What Stock Sage Is Designed to Do
Stock Sage is designed to help investors narrow a large stock universe into a smaller group of companies that may deserve additional research. The basic idea combines two questions:
- 1Is the company fundamentally qualified?
- 2Is its stock trading near its own 52-week low?
Stock Sage uses these conditions as a starting point for research, not as an automatic buy signal. A company appearing in Stock Sage means it passed the platform's required screening conditions at the time of the scan. It does not mean that its stock price cannot fall further, that the company is necessarily undervalued, or that the company is an appropriate investment for every investor.
Stock Sage's Fundamental Qualification
Earnings Requirement
A company must have positive earnings per share (EPS) in at least 4 of the previous 5 years.
This requirement helps Stock Sage focus on companies with a demonstrated history of profitability rather than companies whose investment case depends entirely upon future profits. It does not guarantee future profitability.
Balance-Sheet Requirement
For each of the five years examined, Total Assets must be greater than Total Liabilities.
This provides a basic balance-sheet strength requirement. It does not prove that a company has no debt or no financial risk.
Why Stock Sage Looks Near the 52-Week Low
After fundamental qualification, Stock Sage looks for qualifying companies trading near their own 52-week lows according to the platform's applicable price criteria.
A 52-week low is the lowest price at which a stock has traded during approximately the previous year. Stock Sage combines price location with fundamental screening because a lower stock price can sometimes create an opportunity to research a fundamentally qualified business at a potentially more attractive price or valuation.
A stock being near its 52-week low does not mean it is undervalued.
Prices can fall for many reasons, including:
- Declining earnings
- Changing business conditions
- Industry problems
- Company-specific problems
- Excessive previous valuation
- Broader market conditions
Therefore, the 52-week-low scan helps answer “What should I research?” It does not automatically answer “What should I buy?”
Stock Sage's Weekly Friday Scan
Stock Sage runs one scheduled scan every Friday. ETF Sage also runs one scheduled scan every Friday; this lesson focuses on the Stock Sage Friday scan.
The scheduled weekly Stock Sage scan searches the Stock Sage universe and applies the platform's screening requirements to identify companies that qualify for further research.
- 1
Friday Scan
- 2
Screen Companies
- 3
Apply Fundamental Requirements
- 4
Compare Price With 52-Week Range
- 5
Display Qualifying Results
The purpose of the weekly scan is to give users an updated group of fundamentally qualified companies whose prices meet Stock Sage's applicable 52-week-low criteria.
While data is being retrieved and processed, the interface may display a processing indicator. Users should allow processing to complete before treating the results as final for that scan. Market-data availability and processing time can affect how quickly results appear.
Understanding Today's Results
Today's Results contains companies that met the Stock Sage screening conditions for the applicable scan. Where available in the interface, results can provide information such as:
- Ticker symbol
- Company name
- Five-year EPS history
- Current stock price
Today's Results is a discovery list — not a portfolio and not a list of stocks the user is being told to purchase.
The purpose of Today's Results is to give the investor a more manageable group of companies for further investigation. A company appearing in Today's Results has passed the applicable Stock Sage screening requirements for that scan. It has not automatically been established that:
- The company is undervalued
- The stock price has reached its bottom
- The stock price will increase
- The company is appropriate for every investor
Using the Research Filters
Stock Sage provides additional research filters to help users organize or narrow research results.
Stock Buybacks
Can help the investor identify and examine companies that have been repurchasing shares where applicable.
Balance Sheet
Can help the investor further examine balance-sheet characteristics.
Profit Margin
Can help the investor examine the company's profitability characteristics.
Dividend Yield
Can help the investor identify and examine dividend-paying characteristics where applicable.
Filters are research tools. A company passing a filter should not automatically be considered a better investment than a company that does not.
Opening a Company for Further Research
Finding a company in Today's Results should normally lead to additional research. The user can open the available company information and investigate the business in greater detail. Depending upon available data, this research can include items such as:
- EPS history
- Assets and liabilities
- Historical and current valuation information
- Profitability
- Price history
- 52-week high and low
- Analyst estimates or price-target information when available
- Other financial information available within Stock Sage
The Stock Sage scan narrows the research universe. The company research page helps the investor investigate why a company may or may not deserve continued consideration.
Lesson 3 — Researching a Stock will go much deeper into how to examine and interpret this information.
Adding a Company to a Watchlist
Discovering a company does not require an immediate investment decision. If a company deserves continued research or monitoring, the investor can add it to their Personal Watchlist where that functionality is available.
Personal Watchlist
The Personal Watchlist belongs to the individual customer. The customer can manage the stocks in their Personal Watchlist.
Stock Sage Watchlist
The Stock Sage Watchlist is a separate company-managed watchlist maintained by Stock Sage/company administration. Customers can view and use the Stock Sage Watchlist for research, but customers cannot modify its contents.
These are two separate watchlists. A later lesson will explain watchlists in greater detail.
A Simple Stock Sage Example
Consider a fictional company called XYZ Corporation. XYZ Corporation has the following five-year EPS history:
Year 1
Positive
Year 2
Positive
Year 3
Negative
Year 4
Positive
Year 5
Positive
4 of 5 years have positive EPS. Therefore, XYZ passes the EPS requirement.
XYZ Corporation's Total Assets are greater than Total Liabilities in all five years examined. Therefore, XYZ passes the balance-sheet requirement.
XYZ Corporation is also trading sufficiently near its 52-week low to meet Stock Sage's applicable price condition. Therefore, XYZ may appear in Today's Results.
What Has Stock Sage Established?
XYZ met the applicable Stock Sage screening criteria.
What Has Stock Sage Not Established?
- XYZ is necessarily undervalued
- XYZ's stock price has reached its bottom
- XYZ's price will rise
- The investor should purchase XYZ
What If a Stock Doesn't Appear?
A company may not appear in Today's Results for several reasons. For example:
- It may fail the EPS requirement.
- It may fail the Total Assets versus Total Liabilities requirement.
- It may not be sufficiently near its 52-week low under the applicable Stock Sage price criteria.
- Necessary data may not be available.
Not appearing in Stock Sage does not mean that the company is necessarily a bad investment.
It means the company did not satisfy the applicable Stock Sage scan requirements for that scan, or sufficient information may not have been available to establish qualification.
The Stock Sage Workflow
- 1
Friday Scan
- 2
Fundamental Qualification
- 3
52-Week-Low Screen
- 4
Today's Results
- 5
Company Research
- 6
Watch / Continue Research / Take No Action
Stock Sage narrows the research universe. The investor completes the research and makes the decision.
Knowledge Check
Choose an answer for each question, then check your response.