A Powerful New Tool for Individual Investors

My Foolish readers probably know that I like tools that help individual investors more easily find and analyze investments. I've showcased YCharts.com a few times, but recently I had the chance to play with RobotDough. If Finviz and SEC Watch got together, the result might resemble this innovative new platform.

How it works
RobotDough's biggest strength is its stock screener. Intended as a Capital IQ for individual investors, it's considerably more robust than anything else I've seen on the Web. While it may not have every metric under the sun -- it notably lacks the PEG ratio and insider ownership -- it does have many criteria that other screeners lack, like days sales outstanding and preferred dividends.

However, RobotDough's ability to create freeform equation-style screens truly distinguishes its screener from the competition. Most screeners will let you search for companies with a market cap between $500 million and $10 billion, but that's about as complex as they get. RobotDough lets you mix metrics and create equations from them. If I want to search for companies with an enterprise value less than half their market cap, I can just enter "Enterprise value < 50% * Market cap".

To demonstrate, I created a screen to find relatively liquid stocks with positive free cash flow, a low enterprise value compared to their market cap, and a low enterprise value-to-free cash flow ratio. I also looked for positive accounts receivable, as a trick to weed out any mutual funds. This screen gives us a set of companies whose strong profitability and large cash positions may escape the market's notice.

I used the following criteria:

  • Only stocks listed on the NYSE, Nasdaq, or AMEX
  • Price > $2
  • Market cap > $300 million
  • Volume > 250,000
  • Accounts receivable > 0
  • Enterprise value < 50% * Market cap
  • Free cash flow > 0
  • (Enterprise value / TTM Free cash flow) < 10

Company

EV / Market Cap

EV/FCF

Tessera Technologies (Nasdaq: TSRA  ) 0.43 5.62
Tellabs (Nasdaq: TLAB  ) 0.37 5.80
RealNetworks (Nasdaq: RNWK  ) 0.31 4.15
Comtech Telecomm (Nasdaq: CMTL  ) 0.48 4.93
American Superconductor (Nasdaq: AMSC  ) 0.46 4.61
China Yuchai International (NYSE: CYD  ) 0.49 2.06

Source: RobotDough.

Of course, these are just screen results, not recommendations. No screen gives perfect results without further research.

Still, you can save any screens you like, and either keep them private or share them with other members, who can follow and comment on them. Once you've saved a screen, you can backtest it. RobotDough will also alert you when new companies fall into its criteria, and monitor the continuing performance of that particular strategy. Currently, the site offers 101 public strategies to help investors glean ideas for personalized screens -- or take the easy route by following the top performer.

Digging deeper
Once you've run your screen, you can use some of RobotDough's other features to dig deeper into a company. You can look at financial statement data going back quarterly for a full year, or annually for five years. Better yet, the site automatically highlights any red flags within that information.

For example, the Tellabs balance sheet points out accounts receivable, and explains that AR is growing faster than revenue, suggesting that the company may be extending more favorable credit terms to its buyers in an attempt to keep demand up. That strategy's frankly unsustainable.

You can see all of a company's red flags on a separate tab. If you end up buying shares, you can enter that into the portfolio section, and RobotDough will automatically alert you by email if a new red flag shows up. This alone should save investors hours of digging through quarterly reports to find such items manually.

Final thoughts
Just a few months after its debut, RobotDough remains in invitation-only beta, so it's still working some kinks out. The backtesting tool isn't fully functional yet, and inaccuracies crop up with certain data types. However, this is a known issue; CEO Wilton Risenhoover assures me it should be fixed soon, and that the company is rigorously auditing all its data.

Despite these few issues, RobotDough looks like a tool I'll use often, both to keep track of the stocks I own and to help me find new ones. If you try it out, let me know what you think by leaving a comment below.

Fool contributor Jacob Roche holds no position in any of the stocks mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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