Revised Graham-Shiller 10 Year PE Ratio Stock Screen

Tuesday, December 21st, 2010 | Stock Research with 8 Comments

After I posted the Graham-Dodd-Shiller 10 Year PE Ratio Stock Screen a few weeks ago, I received some great feedback from readers. I used that feedback to retool my PE10 stock screen and the results are below:

Graham-Shiller PE10 Stock Screen Passing Companies as of December 20, 2010

Name

Ticker

PE10

CurRatio

PE

PB

ROI

China Metro Rural Holdings Lt

CNR

2.77

1.77

8.55

1.4

10.9

CONN’S, Inc.

CONN

4.31

5.23

11.46

0.29

1.4

The E.W. Scripps Company

SSP

4.8

2.32

4.9

1.05

2.93

Blyth, Inc.

BTH

5.6

2.86

7.93

1.22

10.22

EnCana Corporation (USA)

ECA

7.14

1.69

9.65

1.19

5.31

Rex American Resources Corp.

REX

7.32

3.54

9.12

0.6

4.94

Lexmark International, Inc.

LXK

7.34

1.78

8.89

2.12

14.03

Constellation Energy Group, I

CEG

7.59

1.96

1.77

0.77

21.68

International Wire Group, Inc

ITWG

7.65

2.59

9.47

1.07

5.19

RadioShack Corporation

RSH

7.68

2.02

10.38

2.31

14.83

SkyWest, Inc.

SKYW

8.69

3.02

11.89

0.65

2.06

Universal Corporation

UVV

8.76

2.27

8.16

1.05

8.98

NRG Energy, Inc.

NRG

11.08

1.9

9.28

0.57

2.4

M & F Worldwide Corp.

MFW

11.63

2.01

4.51

0.71

2.83

Entergy Corporation

ETR

12.09

1.73

10.06

1.47

3.96

P.H. Glatfelter Company

GLT

12.35

2.31

6.79

1.07

8.41

Delta Apparel, Inc.

DLA

12.55

3.09

10.65

0.91

5.73

Computer Sciences Corporation

CSC

12.8

2.16

9.38

1.06

6.53

Noble Corporation

NE

12.94

1.68

8.06

1.29

12.54

National Semiconductor Corpor

NSM

13.46

6.44

11.04

5.63

17.6

So what did I change to the stock screen?

Folks were interested in seeing more small caps, so I dropped the minimum market cap from $500 million down to $100 million. I wasn’t willing to completely drop the minimum market cap criteria, because I don’t really trust the historic data on micro caps, especially for earnings information going back ten years.

Frank Voisin noticed a potential error in my PE10 calculation. He did the smart thing and check my math and he emailed me his results. Frank’s PE10 calculations were somewhat different than mine. After doing a bit of thinking, I figured out that the issue was probably associated with my use of earnings per share, otherwise known as EPS. Earnings per share can be impacted by changes in share count, and it is very likely that the number of shares outstanding would change over a ten year period. Instead of using EPS, I calculated the 10-year average income after taxes for the revised Graham-Siller PE10 Screen. Then I took that 10-year average income after taxes and divided it by current shares outstanding.

Revised Graham-Shiller PE10 Stock Screen Criteria

  1. Eliminated ADRs (mainly to avoid data issues)
  2. Removed stocks in the miscellaneous financial services sector (to remove funds,  special purpose acquisition companies, and the like)
  3. Current ratio > 1.5
  4. Market cap > $100 million
  5. PE10 > 0
  6. Current PE < 12
  7. Number of annual historical reporting periods > 9
  8. Retain the top 20 stocks sorted by lowest PE10

Backtest

A quick backtest of this screen from 2002 to present with a one year annual rebalancing period showed that $100 invested evenly in the stocks selected by the revised Graham-Shiller PE10 Screen grew to $441 today compared to just $109 for the S&P 500 over the same period. The backtest results of this long-term value screen are simply amazing, but I should also remind folks that it is very likely that real world results would likely be less impressive for a variety of reasons.

What do you think of the modification I made to this screen? Would you be interested in following this stock screen regularly?


Comments

  • Perhaps you could screen out strong insider selling as well.

    Kross December 21st, 2010 at 11:21 am
  • @Kross – That’s a good idea. How would you define strong insider selling?

    George December 21st, 2010 at 11:28 am
  • Very interesting screen George. Thanks for putting it together. I have flown Skywest for several years (great service) and both Skywest and NRG Energy have been on my watch lists

    Asif December 21st, 2010 at 2:28 pm
  • Very cool!…do you have a list of the companies that passed the screen in 2002?

    Adam January 26th, 2011 at 1:08 am
  • Adam, I’m glad you like the screen. I’ll run the screen for 2002 shortly and produce a list of companies that passed the screen then.

    George January 31st, 2011 at 1:47 pm

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