Which stocks are currently undervalued?

Screening Filters

1. Market Cap ≥ $2,000,000,000

   • Purpose: Focus on mid- to large-cap companies.
   • Rationale:
     • Larger companies tend to have more stable business models and better disclosure, making valuation metrics (P/E, P/B, EV/EBITDA) more reliable.
     • This avoids tiny, illiquid, or highly speculative stocks that may look “cheap” on paper but are risky or distorted by low trading volume.

2. Region: United States

   • Purpose: Limit results to U.S.-domiciled companies.
   • Rationale:
     • You specifically asked about the US market; this ensures the stocks operate under US regulations, accounting standards, and economic environment.
     • It also keeps comparisons between valuation metrics more consistent.

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

   • Purpose: Include only major US exchanges.
   • Rationale:
     • These exchanges have higher listing standards and liquidity.
     • It filters out OTC/pink sheet names where “cheap” prices can be due to poor reporting, very low liquidity, or higher fraud risk.

4. Return on Equity (ROE) ≥ 10%

   • Purpose: Ensure the companies are reasonably profitable and efficient in using shareholder capital.
   • Rationale:
     • A stock can be “cheap” because it’s a weak or declining business. By demanding ROE ≥ 10%, we tilt toward businesses that generate solid returns for shareholders.
     • Combining profitability with low valuation is a classic way to search for undervalued but quality companies, not just “value traps.”

5. P/E (TTM) between 5 and 15

   • Purpose: Find companies trading at relatively low earnings multiples.
   • Rationale:
     • A P/E under about 15 is often considered below or at the low end of long‑term averages for the broader market (which typically trades higher).
     • A minimum P/E of 5 removes some extreme outliers where earnings may be temporarily inflated or distorted (e.g., one‑off gains), which can make P/E misleadingly low.
     • This range is a practical proxy for “potentially undervalued based on earnings.”

6. P/B Ratio ≤ 1.5

   • Purpose: Identify companies trading not too far above their book value.
   • Rationale:
     • P/B ≤ 1.5 suggests the market isn’t assigning a very high premium over the company’s net assets.
     • Deep value investors often look for P/B near or below 1 as a strong undervaluation signal; 1.5 is a balanced threshold that still captures potential undervaluation without being too restrictive, especially for higher‑quality firms.

7. EV/EBITDA ≤ 10

   • Purpose: Ensure the enterprise is cheap relative to its operating cash earnings.
   • Rationale:
     • EV/EBITDA is less affected by capital structure (debt vs. equity) and some accounting choices than P/E.
     • An EV/EBITDA below ~10 is often viewed as a reasonable value benchmark; below that, the market may be underpricing the company’s operating performance, especially if fundamentals are sound.

Why Results Match Your “Undervalued” Query

• The screen combines low valuation metrics (P/E, P/B, EV/EBITDA) with decent profitability (ROE ≥ 10%). This aims to capture stocks that are not just cheap, but also reasonably strong businesses.
• Limiting to US, major exchanges, and larger caps focuses on established, liquid companies where the “undervalued” signal is more meaningful and less likely to be a data or liquidity anomaly.
• Taken together, these filters approximate what many value investors mean by “currently undervalued”: solid companies whose prices are relatively low compared to their earnings, assets, and cash‑generation power.