Which stocks are currently undervalued?

Screening Filters

1. Return on Equity (ROE ≥ 12%)

   • Purpose: Ensure we only look at companies that are reasonably profitable and efficient at using shareholders’ capital.
   • Rationale: “Undervalued” only makes sense if the underlying business is solid. A ROE threshold of 12% focuses on companies with above-average profitability, reducing the chance that a low valuation is just reflecting a weak or poorly run business.

2. P/E (Price-to-Earnings, TTM: 0.01–15)

   • Purpose: Find stocks that are cheap relative to their earnings, while filtering out distorted or non-meaningful P/E values.
   • Rationale:
     • Max 15: Historically, broad markets often trade around mid-teens P/E. Capping P/E at 15 focuses on stocks trading below or at the lower end of typical market valuations, consistent with “undervalued,” though less strict than the “strongly undervalued” filter you used previously (max 12).
     • Min 0.01: Excludes negative or zero P/E, which usually come from companies with losses or unusual one-off items, where a “low” P/E doesn’t really signal cheapness but accounting noise or business trouble.

3. P/B (Price-to-Book Ratio ≤ 1.5)

   • Purpose: Capture stocks trading near or below the value of their net assets on the balance sheet.
   • Rationale: A P/B below 1 often signals potential deep value (market pricing the company below its net assets); setting the bar at 1.5 still leans toward asset-based cheapness while being a bit broader for “undervalued” vs. “strongly undervalued.” This helps avoid highly priced growth names that may not be “value” by any traditional measure.

4. EV/EBITDA (Enterprise Value / EBITDA ≤ 10)

   • Purpose: Use a capital-structure-neutral measure of valuation to find companies where the total business value is low relative to operating cash earnings.
   • Rationale: EV/EBITDA is widely used in valuation because it ignores differences in debt and tax structures. A cutoff of 10 is consistent with moderate-to-low valuations across many sectors. It’s a bit more relaxed than your previous “strongly undervalued” cut of 8, aligning better with the broader idea of “undervalued” rather than only the most extreme bargains.

5. Target Price Upside Potential: “MoreAbovePrice”

   • Purpose: Prioritize stocks where analysts’ consensus target prices are meaningfully above the current market price.
   • Rationale: While not a guarantee, when multiple analysts believe fair value is higher than the current price, it supports the idea that the market may be undervaluing the stock. This complements the fundamental valuation filters with a forward-looking, sentiment-based check.

Why These Results Match “Currently Undervalued”

• The screen restricts to profitable, reasonably high-quality businesses (ROE ≥ 12%), so low prices are less likely to be a reflection of structurally bad companies.
• It uses multiple classic value metrics (P/E, P/B, EV/EBITDA) to capture undervaluation from different angles—earnings, assets, and cash-flow-like earnings—rather than relying on a single ratio.
• The thresholds are somewhat looser than your prior “strongly undervalued” search, making the universe broader and more in line with the more general question “undervalued” instead of “strongly undervalued.”
• The analyst upside filter adds an extra layer: it favors stocks that not only screen cheap on numbers but are also viewed by professionals as having upside from current levels.

Together, these filters focus on stocks where both fundamentals and analyst expectations suggest the market price may be below intrinsic value, which is precisely what “currently undervalued” implies.