Interest coverage ratio generates a 15% average annual return

The Interest Coverage ratio is another example of a fundamental anomaly using company reported data. Interest Coverage is defined as (pretax income + interest expense) / interest expense. This ratio measures a firm’s ability to meet interest payme

nt obligations and a good sign of corporate health. Research Wizard contains Interest Coverage as a predefined data item and we used this item in our test selecting only the 10% of firms with the highest Interest Coverage ratio.

Using 4 week holding period returns, this strategy has produced a backtested annual average return of 15% from 2002-2010. Here are the annual details:

High Interest Coverage S&P 500

2002 -9% -22%

2003 61% 29%

2004 videos gays 18% 11%

2005 13% 5%

2006 11% 16%

2007 10% 6%

2008 -37% -37%

2009 lesbian porno 44% 26%

2010 25% 15%

Avg 15% 5%

Furthermore, the compounded annual growth rate for this time period is 12% and the backtested results of $10,000 invested at the end of 2001 are below:

Since Research Wizard contains a wide variety of fundamental data, strategies like these can be easily tested in a matter of minutes. Please click here to learn more about the screening and backtesting power of a stock research system built to help you identify winning strategies.

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