Profitable businesses that earn a high return on equity, turn their profit into cash and carry little debt, while the share price holds a long-term uptrend.
Prices to · fundamentals for 1,859 of 2,353 stocks (growth figures for 1,561) · ASIC shorts T+4 · Not financial advice
Market regime · S&P/ASX 200 (XJO)
Neutralas of
Close
9,065.1
vs 50-day
+3.1%
vs 200-day
+2.7%
Off 52w high
−2.5%
Mixed: XJO is above its 200-day average but not in a full uptrend.
Ranked picks
PassFailUnknown (data missing, or not meaningful for this company)
Dots follow the rule order:11. High return on equity22. Healthy profit margin33. Profit that turns into cash44. Little debt55. Liquid enough to trade66. Long-term uptrend77. Revenue not shrinking (scoring only)Hover a dot for the evidence.
Showing 29 of 1,769 ranked stocks. Triggered and setup first.
Pivot is the top of the base: the breakout level, and the exit if the price closes back below it. Growth compares the latest reported period with the same span a year earlier: TTM is the trailing 12 months, FY a full year, HY a half year, and F marks a figure computed from a company filing. "n/a" means we do not hold the figure, never that it is zero; "n/m" means it is not meaningful (growth beyond +500% or below −95%, or a ratio for a bank, insurer or other financial).
The method
Quality compounders · Shorted
This is our own strategy, and a different kind of screen from the others. They look for price momentum and fast growth; this one looks for businesses that are already good: they earn a high return on the money shareholders have left in them, keep a healthy share of every dollar of revenue as profit, turn that profit into cash, and do not lean on borrowing to do it.
A company like that can reinvest at high rates of return for years, which is what compounding means. Berkshire Hathaway's published acquisition criteria ask for the same thing in plain words: businesses earning good returns on equity while employing little or no debt. A trend filter keeps the list to stocks the market is not marking down, because a good business can still be a falling share price for a long time.
Every ratio is computed from one reporting period, the latest full year or the latest twelve months when those are newer, and a balance sheet at or up to six months before it, in the company's reporting currency. Banks, insurers and other financials read unknown on cash conversion and leverage, where those ratios are not meaningful, so they rank as watch at most. Property trusts' profit and EBITDA include revaluations of their properties, which can flatter or depress them in any one year.
Metadata
Style
quality
Holding period
Years
Risk posture
Reassess when a quality test fails at the next result, or when the price closes below its 200-day average and stays there.
Universe
ASX equities with at least 60 sessions of price history; only those with at least A$250,000 average daily turnover can trigger
Refresh cadence
Daily, after the evening price sweep
Rules
7
The rules
Every rule resolves to pass, fail or unknown for every stock. Unknown means the data is missing, or the figure is not meaningful for this company: it never counts as a pass, and a stock cannot trigger while a core rule is unknown. Rules marked scoring only order the list without gating it. The score is the rules' weights earned: a pass earns more the more decisively it passes, and a trigger rule that has not fired yet earns part of its weight for how close the relevant measure is to its threshold, so the setups nearest to triggering rank first.
1
Rule 1: High return on equity
CoreData source: Company fundamentals
The rule
Own businesses that earn a high return on the capital shareholders have in them.
How we test it
Pass when return on equity, net profit over the average of opening and closing shareholders' equity, is at least 15%. Fail below 15%, or when equity is zero or negative. Unknown when either equity figure is missing, or when average equity is under 10% of average total assets, where the ratio says more about borrowing than quality; banks, insurers and other financials are exempt from that test, because their balance sheets are leveraged by design. Net profit is the latest full year's, or the latest twelve months' when those are newer, in the reporting currency.
2
Rule 2: Healthy profit margin
CoreData source: Company fundamentals
The rule
Keep a meaningful share of every dollar of revenue as profit.
How we test it
Pass when net profit is at least 10% of revenue for the same period. Fail below 10%. Unknown when revenue is missing, zero or negative, or net profit is missing.
3
Rule 3: Profit that turns into cash
CoreData source: Company fundamentals
The rule
Reported profit should be backed by cash coming in, not only by accounting.
How we test it
Pass when free cash flow (operating cash flow less capital expenditure) is positive and at least 0.8 times net profit for the same period. Fail when net profit is zero or negative, when free cash flow is zero or negative, or when it is under 0.8 times net profit. Unknown when either figure is missing, and for banks, insurers and other financials, where the ratio is not meaningful.
4
Rule 4: Little debt
CoreData source: Company fundamentals
The rule
Prefer businesses that employ little or no debt.
How we test it
Pass when the company holds net cash, or when net debt is no more than 2.5 times EBITDA (normalised EBITDA when the source publishes it, otherwise statutory). Net debt excludes lease liabilities: total debt minus leases minus cash, from the balance sheet at or up to 6 months before the profit period. Fail above 2.5 times, or when there is net debt and EBITDA is zero or negative. Unknown when net debt cannot be measured, when there is net debt but no EBITDA, and for banks, insurers and other financials, where it is not meaningful.
5
Rule 5: Liquid enough to trade
CoreData source: Daily prices
The rule
Stick to stocks that trade enough to buy and sell without moving the price.
How we test it
Pass when the average daily turnover (close times volume) over the last 20 sessions is at least A$250,000. The same floor excludes sub-cent stocks, whose prices are stored to 2 decimal places and are too coarse to measure. Unknown without 20 sessions of price and volume.
6
Rule 6: Long-term uptrend
CoreData source: Daily prices
The rule
Own quality while the market agrees: the share price is above its long-term average.
How we test it
Pass when the close is above the 200-day simple moving average. Unknown without 200 sessions of price history. Until it passes, the stock scores higher the closer its relevant measure is to this rule's trigger threshold, so the setups nearest to triggering rank first.
7
Rule 7: Revenue not shrinking
Scoring onlyData source: Company fundamentals
The rule
A compounder grows its sales, or at least holds them.
How we test it
Pass when revenue is up or flat on a year earlier, a growth of 0% or more: the latest full year against the one before, or the latest twelve months or half-year against the same span a year earlier when those are fresher. Fail when revenue fell. Unknown when there is no revenue growth figure.
What this cannot see
Reported financial statements cover 1849 of the 2353 stocks evaluated. Where a ratio cannot be measured the quality rules read unknown, never pass, so those stocks cannot trigger.
Ratios use the company's reporting currency, from one period and a balance sheet at or up to six months before it. A company that reports in US dollars is measured in US dollars.
Banks, insurers and other financials read unknown on cash conversion and leverage, where those ratios are not meaningful, so they rank as watch at most.
Property trusts' profit and EBITDA include revaluations of their properties, which can flatter or depress the ratios in any one year.
Net debt excludes lease liabilities, so a company with large leases carries more fixed obligations than its net debt shows.
Statements arrive when companies report, twice a year for most ASX companies, so the ratios can be months old.
Everything is measured on end-of-day prices after the evening sweep. We do not see intraday breakouts, the time of day a move happened, or news released after the close.
Prices are stored to 2 decimal places, so sub-cent stocks cannot be measured reliably; the A$250,000 turnover floor excludes them.
This is a screen, not a recommendation. Nothing here is financial advice.
