These were as follows:
1. An earnings-to-price yield at least twice the AAA bond rate.
2. A P/E ratio less than 40% of the highest P/E ratio the stock had had over the past 5 years.
3. A dividend yield of at least ⅔ of the AAA bond yield.
4. A stock price below ⅔ of tangible book value per share.
5. A stock price below ⅔ of Net Current Asset Value.
6. A total debt less than book value.
7. A current ratio greater than 2.
8. A total debt less than 2 times Net Current Asset Value
9. An earnings growth of prior 10 years at a minimum 7% annual compound rate
10. Stability in growth of earnings with no more than 2 declines of 5% or more in year end earnings in the ten years prior are permissible.
Taking Intel as an example, we will test each of these metrics to see how Intel scores.
1. An earnings-to-price yield at least twice the AAA bond rate.
>> At the time of writing this blog post, this is around 4.01%. Taking Intel (INTC) as an example, the current rate is around 8.15%.
2. A P/E ratio less than 40% of the highest P/E ratio the stock had had over the past 5 years.
>> For Intel, its 12.26% as shown below, which is around 69.2% of the highest PE for Intel of 17.70 in past 5 years.
3. A dividend yield of at least ⅔ of the AAA bond yield.
>> Current Intel dividend yield is 3.41% which is higher than 2/3rd of 4.01%
4. A stock price below ⅔ of tangible book value per share.
>> This is not true. INTC is trading at $28.71, where as book value per share is $12.93
5. A stock price below ⅔ of Net Current Asset Value.
>> This is not true. Intel's Net Current Asset Value was around $6 (= Current Assets - Current Liabilities / Total shares)
6. A total debt less than book value.
>> Intel's total debt is around $22.6B and book value is $103B
7. A current ratio greater than 2.
>> Intel's current ratio is 2.58
8. A total debt less than 2 times Net Current Asset Value
>> Total debt is around $22.B and Net Current Asset Value is around $25B
9. An earnings growth of prior 10 years at a minimum 7% annual compound rate
>> Earnings growth of prior 10 years at Intel is around 1 to 2% at best
10. Stability in growth of earnings with no more than 2 declines of 5% or more in year end earnings in the ten years prior are permissible.
>> This is probably true.
Overall, Intel misses on a few tests but comes out strong on several others.
