The 3x Screen was inspired by Porter himself, who challenged the Porter & Co. analyst team to create a filtering tool to find companies with high capital efficiency, steady revenue growth, and that trade at reasonable valuations… and to backtest the results to ensure the screening criteria selected stocks that generated market-beating gains over time.
One of the best screens we found in this search applies the following criteria:
- Market capitalization of at least $300 million
- Return on assets (“ROA”) of at least 15% over the previous five years
- Return on equity (“ROE”) of at least 20% over the previous five years
- Free cash flow (“FCF”) margins of at least 10% over the previous five years
- Sales growth of at least 5% over the previous five years
- P/E ratio of 25 or below
Click here to access previous 3X Screens.