Quality Small Cap Indian companies?A quality small cap stock screener that shortlists promising companies? I don't have Brijesh's environment around me. I don't have half the time that he can devote, nor am I half as experienced. I was always energized while speaking to Brijesh, but also a bit dismayed - thought I could never catch up! Until we made ValuePickr Stock Screener happen! Even now our screener can only surprise Brijesh 20% of the time:) Those of you who are like me, but want to catch up with the pros, here's how an advanced stock screener can help you reach there, practically. In case you are not familiar with the term, you can find a brief on a stock screener and its capabilities in ValuePickr Stock Screening Basics section. Check out the latest ValuePickr Quality Small Cap screener results here. Steps Criteria Matches 1 Sales_LFY<500 and Sales_LFY>100 804 2 OpCFlow_LFY>OpCFlow_PY1 460 3 OpCFlow_PY1>0 269 4 Debt2Equity_LFY<1 167 5 RoE%_LFY>20 39 6 DPS_LFY>0 33 7 P2E/AvgEPSGrowth%5yr_LFY<0.5 21 8 EPS_PY4>0 21 9 TTMEPS>=EPS_LFY 11 10 EPS_LFY>=EPS_PY1 10 11 EPS_PY1>=EPS_PY2 8 12 EPS_PY2>=EPS_PY3 7 13 EPS_PY3>=EPS_PY4 6 Companies 1 Ador Fontech See the results. If you like it, read on to learn how you too can design an effective screen for the kind of quality small cap companies you want to uncover! Designing the Quality Small Cap Stocks ScreenSetting the UniverseWe wanted to shortlist stock ideas from the small cap stocks unioverse. So a criteria of annual sales between 100-500 Cr, for the current year, is used.Secondary or Conditioning CriteriaWe mentioned "Quality" small cap stocks, right. Which means we do not want the filter to pass companies with poor fundamentals. We want companies that have reported negative operating cashflows for last 2 years and have high debt-to-equity OUT. And we want IN, companies that report high Return-on-Equity and pay some dividends.You could use probably a few more such fundamentals filters, but the above are deemed sufficient conditions. Primary CriteriaNow this is where the objective of your screen gets defined. What kind of companies are we attempting to uncover? Small cap companies that are increasing earnings year over year for atleast the last 5 years. But thats not enough; we want only those that are available at attractive prices today. The PEG ratio is a good measure that compares the Price to Earnings ratio (PE) to the earnings growth rate of the company. In order not to be misled by a year of growth spike, or some one-off extraordinary other income skewing earnings growth last year, we use the 5yr average earnings growth rate, for the comparison.And that sets up our Quality Small Cap stock screener nicely! So enjoy the shortlist! Go ahead and dig into these companies. Let me know if you find Gold anywere! When looking at the results, it is useful to keep in mind that there are no miracle screens that produce lists of guaranteed winners. A well-designed one however, would provide us with a shortlist of stocks that hold some promise. Even the most well-designed screen is only a preliminary search! Remember that even the best designed screen is only a preliminary search for investments using a small set of quantitative factors. A complete in-depth analysis of shortlisted stocks that explores both quantitative and qualitative factors should follow any screen. If you want to follow any of the shortlisted stock ideas, the best place to start is the companies website; start by digging at the Annual Report (usually found in the Investor section); look at analyst presentations if available, press releases and also search for more information on the company, recent newsflow, etc. Find out all you can about the company and its competitive environment. Latest results of over a hundred pre-defined screens for Indian stock market.
|
