S&P Analyst Richard Tortoriello recommends to use 'Capital Expenditures to Property, Plant and Equipment' as a red flag in his book 'Quantitative Strategies for Achieving Alpha'. This ratio shows the capital intensity of a company. In his studies, Tortoriello found that investing in companies with lower Capex to PPE generates higher returns.
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How to detect earnings manipulation and to avoid a permanent loss of capital<blockquote>After all, you only find out who is swimming naked when the tide goes out. more...