France Stocks: Intrinsic Value

Keeps profitable businesses. On the current valuation it lowered the Top N return at every threshold tested.

Drops businesses whose overheads absorb their gross profit. On the current valuation it lowered the Top N return in every mode.

Around -50 it drops only the most indebted companies, which helped Traditional Value slightly. Stricter thresholds lowered the return.

In Tech, 10% and above kept the cheap companies still growing; the gain was large but not consistent across samples. No effect in Traditional Value.

At -0.10 or 0 it drops companies whose growth investment lost money, which helped Traditional Value slightly. Higher thresholds lowered the return.

At 10 or below it drops only extreme prices against book value, which helped Tech Value slightly. Tighter thresholds lowered the return outside Tech.

Leaves out companies whose 15-year profit projection cannot be made: a loss in one of the latest three years, no book value to measure growth on, or a return on equity at or below zero. Their Profit value is the book value alone, so without this filter the average still includes them on the other two values. On the current valuation it lowered the Top N return in every mode.

Leaves out companies whose 15-year free cash flow projection cannot be made: operating profit or free cash flow at or below zero in one of the latest three years, a change in working capital (from the cash flow statement) above half of operating profit, or a return on capital at or below zero. Technology and Communication Services add half of R&D after tax to NOPAT. Banks are not held to it: their working capital is their loans and deposits. On the current valuation it lowered the Top N return more than any other filter.

Collapses the same legal entity listed on multiple exchanges into a single row. For example, Truist Financial appears on the New York Stock Exchange and on two German exchanges; with this on, only the primary US listing is shown. Recommended for portfolio construction; turn off when you need to inspect each individual listing.

After years of losses, or buybacks larger than the book, the book value is close to zero, so the return on equity and the Profit value explode and the company jumps to the top of the list. Over 36 years of history in 21 countries, leaving these companies out kept the Top N return the same (between −0.2 and +0.3 points a year): it tidies the top of the list, it does not raise the return.