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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (13921)2/13/2002 3:57:45 PM
From: Bob Rudd  Read Replies (1) of 78630
 
<<concluded psr is not significant to him in his stock selections>>Maybe Fisher's become more aware of PSR's shortcomings in not factoring in debt structure. That's why I moved away from it. If comparing companies whose debt structure differs or the same company over time where they've substantially changed the debt/equity ratio, your going to get misleading comparisons. A company with very low PSR may be using mostly debt...with just a stub of equity. So what looks like a bargain may just be treading on thin ice. The main attraction of using PSR's was that sales are tougher to fudge than net income. Two aways to get around PSR's limitations would be: 1) to combine PSR screening with Debt/equity range; 2)Use enterprise multiples like EV/Sales which factor in debt.
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