Does Alliance Data Systems Corporation ($ADS$)’s Magic Formula of 3059 Signal a Buying Opportunity?
The formula is calculated by looking at companies that have a high earnings yield as well as a high return on invested capital. Benjamin Graham, professor and creator of value investing principles, was one of the first investors to consistently screen the market looking for bargain companies based on value factors. He didn’t have databases such as ValueSignals at his disposal, but used people like his apprentice Warren Buffet to fill out stock sheets with the most important data. Graham was always on the watch for firms that were so discounted, that if the company went into liquidation, the proceeds of the assets would still return a profit.