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Joel Greenblatt's MAGIC FORMULA Screen for Indian Stocks with Additional filtering for Quality. Ranked the resultant Companies.
Ist Update - 04May2020

Details in below tweets.

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#MagicFormula #Stocks #Indianstocks #JoelGreenblatt

1/n Joel Greenblatt's MAGIC FOR...
Magic formula =Good Stocks @ Attractive Price

Higher Earnings Yield =Undervalued Stock

Higher Return on Invested Capital(ROIC)/Return on Capital Employed(ROCE) =Better Quality

RANK stocks on ROIC/ROCE(1 for Highest ROIC/ROCE)

SUM the Ranks

RE-RANK on Combined score

Additonal Filtering -

Good ROCE/ROIC over a period of time. Min 22%.

Attractive Earnings Yield. Min 6.5%.

Good Operating Cash Flow over a period of time.

Good Asset turnover ratio/Management Efficiency.

Stable Promoter holding.

Eliminated Financials & Utilities Stocks

Eliminated Stocks with too much fluctuation in Year on Year (YOY) Qrtry Sales & Profit Growth(>150% combined).

Took ROIC & ROCE & listed both rankings combined with Earnings Yield. Choose either as per your comfort.

Explanation -

ROIC = Net Operating Profit(EBIT)/Invested Capital
= Return from Core Business
= Profitability relative to capital actually invested in business

ROCE = Net Operating Profit(EBIT)/Capital Employed
= Profitability relative to total capital employed in business

Scope of ROCE is more extensive than ROIC.

ROCE is pre-tax measure while ROIC is post-tax measure.

Invested Capital = Capital employed - Non-operating assets (like Cash or Cash equivalents)

Earnings yield = Net Operating Profit(EBIT)/Enterprise value.

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