Best undervalued stocks

Screening Filters

1. Market Cap ≥ $2,000,000,000

   • Purpose: Focus on mid- and large-cap companies.
   • Rationale:
     • Larger firms tend to have better disclosure, analyst coverage, and liquidity, making valuation metrics more reliable.
     • This avoids tiny, speculative micro-caps that can look “cheap” on paper but are very risky and illiquid.
     • For “best undervalued stocks,” investors typically mean established businesses, not penny stocks.

2. Exchange: XNYS, XNAS, XASE (NYSE, NASDAQ, AMEX)

   • Purpose: Restrict to major U.S. stock exchanges.
   • Rationale:
     • These exchanges have stricter listing standards, better reporting quality, and deeper liquidity.
     • That helps ensure the “undervaluation” you see is more likely due to mispricing, not bad data or weak governance.

3. Region: United States

   • Purpose: Match your request to focus on U.S. companies.
   • Rationale:
     • Limits results to firms primarily operating and reporting under U.S. regulations and accounting standards.
     • Ensures the universe aligns exactly with “US stock market.”

4. Return on Equity (ROE) ≥ 10%

   • Purpose: Ensure the companies are reasonably profitable and efficient at generating returns on shareholders’ capital.
   • Rationale:
     • A stock can be “cheap” because it’s a weak or structurally broken business (a value trap).
     • Requiring ROE ≥ 10% filters for companies that have historically earned solid returns, aligning more with “quality value” rather than distressed names.

5. Annual Revenue YoY Growth ≥ 5%

   • Purpose: Require at least modest growth in the underlying business.
   • Rationale:
     • Undervalued plus growing revenue is more attractive than undervalued but shrinking.
     • A minimum 5% growth helps avoid companies in structural decline that may be cheap for good reason.
     • This leans toward “undervalued quality” rather than pure deep value in turnaround/declining sectors.

6. P/E (Price to Earnings, TTM) between 3 and 15

   • Purpose: Identify stocks trading at relatively low earnings multiples, but filter out extremes that could be noisy or suspicious.
   • Rationale:
     • “Undervalued” is commonly defined by low valuation ratios. A P/E up to 15 is generally below or around long-term market averages, often signaling value.
     • A lower bound of 3 prevents including names with abnormally low P/E that may be due to one-off events, distorted earnings, or impending trouble (e.g., lawsuits, cyclical peaks).
     • The 3–15 band tries to capture companies that look meaningfully cheaper than typical growth names, without diving into the riskiest outliers.

7. P/B (Price to Book) between 0.3 and 2

   • Purpose: Target stocks whose market price is low relative to their net asset value, but again avoid the most extreme outliers.
   • Rationale:
     • A P/B under 2 is often used as a basic “value” threshold, especially in asset-heavy sectors (financials, industrials, etc.).
     • Values below 1 can signal that the market prices the company below the value of its net assets, a classic sign of potential undervaluation.
     • The lower bound of 0.3 excludes ultra-low P/B names that may be near-distressed, where the balance sheet or assets might be impaired (another value trap control).

Why the Results Match Your Request

• Focus on undervaluation:

  • The P/E (3–15) and P/B (0.3–2) ranges are classic value-investing filters, directly targeting stocks that trade cheaply relative to earnings and book value.

• Emphasis on quality, not just cheapness:

  • ROE ≥ 10% and revenue growth ≥ 5% ensure the companies aren’t just statistically cheap but also reasonably profitable and still growing, which is closer to “best undervalued” rather than simply “lowest multiples.”

• Risk and practicality:

  • Market cap ≥ $2B and listing on major U.S. exchanges keep you in more liquid, established names, where valuations are more meaningful and execution risk (trading, governance, data quality) is lower.

• Alignment with “US stock market”:

  • The exchange and region filters ensure all results are genuinely part of the U.S. equity universe you asked about.

Taken together, these filters aim to surface established, profitable, growing U.S. companies that trade at relatively low valuation multiples, which is a practical, data-driven interpretation of “the best undervalued stocks currently in the US stock market.”