AAII Stock Ideas: Oberweis Octagon Strategy

Investing in Small Companies Using the Oberweis Octagon Screen

  • Rapid annual growth in revenue (sales)
  • Rapid annual growth in pretax income
  • “Favorable” recent (quarterly) trends in revenue and earnings growth, ideally showing acceleration
  • Low price-earnings ratio in relation to underlying growth rate
  • Low price-to-sales ratio
  • Strong price strength relative to the market
  • Products or services that offer the potential for strong future growth
  • Review of company financial statements, especially the footnotes, to attempt to identify future problems

Small Companies

Growth in Revenues and Earnings

Early Earnings Acceleration

Value Elements: Low Relative Price-Earnings Ratio and Low Price-to-Sales Ratio

Strong Price Strength Relative to the Market

Future Growth Potential

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