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author Olivier Dambrine - October 27, 2016

The Magic Formula has featured in the scorecard for quite some time but we never really added any additional insights. A stock might get a high ranking, but is this mainly because of an excellent score on one of the ratios or does the company have a great score on both? And if a stock has a good Earnings Yield or ROC, how does it compare to other companies, i.e. where does it sit on the distribution? And how are companies distributed for each of the ratios for your specific stock screener selection?

To make it much easier to understand the relative cheapness and quality of the selected company, we created the magic formula scorecard. This scorecard is available for all screener members and is fully integrated into the existing scorecard. It adds the following visualisations:

  • A star rating which visualises the percentile to which the company belongs in the filtered stock universe. (Taking into account the main filters of your last screen)
  • The formula behind each of the ratios and the values behind the components used in the formula.
  • A histogram that displays the distribution of the companies across buckets with equal value ranges. By hovering over the different bars in the chart, you can see the mean of this group and how many companies have an Earnings Yield or ROC within that range. The chart also shows the bucket to which the selected company belongs in a different color. The best companies appear on the right hand side of the chart.

All this goodness is available today and we're convinced that it will really help you make sense of the Magic Formula without having to do a detailed analysis. By adding additional filters to your screen, you can see where your stock is positioned on the histogram of the filtered stock universe. (for example: Microsoft compared to all large cap IT companies,... etc.)

We have more insightful reports in the pipeline and hope to release them all during the coming months. This should make the scorecard even more valuable for assessing stocks in record time. If you have ideas on how to make the scorecard even better, do not hesitate to contact us. We love new ideas!

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