SHOW ME THE UNDERVALUED STOCKS

Screening Filters

1. list_exchange: ['XNYS', 'XNAS', 'XASE']

   • Purpose: Limit results to stocks listed on major U.S. exchanges (NYSE, NASDAQ, NYSE American).
   • Rationale:
     • The user asked for “US market” stocks; these three exchanges capture the core of the U.S. listed equity universe.
     • Focusing on primary U.S. exchanges generally improves liquidity and data reliability, which matters when evaluating “undervaluation.”

2. market_cap: {} (no constraint)

   • Purpose: Do not restrict by company size.
   • Rationale:
     • Undervalued opportunities can exist in large caps, mid caps, and small caps.
     • Leaving this open allows the screen to capture value stocks across the full spectrum of the U.S. market, from established blue chips to smaller, potentially overlooked companies.

3. return_on_equity (ROE): {'min': '10'}

   • Purpose: Require a minimum profitability and capital efficiency (ROE ≥ 10%).
   • Rationale:
     • Purely “cheap” stocks can be low-quality or distressed.
     • By enforcing a reasonable ROE threshold, the filter tries to focus on companies that are both profitable and generating decent returns on shareholders’ equity.
     • This leans toward “quality value” rather than low-priced “value traps.”

4. debt_equity: {'max': '1.5'}

   • Purpose: Limit financial leverage (Debt/Equity ≤ 1.5).
   • Rationale:
     • Extremely indebted companies often appear “cheap” because the market is pricing in higher risk.
     • By capping leverage, the screen avoids many high-risk balance sheets and keeps the focus on companies that are not excessively financed by debt.
     • That supports the idea of sustainably undervalued businesses, not ones cheap solely due to financial distress.

5. pe_ttm: {'min': '0.01', 'max': '15'}

   • Purpose: Target stocks with a low price-to-earnings ratio based on trailing 12 months (0 < P/E ≤ 15).
   • Rationale:
     • Low P/E is a classic valuation metric for identifying potentially undervalued stocks: investors are paying fewer dollars per dollar of earnings.
     • The lower bound above zero filters out invalid or nonsensical values (e.g., negative P/E from losses, or zero).
     • The upper bound of 15 is below the historical average market P/E in the U.S., which helps isolate stocks priced cheaper than the broader market, consistent with “undervalued.”

6. pb_ratio: {'min': '0.01', 'max': '2'}

   • Purpose: Target stocks with a low price-to-book ratio (0 < P/B ≤ 2).
   • Rationale:
     • P/B compares market price to the company’s net assets; a lower P/B suggests the stock may be trading close to or below its accounting value.
     • Keeping P/B capped at 2 is another traditional value-investing criterion, especially for asset-heavy or financial companies.
     • The positive lower bound removes broken data or meaningless 0 values.

Why Results Match “Undervalued Stocks in the US Market”

• The exchange filter ensures we are firmly within the U.S. market (NYSE, NASDAQ, NYSE American).
• The combination of low P/E (≤ 15) and low P/B (≤ 2) directly implements common value-investing definitions of “undervalued” versus the broader market.
• The ROE ≥ 10% and Debt/Equity ≤ 1.5 filters add a quality and financial health layer, aiming to avoid cheap-but-broken businesses and instead emphasize companies that are both:
  • priced cheaply on earnings and book metrics, and
  • reasonably profitable with controlled leverage.

Together, these filters approximate a universe of U.S.-listed, fundamentally sound value stocks that are more likely to be genuinely undervalued rather than simply risky or distressed.