Book's Gist: How to Make Money from Your Stock Investment Even in the falling Market

Filter based on value
1. ROE > 15% for past 5 to 10 years
2. Avg EPS GR (Growth Rate) - Compare year to year EPS diff and find average > 15% for past 5 to 10 years
3. D/E (Debt / Equity) < 0.5
4. Better Profit Margin than similar industry counters
5. P/E < Avg P/E of similar industry counters
6. Price < Intrinsic Value
7. Price < Fair Price
8. Competitive Advantage

Calculate Intrinsic Value
Data Req:
-Current Year: 2003
-Current Price: $12
-Avg EPS GR (past 10 yrs): 16%
-Current Year EPS: $1.10
-Avg P/E (past 10 yrs): 18.50
-Avg Div Payout (past 10 yrs): 5%

1. Calc Total EPS for next X years (X = years expected to be invested)

2. Calc Price of stock at X+1 year, assuming Y% appreciation yearly (Y=% expected annual returns )

3. Calc Total Dividends for next X years, using Avg Div Payout & EPS

4. Calc Total Returns after X years

5. Calc Intrinsic Value