What ratios do you guys use to identify Value companies?

I have read about the P/E, NCAV etc… But i dont know i feel like i need something more convincing.

Totally depends on the industry, company and business structure.

There is no ratio…you tend to look for mature firms with stable cash flows…and see if they are less than your estimate of intrinsic value.

There are many ways to skin a cat. If you try to screen strictly by ratios, you will likely become frustrated very quickly. Anything that is easily identifiable by simple ratio analysis tends to get arbitraged out of the market almost immediately. You didn’t think you were the only person running screens, did you?

^ Not true. At all. Running screens is one thing, acting on the conviction is quite another. I can give you multiple examples from my own investing universe. I found the following companies by running ratio screens. Anyone could have acted on this knowledge but people (sometimes including me) were just too chicken to go against the tide.

BKE - beautiful financials, management knows what they are doing; but it went for $24-ish 2 years ago when I bought it. Climbed up to $40-ish an year ago and has stayed there since then.

VFC - when cotton prices were spiking (last fall I think), went down to $75 when I bought it. Now doubled.

STX - the one that got away from me. Was trading at absolutely ridiculous multiples (IIRC 2.6 P/E) a year or so ago, up 100+% since then; and may still have an upside.

In 90% of the cases, the market is right. Take that as a caveat. But having said that, 10% of the time the market gets it wrong, and sometimes spectacularly wrong. You can definitely find companies using screens.

Buffett has no special inside knowledge when he invests. Anyone can read 10Ks. How is it that he beats the market again and again? Courage of convictions.

To OP’s question, like bromion said the absolute and relative values depend on the industry (mostly). But the ratios I look at are: ROE, P/E, P/B (beware: buybacks will increase P/B for value stocks!), debt-to-equity, EV/EBITDA, EV/EBIT, OCF/NI, current ratio, and as tie-breakers; growth %ages for the last X years.

Also beware, ratios are useful for screening but you do havve to get a feel for the company. I am not into mechanical investing where you rotate in and out of stocks based solely on ratios. This supposedly takes emotion out of investing, but I think it also makes you vulnerable to management’s manipulations (like CSCO who used to beat the consensus earnings by 1 penny every quarter.)

It would be better if you read my posts twice and then consider not responding at all, thanks

My reading comprehension is quite unimpaired, thank you.

" Anything that is easily identifiable by simple ratio analysis tends to get arbitraged out of the market almost immediately. You didn’t think you were the only person running screens, did you?"

This statement is not true. Someone has to set the record straight. I gave counter-examples. Unless you can dispute them, one-line put-downs are not going to stop me, thanks.

bromion vs 1recho

LOL that cow has some problems

Screens are great to deliberately shortlist candidates

I prefer EBIT / EV to get a yield…minimum 15% hurdle rate

But remember a stock that does not pass this screen may pass a discount to book screen and it may become an asset value play like a lot of REITs over past few years.

Are you looking for quant. models? Read some James Montier books.

I call BS. There is only one way to skin a cat: with a laser. I bet you’ve never even skinned any cats.

I had to skin a cat in junior year biology. I actually had two lab partners, for some reason that I can’t remember, so I had to actually skin two cats.

So, I can confirm that there are multiple ways to skin a cat, since I used two different approaches that year.

One approach was surgical, where we took our time and used our scalpels like sugeons, separating the skin from the muscle. It took us a while, but we had a fine-looking cat when we were done.

The other approach was to rip it off like you would a latex glove. It ended up being a lot harder than we expected, but it was still a lot quicker than the scalpel approach. We ended up with an ugly-looking cat, but it worked just as well for disection.