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Strategies & Market Trends : Value Investing

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To: Steve168 who wrote (20332)	12/24/2004 4:13:55 PM
From: Spekulatius	Read Replies (1) of 78576

Steve, i would just chip in that the well performing Piotroski screen looks at the value of the underlying business just as much as it does at book value: Piotroski's solution wasn't rocket science. He figured that the companies with the best prospects might show some early signs of a turnaround. So he devised a nine-point rating scale based on balance sheet analysis. First there's profitability, which can earn a company up to four points: one point for positive return on assets (a hurdle that eliminates almost half of all value stocks), one for positive cash flow, one if return on assets improved during the past year and one if cash flow exceeds reported income (a measure of earnings strength). Then comes capital structure, three points: one if the ratio of long-term debt to total assets declined over the past year, one if the current ratio (current assets divided by current liabilities) improved and one if the company didn't issue any more common stock. Finally, there are two points for operating efficiency: one if gross margins improved over the past year and another if asset turnover (revenue divided by total assets, a measure of productivity) improved. smartmoney.com

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