A FA study based on pe and roce, comments please

I made (tried to do so rather) an analysis of indian stocks based on 2 criteria, PE and Roce, to get a list of stocks which has the best combination of both of these values. In other words, stocks which have a high growth potential and are available at cheap price. I did this study on the basis of the book "The little book that beats the market."

I obtained the above data from www.icicidirect.com and I am not very much sure on the quality of the data. However, even if 80% data is accurate, then the average result wont be very inaccurate.

Please find attached the csv files which list companies with best companies at top and worst at the bottom (the lowest score of "best combo" signifies best scrips).

Incidently, the scrips found on the top are showing positive technical trend, eg, hinduja tmt is showing a divergence between price and macd.

Please comment to improve this method of screening stocks and on individual stocks as well.

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers. Besides, PE, ROCE etc you are ignoring other aspects, such as market share, quality of top management, growth potential in the industry, % of productive assets to total assets, kind of leverage the firm employs and ability of the firm to service its debt, cyclical nature of the companies, type of buyers and their purchasing power, brand value, employee attrition and lot lot more.

Hmm...we were talking analysis stuff on a quiet sunday afternoon and you have to bring logic into it!

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers.

hi Ravi

where u get the funda data from?
canyou give the bse code and/ or nse code for your excel sheets.

In Amibroker u can incorporate the fundas.

Hello,
By comparing the PE ratios of different industry stocks, you are comparing ice-creams with screw drivers. Besides, PE, ROCE etc you are ignoring other aspects, such as market share, quality of top management, growth potential in the industry, % of productive assets to total assets, kind of leverage the firm employs and ability of the firm to service its debt, cyclical nature of the companies, type of buyers and their purchasing power, brand value, employee attrition and lot lot more.

One way of avoiding this is to take the ratio [Industry PE/Stock PE] instead & look for ones with a Relative PE of <1. Also RONW is a better measure than ROCE.

One way of avoiding this is to take the ratio [Industry PE/Stock PE] instead & look for ones with a Relative PE of <1. Also RONW is a better measure than ROCE.

Regards,
Kalyan.