103-25 Find Underpriced Stocks

Screener Strategy 1 – Find underpriced stocks.

To find longer terms value stocks to invest in for longer-term investment appreciation, you will want to include criteria that match the type of company you want to find.

  • P/E ratio < 15 – Low valued companies low P/E.
  • Earnings Growth 1 year >5% – Earnings Growth 5 Years >5%.  If you are looking for a value play, the company you are investing in still needs to be making a steady profit year in year out.
  • Revenue Growth 5 Years >5% – Sales and revenue growth, moving together is vital, as previously discussed.
  • Low Debt – look for debt to equity ratios of as close to 1 or less as possible.
  • Quick Ratio is current assets minus inventory divided by current liabilities.  So if a company has $50 million cash and $10 million debt, the ratio will be 5.1.  So a higher quick ratio is nice to have.

If you have an earnings growth higher than the P/E ratio, this can also be a good indicator as the earnings are outstripping the valuation.

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