Enterprise value below 200 million:: Discounted to normalized earnings

Some of the criteria was as follows

1) Enterprise value < 200 million

2) Share count over the prior trailing 12 months being less than the average 5 year annual count.

3)Calculated average annualized prior 5 year free cash flow (04- 08) as a percentage of the current enterprise value and then compare this yield to the yield using the prior 12 months of operating income as a percentage of the current enterprise value.
My goal was to select only those companies selling for a lower earnings yield using the current operating income/enterprise value versus the yield calculated by the average 5 year FCF/EV. The thought was to find stocks that may be temporarily trading at a discount to normalized earnings.

4) Cash flow from operation >0 over the past 12 months.

5) Company share buybacks over 2008 and YTD 2009.

6) Return on invested capital (ROIC) > the annualized return of 20% over the past 5 years.

Please click to review the results


Ranni said...

Greeting from Finland

I just wonder, do you have some special metric, which you use to filter dillutive companies from shareholder friendly ones; or do you have to 'calculate' sharecounts 'manual way'? Like i have to do.

I have seen your blog quite unique and intresting. These days most "value guys" are just parroting each others, and to me their ideas looks too crowded.

Keep ignoring the crowd! ;)

ShadowStock said...

Hello Finland, great country and great people, in my opinion.

My custom built programs allow me to filter based on multiple metrics including shares outstanding. The benefits of providing lists that have been scrubbed and focused on a particulate style have several benefits. Investors can make their own choice and do extra work if they feel it’s needed and concentrate on the best ideas. The ideas have supporting documentation that can be reviewed or checked for accuracy. My focus may be a select list with recent insider buying, or reducing share count, or reducing debt, or increasing GP%, or improved valuation based on P/S versus historical measures, or below industry average SGA to revenue … you get the point. At times I will even mention a particular stock. But the financial background coupled with some data management experience helps me to quickly find the most interesting ideas given the current market environment. Also, I just don’t have much time to provide a long narrative explaining an idea given my full time job prevents this.
This list created last night (Sunday 12/20/09)was an attempt to find stocks trading below their future value by taking operating income over the past 5 years and comparing this to the current operating income with the belief they may be temporally trading below their fair value. Controversial list but may be valuable to some investors.


Stocks are looking fully valued and deep discounts are far more difficult to find. Use the lists provided to keep on a watch list if you find any interest.
Again thanks for taking the time to write

Good Luck

Ranni said...

Just want to thank you for your profound answer, like I suspect you have more sophisticated infrastructure on place.

I keep lurking here, in the ShadowS.... ;)

regards, Ranni

ShadowStock said...

You can easily get outstanding results spending time fully utilizing and understanding all the free stock screeners from Yahoo, MSN, or the brokerage firms such as Schwab and others.

There is so many free sources for insider trading, news, etc. Don’t give up as my approach became necessary as my time is limited but does not mean its superiors to other approaches.