To build a screener for "CapExpanders," which identifies companies that are likely planning to expand their business, we need to focus on metrics that indicate capital investments, revenue growth, and strategic decisions suggesting business expansion. Below is a detailed screener setup for this purpose:
Screener Criteria:
Sales Growth:
Criteria: (Sales growth 3Years > 15) AND (Sales growth 5Years > 15)
Reason: Consistent sales growth over the past 3 to 5 years suggests that the company is expanding its market or product offerings.
Capital Work in Progress (CWIP):
Criteria: Capital work in progress > 0
Reason: CWIP indicates that the company is investing in new projects or expanding existing facilities.
Increase in Fixed Assets:
Criteria: (Net block > Net block preceding year) AND (Net block preceding year > Net block 3Years back)
Reason: An increase in net block over multiple years suggests ongoing capital investment in property, plant, and equipment, which typically aligns with expansion plans.
Debt to Equity Ratio:
Criteria: Debt to equity < 1.5
Reason: While expanding, companies might take on debt, but a healthy debt-to-equity ratio ensures that the expansion is sustainable and not overly risky.
Free Cash Flow (FCF):
Criteria: Free cash flow last year > 0 AND Free cash flow preceding year > 0
Reason: Positive free cash flow ensures that the company has internal funds available for expansion activities without solely relying on external funding.
Return on Capital Employed (ROCE):
Criteria: Return on capital employed > 12
Reason: A high ROCE indicates efficient use of capital, which is crucial when a company is expanding its operations.
Promoter Holding:
Criteria: Change in promoter holding > 0
Reason: An increase in promoter holding can be a sign of confidence in the company’s future prospects, often associated with expansion plans.
Market Capitalization:
Criteria: Market Capitalization > 1000
Reason: Focusing on mid to large-cap companies that are more likely to have the resources and stability to undertake significant expansion.
Piotroski Score:
Criteria: Piotroski score > 6
Reason: A higher Piotroski score is a good indicator of financial health, which is critical when companies are planning to expand.
Operating Cash Flow Growth:
Criteria: Operating cash flow 3years > 10
Reason: Growth in operating cash flow over the past three years indicates that the company is generating sufficient cash to support expansion activities.