Visualizing the Magic Formula using a scatter plot for companies less than 2 billion.
The X-Axis represents EV/EBIT as a measure of “cheap companies”. The Y-axis attempts to rank “good companies” using the average ROIC over the past 4 years.
The upper left quadrant clusters good (high ROIC) and cheap companies (low EV/EBIT) and with the same color. The lower left is cheap companies but not as “good” (high ROIC) as the upper left quad.
Plug and play to find companies reducing shares outstanding from 2015 to the MRQ or total liabilities. Industry, financial strength, revenue growth, exchange, market size are also options.
Supporting Data, Export to Excel at bottom
Article by Shadow Stock