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AlphaScreens: Quality starting points

Consistent performance against quality tests identifies companies to examine further
August 20, 2018

Stock screens aren't foolproof but they can be a great launch pad for research, highlighting interesting companies that meet criteria. Our quality screen finds companies that have delivered impressive return on equity and operating margins, as well as demonstrating solvency and good earnings growth prospects. The screen does not conclusively prove whether these companies are the real deal or if they are just enjoying a good run. We list the results alongside other measures, such as 3-mth share price momentum, to indicate sentiment towards the shares and highlight a need for more analysis.  

 

  • The FTSE All Share screen still sees large companies like Diageo (DGE), Unilever (ULVR) and Reckitt Benckiser (RB.) score well against our quality criteria
  • Taylor Wimpey (TW.), which now passes the Return on Equity growth test, also scores 9/9 in the All Share screen. Domino’s Pizza (DOM) is a new entry in the 9/9 club but other indicators, such as its negative three-month share price momentum, suggest the investment case requires careful appraisal
  • There are no companies that pass all nine tests in our FTSE All Small Companies screen. Of companies that had previously met all the criteria; the interest cover test is now failed by MJ Gleeson (GLE), XP Power (XPP) now fails the Free Cash Flow test and PhotoMe (PHTM) falls short on Forward EPS growth forecasts
  • The Aim screen has just one new entry to the ‘perfect nine’ club – clothing retailer Quiz (QUIZ). This company has had a good first year since it listed but, as ever, screens are only a starting point for research and faltering share price momentum reflects headwinds for the retail sector in the UK.
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