctly because it is growing at a very slow rate. However, what if a company has a high PE but the company is growing at a very slow rate? Or what if a company has a low PE but the company is growing at a very fast rate? With the former, you would say that the company is greatly overvalued. With the latter, you would say that this is a bargain!
PEG Ratio
Based on this, we can't look at the PE ratio to judge a company. We want to buy a company that is reasonably priced with respect to its growth rate. So that's where we come up with the PEG ratio, or the PE ratio divided by the companies growth rate.
Using GE again, we find, that GE has a forward PE of 15.36, and the 5 yr growth rate of 10%. So that means the PEG of GE is: 15.36/10 = 1.536.
So how do we use this number?
In general, if the PEG of a company is less than 1, the company is considered a very good value. If the company has a PEG greater than two, the stock is considered very expensive and it is best that it be avoided. With GE above having a PEG of 1.53, it is reasonable, but not extremely cheap.
Comparing PEGs
We could compare stocks and compare PEGs and choose the lower ones, but we could do better. It's better to compare the PEG of a company with its competitors or its industry because each sector might have a different range of good PEGs. You can use the PEG to choose the best stock in a sector.
Finding the information through Yahoo Finance
Now, you might want to know how to find the information in Yahoo finance. Go to finance.yahoo.com and enter your stock. You can see a nice summary page and find news stories about the stock, a companies market cap, and the Trailing PE ratio.
To find more details about the stocks, go to the Key Statistics tab. You can find the Trailing PE and the Forward PE. The PEG Ratio is also mentioned, but I prefer to calculate the PEG ratio myself.
If you want to manually calculate the PEG ratio yourself, you can find the forward PE, and then find the 5 yr estimated growth rate through the Analysts Estimates Tab. Go to the bottom part of the page and look for the 5 yr Estimated Growth. The Growth Rate of GE in this page is 10%.
So Forward PE = 15.36, Growth = 10%, so PEG is 1.536.
This investing style (by using PEG ratio) is called Growth At a Reasonable Price or GARP.
Improved Version of PEG incorporating Yield and Cash Per Share
The PEG ratio above is biased against slower growers with lots of cash and a good yield. So in order to incorporate this fact, I've developed the MyPEG. More information in this link.
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