How to Find Undervalued Stocks with the STRIDE Screener

stride-how-to-use-free-cash-flow-yield-to-find-undervalued-stocks-featured.jpegWelcome to our final video tutorial on screening for undervalued stocks. In this video tutorial, we’re going to be combining our lessons from the three previous vlogs (in which we screened stocks using the balance sheet, income statement, and cash flow) and build a target screen of around 20-30 companies.

First, we're going to pull 3-4 fields from each of the balance sheet, income statement, and cash flow tutorials. This is going to be a small set of what we were looking at previously… but I'm doing this to more easily show the key points of what we’re looking for in this process, and the effect of pulling it all together.

How to Find Undervalued Stocks with the STRIDE Screener

Wistia video thumbnail - Putting it together

Thanks for reporting a problem. We'll attach technical data about this session to help us figure out the issue. Which of these best describes the problem?

Any other details or context?



If you'd like to try out the STRIDE engine for yourself, just sign up for a free live demo by clicking below. 

The following are transcript points taken from the above video on screening for undervalued stocks using the STRIDE screener. 

Financial filters from company statements

I’m going to start with the income statement and pull through Earnings Per Share (EPS): Diluted EPS Before Extra, 1YR, Growth %; Diluted EPS Before Extra, 5YR, CAGR %; and STRIDE EPS Growth Streak.

Then I’m going to move onto the balance sheet and pull through Price to True Book Value (TBV), Current Ratio, and Quick Ratio.

Lastly, I’m going to pull through some cash flow items: Levered Free Cash Flow, 1YR, Growth %; Levered Free Cash Flow, 5YR, CAGR %; Levered Free Cash Flow Margin; and, finally, Return on Equity % (a basic look at how much profit the business returns to equity holders).

Tweak the analysis to properly filter your target list

I'm aiming to have a 3% average growth in all our growth ratios, and that the earnings per share growth streak has grown in the past 3 years. I also want the price to TBV to be above 0 and below, say, 1. Our current ratio must also be above 1, our levered free cash flow margin is going to look for a 10% margin, and so is the return on equity. That's about the average ranges to filter this large list of targets down.  

If you have any queries about any of these ratios and financial filters, please see our previous video tutorials where we go into more detail on each of them.

Once you’ve completed this, you’ll see that the screen has filtered down to just 8 target companies. What we’ve done here is screen about 40,000 businesses down to 8 in a mere couple of minutes. Of course, you’ll now need to look into these 8 more carefully, but that deeper screening must depend on your particular investment needs and goals. The point of this video tutorial is to see that by using the STRIDE screener to only place some basic financial filters in place, you can very quickly filter a list of  thousands of potential targets to a more manageable number of more accurate targets for your portfolio.

If you’ve been enjoying our video tutorial series, you’ll be happy to know that I’m going to be continuing to do more on the series on screening, and also on charting in the near future… so keep an eye out for those, and I hope to hear from you soon.

If you'd like to try out the STRIDE engine for yourself, simply sign up for a free live demo below.

Topics: STRIDE, Valuation


3D Value Investing: Triangulating The Best Investment Targets

3D Value Investing uncovers the best businesses for investment, the fair value of those businesses and the best times to buy in and sell out. This approach to long-term investing results in higher returns with lower risk.

Download your eBook now

Subscribe to Email Updates