Price to Sales Ratio Backtest

The Price-to-Sales (P/S) ratio is a commonly mentioned valuation ratio. It is similar to the P/E ratio but uses revenues instead of earnings. The advantages of using sales in this valuation ratio are two fold. First, it somewhat controls for earnings manipulation, since it is harder to manipulate sales numbers. Second, because the Price/Sales ratio does not

Price to Free Cash Flow Ratio Backtest

The Price-to-Free Cash Flow (P/FCF) ratio a popular valuation ratio among value investors. It is similar to the P/E ratio but free cash flow is just operating cash flow minus capital expenditures.  Because it relies on the Statement of Cash Flows, it is thought to be less susceptible to accounting manipulation. Free cash flow is also similar to Warren

PEG Ratio Backtest

The Price-to-Earning to Growth ratio, commonly referred to as the PEG ratio, is a simplistic valuation rule of thumb. A value less than one potentially indicates an undervalued stock and a ratio greater than 1 might indicate overvalued stock. This simplistic and somewhat controversial ratio was popular in the ’90s but has more recently grown out of favor . The

Total Debt to Equity Ratio Backtest

The total debt to equity ratio is a measure of a company’s financial leverage. A high debt to equity ratio can indicate higher financial risk due to potentially higher interest costs associated with the debt and the future need to either pay back the debt or roll the debt forward with new financing. Alternatively, if

New Value Opportunities Selling below PE 12.5 May 19, 2014

What stocks are on sale this week? One method to try to answer this question is to look for stocks that recently started trading below a Price to Earnings (PE) ratio of 12.5.  Why 12.5?  A PE of 12.5 is the same as an earnings yield of 8%, which provides a decent return given an approximately

Current Ratio Backtest

The current ratio is a popular stock fundamental used to test a company’s liquidity. It primarily tries to answer the question of whether a company has enough resources to pay its debt over the next 12 months. The current ratio is calculated as follows: Current Assets / Current Liabilities = Current Ratio Benjamin Graham suggested in The

New Value Opportunities Selling below PE 12.5 May 12, 2014

What stocks are on sale this week? One method to try to answer this question is to look for stocks that recently started trading below a Price to Earnings (PE) ratio of 12.5.  Why 12.5?  A PE of 12.5 is the same as an earnings yield of 8%, which provides a decent return given an approximately

New Value Opportunities Selling below PE 12.5 May 5, 2014

What stocks are on sale this week? One method to try to answer this question is to look for stocks that recently started trading below a Price to Earnings (PE) ratio of 12.5.  Why 12.5?  A PE of 12.5 is the same as an earnings yield of 8%, which provides a decent return given an approximately

Current Stocks with the Highest Employee Growth

We recently looked at the impact of employment growth on stock returns over the past 14 years. Today, I decided to share with you a list of the publicly traded companies with market caps of over $500 million with the highest employee growth. Those stocks are as follows: Company Name Ticker % Empl Growth Current

Special Situations Real Money Portfolio May 2014 Update

It’s been quite some time since I’ve updated you on the Special Situations Real Money Portfolio.  The Special Situations Real Money Portfolio is actually my son’s Coverdell Education Savings Account that I set up on October 19, 2004 as an experiment. I wanted to see if an individual investor could earn stable returns from special situations