Stock Screen: Ben Graham Formula

Stock Screen: Ben Graham Formula

The goal of this screen is to find companies that have strong upside based on the Ben Graham valuation formula

You can view the latest results here: Screen: Ben Graham Formula

About the Ben Graham Valuation formula

The Ben Graham Formula is a simple method for estimating the intrinsic value of a company. It was proposed by Benjamin Graham in his world famous book the Intelligent Investor.

The formula he proposed can be summarized as follows:

Ben Graham Formula


Filters

In this section, I'll summarize the key filters used in the default Ben Graham Formula screen.

  • Ben Graham Formula Upside > 0%
  • Upside (Analyst Target) between 20% and 75%
  • Return on Invested Capital > 0%
  • Market Capitalization > $250 million

Filter 1: Ben Graham Upside

finbox.io makes it easy to find stocks that have strong upside potential based on the Ben Graham Formula (BGF) value. You can find stocks trading below their intrinsic value using Ben Graham Formula Upside filter:

Ben Graham Upside


I wanted to view companies trading below BGF intrinsic value (> 0% Upside). Here's the default filter:

Ben Graham Upside Filter


We recommend adding additional filters to uncover the best results. The default screen uses Upside (Analyst Target), Return on Invested Capital, and Market Capitalization as additional filters. You can easily adjust these to your liking!

Filter 2: Upside (Analyst Target)

Upside (Analyst Target) represents the upside potential of the stock based on the average price target of stock analysts that typically work at investment banks or equity research firms.

I've selected an upside range of 20% to 75% to exclude any companies that analysts are overly optimistic about (< 75% Upside) but still have rich upside (> 20% Upside)

Here's the default filter:

Analyst Upside Filter


Use the STAT BY SECTOR button to get guidance on threshold to use:

Stat By Sector


Filter 3: Return on Invested Capital

Return on Invested Capital (ROIC) is used to evaluate the ability of the company to create value for all its stakeholders, debt and equity.

ROIC = NOPAT / Average Invested Capital

where NOPAT is defined as Net Operating Profit After Tax and Average Invested Capital is the average Debt + Equity over the same time-period.

I'm using it in this screen to weed out companies that aren't profitable on a NOPAT basis. Here's what the default filter looks like in action:

Return on Invested Capital Filter


Filter 4: Market Capitalization

Market Capitalization is a public company's total equity value as implied by the stock's last observed trading price. In this screen, I'm using it to weed out companies that are below a certain size (< $250 million).

Here's the default filter:

Market Capitalization Filter


Sorts

To bring the strong candidates to the top, I've applied a sort based on Ben Graham Formula Upside:

Sort


Downloading Results

Once the screen returns the relevant matches, you can either research the individual names further or create a portfolio based on the results.

To add any match to your Watchlist, just click the icon:

Add to Watchlist


You can also Save the screen run again at a later time or Download all the matching results:

Download Save


Sources / Further Reading:

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