A value investing screen based on Walter Schloss's dedicated focus on stocks that are hitting new lows and those trading at a price lower than their Book Value per Share.
Schloss summarized his own approach as being: “We want to buy cheap stocks based on a small premium over book value, usually a depressed market price, a record that goes back at least 20 years…and one that doesn’t have much debt.
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The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company's book value to its current market price and is a key metric for value investors. Book value denotes the portion of the company held by the shareholders; in other words, the company's assets less its total liabilities. This is calculated as the Current Price divided by the latest annual Book Value Per Share (The inverse ratio is known as book to market). We exclude preferred shares in the calculation of Book Value.
As with most ratios, it varies a fair amount by industry (companies that require more infrastructure capital will usually trade at P/B ratios much lower than, for example, consulting firms). P/B ratios are often used to compare banks, because most assets and liabilities of banks are constantly valued at market values. This version includes intangible assets and goodwill, unlike price to tangible book value. The price / book value ratio rarely falls below 1
Stockopedia explains P/B...
This is a key metric for value investors, whereas growth investors typically believe that book value reveals very little about a company's prospects for future performance.
The price / book value ratio rarely falls below 1.0. As with most ratios, it varies a fair amount by industry (companies that require more infrastructure capital will usually trade at P/B ratios much lower than, for example, consulting firms). P/B ratios are often used to compare banks, because most assets and liabilities of banks are constantly valued at market values.
A company that can't make an ROE greater than its cost of capital may be expected to have a low price to book. Therefore, look for a low PBV combined with a high ROE and low default risk.
This compares the current price to the lowest Price the stock has traded at in the last 12 months expressed as a percentage.
To screen for companies that are within 10% of their 52wk Lw, the criteria would be Price vs. 52 Week Low < 10, rather than greater than 90, i.e. it's a comparison rather than a rank. Here's a sample screen that you can fork.
Stockopedia explains % vs. 52w Low...
The 52 week low lists are common hunting grounds for bargain and value investors. Behavioural finance has shown that investors tend to over-react on bad news, providing opportunities for investors with a greater tolerance for uncertainty. The 52 week low is a metric which was extensively used by famous value investor and bargain hunter, Walter Schloss.
Net Debt is the sum of all short term debt, and notes payables, Long Term debt and preferred equity minus the total cash and equivalents and short term investments for the most recent reporting period.
Stockopedia explains Net Debt...
Net debt is the level of debt remaining assuming all cash and equivalents were used to immediately pay of debt. A negative number means more cash than debt.
Some industries may have more net debt than others; therefore, investors often compare a company's net debt to others in the same line of business. It is usually considered as a ratio versus the total assets of the company.
Market Capitalisation only takes into account the value of the company's shares (equity), it ignores the amount of debt a company may have taken on and therefore isn't the best indicator of the company's size. The Enterprise Value adds the net debt to the Market Cap and is a better indicator of the minimum amount that an acquiring company may have to pay to buy the firm outright.