In the present market condition, many stocks are looking cheaper. But it has now become more important for investors to focus on quality companies. For this, we have used various quality filters in the mid-cap space to identify fundamentally strong companies trading at a decent valuation.
These companies gave an earning yield - a measure of total operating income to enterprise value - of more than five per cent and now are trading near or lower than their five-year median price-to-earnings (PE) ratio. Further, we have filtered through Z-score, which predicts the financial distress of a company and F-score, which highlights the financial performance of a company. Finally, we have arrived at two companies. One of them is a power utility company operating in Gujarat, while the second one is the lowest cost producer of bauxite in the world.
Filters:
Altman Score: More than 2.99
Piotroski F-score: More than seven
Earnings yield (EBIT/Enterprise value): More than five per cent
Price-earnings to growth (five years): Zero to one
Price-earnings to median price-earnings: Less than 1.5
source: valueresearch.com
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