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lue Stock Investing Test

1

CHECKLIST FOR INVESTING Is this a monopoly or nearly one?

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2 3 4 5 6 7 8 9 10 11 12

Do you understand this business & Industry? Little to no long-term debt Is the company focused on it's core business? Does the company buy back its shares? Are retained earnings being invested well? Company ROE above average? Can the company adjust to inflation quickly? High levels of free cash flow? Does company have 8+ years of data? Does the company have a product? Good sized company? From Data Sheet Earnings Yield Above Gov Bond Yield Projected Gain via EPS Growth Rate Projected Gain via Sustained Growth Rate

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13 14 15

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Is this company ok thus far to invest in?

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The business should be a consumer monopoly with no effective competitor because of either patent, brand name or other intan To help identify consumer monopolies look for: (1) Operating Margin and Net Profit Margins above Industry norm, (2) Strong Earnings, & (3) High Return on Equity Does the business this company participates in a industry/technology that you understand? There should be little to no debt. A consumer monopoly should have strong earnings. And strong earnings should mean little to no debt. If there is serious debt in a consumer monopoly then there is likely problems. Capital should be invested within its area of expertise. Look at past patterns of acquisitions and new directions. Earnings are reinvested within the company assuming that these investments can be used to pursue profitable oppurtunties. Look for share buyback program as a good sign. Look for signs of strong and consistent earnings and high return on equity ratios. It is very important that when the company increases it's retained earnings there should be signs of increased earnings from profitable It is hard to say what above average means, but my general rule is 12% ROE per year for the last 7 years. The 12% number is based on a general market opinion that the average ROE for the last 30 years has been about Consumer monopolies are usually free to adjust to inflation quickly. Look into how this company performs in relation to other companies within the industry. I don't like companies who have to constantly reinvest earnings to maintain operations at competitive levels. So the lower the amount need to maintain operations, the better. Therefore, high levels of free cash flow should be a The company needs to have been in existance and making a profit for a good period of time. I invest in companies that have products and not just ideas. Does the company have products to sell? I want a company that has some size to it. I prefer a market cap of at least 500 million or better.

Check the boxes for each item your stock being evaluated passes these tests. Ensure you have done the data worksheet as well. Does your stock pass all 15 tests for investing in?

brand name or other intangible

Date of Analysis: Current Stock Data Company: Ticker: Price: EPS: DPS: BVPS: Gov Bond Yield: P / E ratio: #DIV/0! Earnings Yield: #DIV/0! Dividend Yield: #DIV/0! Price / Book: #DIV/0!

Seven Year Averages Return on Equity: #DIV/0! Payout Ratio: #DIV/0! P/E Ratio-High: #DIV/0! P/E Ratio-Low: #DIV/0! P/E Ratio: #DIV/0! Sustainable Growth #DIV/0!

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Year Year 8 Year 7 Year 6 Year 5 Year 4 Year 3 Year 2 Year 1

EPS

DPS

BVPS

Historical Data Price High Low

P/E Ratio High Low #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

EPS DPS BVPS High Price Low Price Annually Compounded Rates of Growth (7 year) [(Year 1 / Year 8) ^ (1/7)] - 1 #DIV/0! #DIV/0! ##### #DIV/0! #DIV/0! Annually Compounded Rates of Growth (3 year) [(Year 1 / Year 4) ^ (1/3)] - 1 #DIV/0! #DIV/0! ##### #DIV/0! #DIV/0! Year Current Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year Current Year 1 Year 2 Year 3 Year 4 Year 5 Projected Company Data Using Historical Earnings Growth Rate EPS DPS $0.00 #DIV/0! #DIV/0! Earnings after 10 years #DIV/0! #DIV/0! #DIV/0! Sum of dividends paid over 10 years #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Projected price (Average P/E * EPS) #DIV/0! #DIV/0! #DIV/0! Total gain (Projected Price + Dividends) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Projected return using historical EPS growth rate #DIV/0! #DIV/0! [(Total Gain / Current Price) ^ (1/10)] - 1 #DIV/0! #DIV/0! #DIV/0! #DIV/0! 2 #DIV/0! #DIV/0! Projected Company Data Using Sustainable Growth Rate BVPS EPS DPS $0.00 #DIV/0! ##### #DIV/0! Earnings after 10 years (BVPS * ROE) #DIV/0! #DIV/0! ##### #DIV/0! Sum of dividends paid over 10 years #DIV/0! #DIV/0! ##### #DIV/0! #DIV/0! ##### #DIV/0! Projected price (Average P/E * EPS) #DIV/0! #DIV/0! ##### #DIV/0! Total gain (Projected Price + Dividends) #DIV/0! #DIV/0! #####

Year 6 Year 7 Year 8 Year 9 Year 10

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

##### ##### ##### ##### #####

#DIV/0!

Projected return using sustainable growth rate [(Total Gain / Current Price) ^ (1/10)] - 1

3

#DIV/0! #DIV/0! #DIV/0!

My 3 Rules Earnings Yield Above Gov Bond Yield Projected Gain via EPS Growth Rate Projected Gain via Sustained Growth Rate

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ROE #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Payout Ratio #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Enter data into the yellow shaded cells. When you ensure all 3 of these tests are met, return to the checklist screen and ensure all tests are good for investing.

Year 8) ^ (1/7)] - 1

Year 4) ^ (1/3)] - 1

wth Rate

rs d over 10 years

age P/E * EPS) Price + Dividends)

g historical EPS growth rate Price) ^ (1/10)] - 1

Rate

rs (BVPS * ROE) d over 10 years

age P/E * EPS) Price + Dividends)

g sustainable growth rate Price) ^ (1/10)] - 1


				
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posted:11/28/2009
language:English
pages:9
Description: Stock-Valuation