David Dreman Low Price to Cashflow is a contrarian value strategy developed by the famous US investment manager and author David Dreman in his book Contrarian Investment Strategies. It uses a basic value filter of selecting the cheapest 40% of the market by Price to Cashflow ratio and filtering further for quality according to company size, financial strength and growth. Dreman favours cash flow over earnings: "If we take two companies with similar outlooks, markets, products, and management talent, the one with the higher cashflow will usually be the more rewarding stock. In investing, as in your personal finances, cash is king." Dreman's studies showed that the cheapest 20% of the market by P/CF outperformed the most expensive 20% by 6.8% annually. Dreman cautions towards a buy and hold approach because "transaction costs are often not recognized by investors, but can be very expensive". more »
This is the share price of the company divided by the free cash flow. Free cashflow is the operating cashflow minus capital expenditures. A more detailed definition would be (Earnings before interest and taxes * (1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital Expenditure)
Stockopedia explains P/FCF...
Free Cashflow is the amount left over a company can use to pay down debt, distribute as dividends, or reinvest to grow the business.
This ratio is similar to Price to Earnings, but omitting purely "paper only" expenses.
Some companies report high profits, but they can't turn those profits into cash! A company can't survive without cash, and if it can't generate it internally it will have to go to outside investors to support it, resulting in either share dilution or increased borrowing.
This is sales over the last 12 months, translated in Pounds Sterling for all companies.
Stockopedia explains Sales £m...
The sales figure gives a sense for the scale of a company, although companies can have very different profit margins depending on the industry and state of the business, so this may not bear much relation to the earnings figure. Some however argue for the importance of sales, since sales figures are less easy to manipulate than either earnings or book value.
The higher the ratio, the greater risk will be associated with the firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial flexibility. Like all financial ratios, a company's debt ratio should be compared with their industry average or other competing firms.
Companies with high debt/asset ratios are said to be "highly leveraged". A company with a high debt ratio could be in danger if creditors start to demand repayment of debt.
This is the ratio of Total Current Assets divided by Total Current Liabilities for the same period. NOTE: This item is Not Available (NA) for Banks, Insurance companies and other companies that do not distinguish between current and long term assets and liabilities.
Also known as Return on Sales, this value is the Net Income divided by Sales for the same period and expressed as a percentage. This is one of the best indicators of the company's efficiency because net profit takes into consideration all expenses of the company. Investors want the net profit margin to be as high as possible.
Stockopedia explains Net Mgn %...
This is one of the best indicators of the company's efficiency because net profit takes into consideration all expenses of the company. Investors want the net profit margin to be as high as possible. Rising margins are seen as a positive signal although high margins do tend to attract the interests of competitors.
The Growth in Earnings per share as a percentage change over the last trailing twelve month period.
Earnings-per-share growth gives a good picture of the rate at which a company has grown its profitability.
Stockopedia explains EPS Gwth %...
One of the important differences vs. net-income growth rates is that EPS growth reflects the dilution that occurs from new stock issuance, the exercise of employee stock options, warrants, convertible securities, and share repurchases.
Stocks with higher earnings-per-share growth rates are generally more desired by investors than those with slower earnings-per-share growth rates, though in general high growth rates have a tendency to revert over the longer term to more stable growth rates.
The dividend yield shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. It is calculated as the historic or consensus forecast Annual Dividend per Share, divided by the current Price, multiplied by 100, and is stated on a net, rather than gross, basis.
Stockopedia explains Yield %...
In the absence of any capital gains, the dividend yield is the return on investment for a stock. A higher dividend yield is often considered to be desirable among many investors but it needs to be interpreted in light of the rest of the company's financials.
A high dividend yield may be considered to be evidence that a stock is under priced or alternatively it may be that the company has fallen on hard times and future dividends are at risk of being cut. Similarly a low dividend yield can be considered evidence that the stock is overpriced or an indication that future dividends may be higher. Many growth companies do not pay dividends, preferring to reinvest profits back into the business.