Run a Checklist

What does Mkt Cap £m mean?

Market Capitalisation is an indicator of the size of the company, specifically the total market value of the company's shares. It is calculated by multiplying the current Share Price by the current number of Shares Outstanding. This value is standardized into £ Sterling and it is updated each night (i.e. it is not 15 minute delayed data).

Stockopedia explains Mkt Cap £m...

Market Capitalisation only takes into account the value of the company's shares (equity), it ignores the amount of debt a company may have taken on and therefore isn't the best indicator of the company's size. The Enterprise Value adds the net debt to the Market Cap and is a better indicator of the minimum amount that an acquiring company may have to pay to buy the firm outright.

What does Magic Formula Rank mean?

This is the actual (as opposed to percentile) ranking of a stock according to Joel Greenblatt's Magic Formula. It sums its Earnings Yield and Return on Capital rankings, so a company that was 14th on an EY basis and 96th on an ROC basis would have a score of 110th. Theoretically, the best company would have a score of 2nd but that assumes that it is top of both lists, which is unlikely.

For the purposes of this calculation, only companies above a market capitalisation of £10m are included (Greenblatt uses a threshold of $50m).

Stockopedia explains Magic Formula Rank...

Joel Greenblatt's Little Book that Beat the Market became a financial publishing phenomenon. In a simple writing style, the successful hedge fund investor showed how picking 'good' stocks at 'cheap' prices was enormously profitable. He claims that a portfolio of the top 30 Magic Formula stocks has averaged a 17-year annual return of 30.8% and beats the S&P 500 96% of the time. It should be noted that these returns are volatile and require a fully diversified portfolio. Greenblatt suggests sticking to A+ stocks (in the top 10%) for the best chance of outperformance and ideally to a basket of the top 50 ranked stocks in the market.

<

p>

What does Earnings Yield % mean?

As defined in the Little Book that Beats the Market, the earnings yield compares the profit generated with the market valuation of the company. It is defined as operating profit divided by enterprise value - enterprise value is used rather than market capitaliation to reflect the competing claims of debt and equity holders on the business. This penalizes companies that carry a lot of debt and little cash, and rewards firms with a lot of cash - a useful distinction not reflected in the P/E ratio. Operating earnings are used instead of net income to eliminate the distortions caused by recognized tax benefits or goodwill write-downs that have very little to do with the company's profitability.

What does ROCE % Greenblatt mean?

Return on Capital is used by Joel Greenblatt in his Magic Formula to measure the rate of return a business is making on the total capital used in the business. His definition uses EBIT / (Net Working Capital + Net Fixed assets). Companies that can earn a high ROC over time generally have a special advantage that keeps competition from destroying it.