Top value stocks

Screening Filters

1. market_cap_category: large, mid

• Purpose: Focus on established companies.
• Rationale: “Top value stocks” usually implies businesses with enough scale, stability, and liquidity to be considered high-quality candidates. Large- and mid-cap stocks are more likely to have reliable financial reporting, stronger balance sheets, and less extreme speculation than small caps.

2. free_cash_flow_ttm min: 0

• Purpose: Keep only companies generating positive cash flow.
• Rationale: Value investing is not just about low multiples; it also favors companies that can actually produce cash. Positive free cash flow helps confirm the business is financially healthy and supports dividends, debt reduction, or reinvestment.

3. return_on_equity min: 0

• Purpose: Exclude companies destroying shareholder value.
• Rationale: A positive ROE suggests the company is generating earnings relative to shareholder equity. For value stocks, this helps avoid cheap stocks that are cheap for a reason, such as persistently unprofitable businesses.

4. current_ratio min: 1

• Purpose: Screen for adequate short-term liquidity.
• Rationale: Value stocks should generally have enough near-term assets to cover near-term liabilities. A current ratio above 1 reduces the chance of finding distressed companies with severe balance-sheet risk.

5. pe_ttm max: 15

• Purpose: Identify stocks with modest earnings multiples.
• Rationale: This is a classic value filter. A low P/E helps find stocks that may be priced conservatively relative to their current earnings.

6. p_fcf_ratio max: 15

• Purpose: Find stocks trading at reasonable prices relative to free cash flow.
• Rationale: Some companies look cheap on earnings but not on cash flow. This filter reinforces the value theme by requiring the market price to be reasonable compared with cash generation.

7. pb_ratio max: 3

• Purpose: Target stocks that are not heavily priced versus book value.
• Rationale: Book value matters more for asset-heavy or mature businesses, which are common in value screens. A low-to-moderate P/B can indicate the stock is not overvalued relative to its net assets.

8. ps_ratio max: 3

• Purpose: Avoid paying too much for revenue.
• Rationale: This is useful for companies where earnings may be temporarily distorted. A restrained P/S ratio helps ensure the stock is not expensive even on a sales basis.

Why these filters work together

• They combine valuation filters (P/E, P/FCF, P/B, P/S) with quality and financial health filters (positive FCF, positive ROE, current ratio above 1).
• That combination is well suited for finding true value stocks: companies that are not only cheap, but also fundamentally sound.
• Limiting the universe to large and mid caps further improves relevance by prioritizing more established names over speculative low-priced stocks.

Why Results Match:

• The screen is designed to find stocks that are inexpensive relative to earnings, cash flow, assets, and sales.
• It also ensures the companies are profitable or at least efficient, liquid enough to meet obligations, and large enough to be considered established value opportunities.
• In short, these filters aim to uncover quality value stocks, not just statistically cheap stocks.