Razik's screener

Medium to big size companies having consistent growth in sales, profit and returns and with less debt.--------------------------------------------------------------------------------------------------------------------------------------------- Approximately only around 200 to 300 companies will satisfy all the criteria among the 5000 listed companies in India.------------------------------------------------------------------------------------------------------------------ Parameters set and reasons for the same:---------------------------------------------------------------------------------------------- 1. Market Cap > 1000: Eliminates all the micro cap companies which are too risky to invest without understanding the Company 100% and a normal retail investor cannot get the complete picture from publicly available information.------------------------------------------------------------------------------------------------------------- 2. Sales > 500: The Company is too small to be considered a good potential and need to cross at least the 500 crore turnover mark to be looked into.--------------------------------------------------------------------------------------------- 3. Profit > 10: Companies making a loss are a big risk, turnaround cannot be guaranteed by anyone unless there is a suitable long term business plan and it is too early and unworthy risk to invest in such companies.------------------------------------------------------------------------------------------------------------------------------------------ 4. Debt to equity < 1: In simple words, debt means trouble and debt more than equity is a complete no-go. Companies with no debt or less debt are always a safer bet and these companies always have a better track record in performance due to the higher cash flow to reinvest in the business compared to the debt and interest paying companies.----------------------------------------------------------------------------------------------------------- 5. Average ROE - 3 years > 15: A Company that does not make returns more than its cost of equity does not have to run in the first place, a return of 15 or more signifies it is generating returns definitely higher than the cost of equity and a 3-year span gives a clear cut judgement--------------------------------------------------------------------- 6. Average ROCE - 3 years > 15: A Company that does not make returns more than its cost of capital employed (equity + debt) does not have to run in the first place, a return of 15 or more signifies it is generating returns definitely higher than the cost of equity and debt.------------------------------------------------------------------------ 7. PEG Ratio > 0 < 5: Usually the price-to-earnings (PE) ratio is considered by most investors to check whether the current market price of the share is overpriced or undervalued. But the price to earnings to growth (PEG) ratio factors in the expected growth of the Company to the PE ratio. And unlike the PE ratio which differs significantly for different industries, the PEG ratio usually stays in a range of 0 to 10, anything below 1 is usually considered undervalued, and 1 to 5 is acceptable if Company's other records are very good but anything more than 5 is extremely overpriced and the filter eliminates those companies alone. (the lower the PEG ratio, the better it is)------------------------------------------------------------------------------------------------8. Average dividend payout of 3 years > 0: It is important for an investor to receive dividends from the Company, it is the sole source of income from investing when share price plunges or stays flat, companies not paying dividend does not mean bad, it's just that they believe them reinvesting money back into the business is much better but shareholders need some or other income to be compensated for staying invested. Benjamin Graham considers this as one of the four main rules a defensive investor should follow before buying a stock. Have considered dividend payout ratio of 3 years because there could be off years for Company where they fail to declare dividend, so considering just one year doesn't give a true picture---------------There are several other factors to be looked into from this list which has not been applied as a filter so as to not eliminate these companies based on these factors but these are definitely to be looked into while doing your analysis, especially sales growth %, dividend yield %, interest coverage, free cash flow 3 years and therefore I would suggest you add these to your columns for a good analysis.------------------------------------------------------------ DISCLAIMER: Due to the ROCE and Debt/equity parameters set, banking companies would not form part of the list.

by Abdul Razik