I like to re-read Joel Greenblat's classic 'The Little Book that Beats the Market' on a regular basis. It really does help to bring the mind back to what is important in stock picking... picking good companies for cheap prices.
The definition of a 'good company' is one with a high Return on Capital Employed, and the definition of a cheap company is one with a high earnings yield defined as EBIT / EV (earnings before interest and tax divided by the enterprise value of the company (mcap + debt - cash).
The formula is a simple one... rank all companies in order of decreasing ROCE. Rank all companies in order of decreasing Earnings Yield. Add both Ranks. Then Sort.
I've used sharescope and written a sharescript to generate EBIT/EV... here's the results... happy reading... this is a list of the top ranked 100 companies from the screen - Communisis being the highest rated. Makes for very interesting reading - I've discounted companies with a mCap of < 15m - if you want the rest let me know.
The columns show... 'combined rank' 'EPIC' 'Name' and 'Market Cap'....
| 77 | CMS | Communisis PLC | 19.8 |
| 97 | HVN | Harvey Nash Group PLC | 23.5 |
| 113 | OPD | OPD Group PLC | 20 |
| 115 | PVCS | PV Crystalox Solar PLC | 247.1 |
| 133 | CCAP | Charlemagne Capital Ltd | 44.9 |
| 151 | COST | Costain Group PLC | 147.5 |
| 160 | LIO | Liontrust Asset Management PLC | 33.3 |
| 178 | BMS | Braemar Shipping Services PLC | 86.3 |
| 182 | CKN | Clarkson PLC | 154.2 |
| 199 | MUBL | MBL Group PLC | 30.4 |
| 201 | WSH | WSP Group PLC | 168.5 |
| 201 | TGE | TGE Marine AG | 27.4 |
| 222 | SFR | Severfield-Rowen PLC | 160.4 |
| 224 | TLPR | Tullett Prebon PLC | 620.1 |
| 245 | DTG | Dart Group PLC | 66 |
| 290 | MIRL | Minera IRL Ltd | 47.8 |
| 291 | CSU | Castle Support Services PLC | 71.4 |
| 292 | ENRC | Eurasian Natural Resources Corporation PLC | 11473.9 |
| 294 | HMY | Hamworthy PLC | 123.1 |
| 297 | IRV | Interserve PLC | 243.6 |
| 304 | MBE | …
