scoutingstocks.com is a free web-based stock screening tool to find undervalued
stocks that meet the criteria
set out by Benjamin Graham himself in the Intelligent Investor book.
Our mission is to enable as many people as possible to make informed investments decisions based on sound
If you are interested in knowing what these principles are, keep reading!
WHAT IS VALUE INVESTING?
Benjamin Graham was the mentor of the greatest investor to ever live in Warren Buffett and is regarded as
the founding father of Value Investing.
Value Investing is an Investment Strategy that aims to create a portfolio of stocks based on their intrinsic
value, which can be very different compared to the price-tag that the market places on a company’s shares.
In particular, the valuation framework introduced by Benjamin Graham in the Intelligent Investor covers
seven criteria that can be used to filter through common stocks and spot quality investment opportunities:
- Adequate Size of the Enterprise
Although the threshold set out by Benjamin Graham in his book was of $100 million of annual sales for an
industrial company, we have decided to revise this figure to $500 million, which is a more up-to-date
estimate of what an adequately-sized business should be according to Jason Zweig.
- A Sufficiently Strong Financial Condition
According to Benjamin Graham, a company’s Current Assets should be at least twice its Current
(2:1 Current Ratio). Furthermore, Long Term Debt should not exceed Net Working Capital (Current Assets –
Current Liabilities). The latter has been referred to as “Liquidity” on our homepage.
- Earnings Stability
Based on the Intelligent Investor, a stock should have recorded positive earnings for each one of the
ten years to be taken into consideration.
- Dividend Record
Similarly, a prototypical value investor should only consider stocks that have uninterruptedly paid
dividends for the past 20 years.
- Earnings Growth
According to Benjamin Graham, a company should have increased its Earnings per Share (i.e. Net Income
Share) by at least one-third (33%) in the past ten years. The percentage increase has been calculated by
using three-year averages ten years apart, as suggested in the Intelligent Investor.
- PE * PB
- Moderate P/E Ratio
- Moderate Ratio of Price to Assets
Last but not least, Benjamin Graham states that the product of the Price-to-Earnings ratio (PE
Price-to-Book ratio (PB ratio) of a value stock should not exceed 22.5. In spite of being the
presented, the PE*PB product is presumably the most powerful metric provided in the Intelligent
has widely gained recognition as the “Graham number”.