The most rigorous of our value screens, our Three-Point search seeks out stocks that look inexpensive based on a trio of measures: the price/earnings, price/sales and price/cash-flow ratios. Why three? Think of a company's financial statement like one of those inflatable castles at kids' birthday parties (or adult parties; we're not judging). Push down on one side of the floor and it bulges on the other. So it is with income measures. Juice a company's sales by slashing prices and earnings will take a hit. Big write-offs for past mistakes will also cut into earnings, even though they won't affect cash flow.
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Raaj
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