My filter included the financial hurdles below coupled with other qualitative and quantitative measures
1) Increasing book value: Current book value greater than the 2006 value.
2) Negative returns: A negative 3 year stock return.
3) No Dilution: Relatively constant or reduced share count from share buybacks over the past 5 years
4) Discount to normalized Earnings: Earnings yield using current operating income to enterprise value and only selecting those less than the earnings yield using the 5 year average annual free cash flow to current enterprise value. May indicate the company is trading at for less than the normalized earnings yield.
5) High magic formula Ranking: Rank high based on ROIC and earnings yield combination (magic formula)
6) Greed Factor: Annual SGA/Revenue < 30% (my management greed factor)
7) Margin of safety: Margin of safety based on selecting companies with an Enterprise Value/Market Cap < .90
The result was as a list of 8 deep value small cap stocks
Please Click to review stocks that I consider worth a second look