Negative Enterprise Value Screen Strategy


Pick the best value stocks with our Stock Ranks, screening and valuation tool. Try the live demo today.

Stock Screen Strategy and Backtest Series

Negative Enterprise Value

I’ve written extensively about how companies with negative enterprise values are great value stocks and in a previous article, I went through how you can search negative EV stocks off the Yahoo screen. But let’s see how the screen actually performs over a longer period.

In case you aren’t familiar with the formula for EV:

Enterprise Value = Market Capitalization + Total Debt – Excess Cash

Excess Cash = Total Cash – MAX(0,Current Liabilities-Current Assets)

Negative EV Screen Strategy

If done correctly, looks like this strategy is hugely profitable, but it does come with a lot of volatility. On paper of course. Don’t know whether anyone has ever done it so I can’t guarantee that this works 100%.

Looking at the results below, you can see some monster gains by the negative EV stocks as well as huge drops which would have turned anyones stomach.

Neg EV vs S&P Yearly Results

Negative EVS&P500
200147.5%-2.5%
20028.5%-23.8%
2003237.7%28.5%
200472.8%3.9%
20057.0%10.3%
200637.0%10.4%
2007-41.4%-4.8%
2008-53.8%-38.1%
2009192.3%47.4%

Backtest Conditions

  • No OTC stocks
  • No financial stocks
  • No ADR stocks
  • EV is less than 0
  • Daily volume greater than 20k

Backtest Results

I’m not surprised that negative EV stocks perform well overall given that even my random set of neg EV stocks beat the market last year. But over a span of 9-10 years, the result is mind blowing.

Negative Enterprise Value Screener

In case you missed it, you can view negative EV stock screener for yourself. Results are updated every few days.


Disclosure

No positions in any stocks mentioned

Pick the best value stocks with our Stock Ranks, screening and valuation tool. Try the live demo today.

Ready to try Old School Value?

TEST DRIVE THE DEMO TODAY