The Japan Analytics App has large amounts of data on all listed companies, some have said almost too much!
The Screening Module has been designed to help narrow down the search for attractive stocks.
In this post we will demonstrate some of our favorite screening ‘factors’ and select some attractive mid-cap companies.
The Screening Module has 70 filters and 40 factors to chose from. The factors use the latest trailing twelve-month (TTM) data wherever possible.
Our preference is to start with the factors and then use the filters to refine the factor results later.
Our blank canvas is below showing the currently listed 3747 companies.
For practicality and to avoid overloading our servers, we are limit the screening to ten factors and/or filters. As we shall see, as factors are added the number of companies remaining quickly falls to a small number so this limitation is not really a constraint.
Factors are grouped into four types: – Revenues & Margins, Returns, Scores and Valuation.
Our first focus is on margins. Of the five margin factors, our preference is “Core NOPAT Margin” which is Core Operating Income after tax as a percentage of sales.
(Note that this margin only applies to non-financial companies. For those wishing to include financials, use Operating Profit Margin instead.)
The average is 3.7% but our threshold is 6% so we will set the Factor Range to “Top Quartile”. This narrows the field to 867 companies with a minimum of Core NOPAT Margin of 6.3%.
To view the result, press VIEW COMPANIES and the list will appear on the second screen sorted by descending market cap.
Next we add a return factor.
Of the six return factors,our preference is Residual Core Return which is a company’s residual income (core operating income less a 6% charge of the use for net operating assets) divided by its net operating assets at the start of the period. The average is 3.7% which we will uses as the threshold, so we select the “Top Half”.
(Note that companies with negative net operating assets are eliminated here. These are often very interesting companies, and can be screened for using the “Return on Net Oper. Assets” factor instead.)
To view the result, press VIEW COMPANIES and the list will appear on the second screen sorted by descending market cap. The list is now 687 companies.
For growth investors, we would now suggest adding the “Revenue Growth TTM” factor in “Revenues & Margins” but as we have more of a value orientation, we will use our proxies for earnings momentum, the “Results Score” and “Results Score 3M▲” factors.
This narrows the field to 231 companies and removes some of the fastest growing companies whose earnings momentum may be peaking.
For valuation, we will use the “Upside/Downside TTM” and “Upside/Downside Forecast” factors which are calculated using the Japan Analytics’ Residual Income Valuation model. The factors are the amount by which the stock has to appreciate or depreciate to equal our no-growth valuation.
The screen now has only 100 companies.
We can then apply filters such as cap range, sector or index. In this case we select “Mid” from the cap range and get 29 companies.
Again for the full list, select “VIEW COMPANIES”.
From here the individual companies can be viewed in the Company Analysis module by selecting the circle next to the companies code number and selecting “LOAD INTO ANALYTICS” at the bottom left of the screen.
It is from this point that the real work starts!
Creating this screen took less than a minute and the screen can be saved for later reuse to be run again updated for current prices and factor results.
We hope you enjoy hunting for stocks using our Screening tool as much as we do!
The Japan Analytics Team