Is a cheap valuation backed by substance and growth, or just a value trap? Fifteen criteria check that automatically across the entire market.
Save the strategy and StockScorer checks its rules for you every day. You'll get a heads-up whenever a stock crosses the upper or lower score threshold.
Gap to MSCI World: -82.5 percentage points total, -3.1 per year
Index, start = 100
Past performance is not a reliable indicator of future results.
Based on all 16,182 stocks with a score. Not rated are stocks that the profile does not classify because of a size limit or an exclusion rule.
| Score | Number of stocks | High match | Medium match | Low match | Not rated |
|---|---|---|---|---|---|
| -6 | 6 | 0 | 0 | 3 | 3 |
| -5 | 67 | 0 | 0 | 58 | 9 |
| -4 | 359 | 0 | 0 | 331 | 28 |
| -3 | 792 | 0 | 0 | 704 | 88 |
| -2 | 1,132 | 0 | 0 | 969 | 163 |
| -1 | 1,666 | 0 | 0 | 1,370 | 296 |
| 0 | 2,167 | 0 | 0 | 1,767 | 400 |
| +1 | 1,869 | 0 | 0 | 1,533 | 336 |
| +2 | 1,636 | 0 | 0 | 1,272 | 364 |
| +3 | 1,303 | 0 | 966 | 0 | 337 |
| +4 | 1,415 | 0 | 1,012 | 0 | 403 |
| +5 | 1,356 | 0 | 911 | 0 | 445 |
| +6 | 1,043 | 0 | 715 | 0 | 328 |
| +7 | 706 | 591 | 0 | 0 | 115 |
| +8 | 405 | 377 | 0 | 0 | 28 |
| +9 | 211 | 200 | 0 | 0 | 11 |
| +10 | 49 | 46 | 0 | 0 | 3 |
Every stock runs through the same disclosed rules. The points add up to a score, traceable down to the individual rule.
Each rule checks a metric against a threshold, here for example “Cheaper than the industry (P/E below sector median)”.
In this profile, each rule that is met counts +1 to +2 or −1 to −2 points. Exclusion rules take a stock out of the rating regardless of its points: it is then not rated.
The sum is the score. That gives three classes: high, medium, low match.
These terms describe only the match with the criteria, not a recommendation to buy or sell.
P/E and P/B are compared against the sector median, plus the absolute Graham marks for P/E and P/B.
A current ratio of at least 2 and a debt-to-equity ratio below 0.5 check the balance sheet by classic Graham criteria.
A PEG below 1 shows whether the P/E is backed by earnings growth rather than just looking cheap.
Five deduction rules check loss years, profit and revenue declines, free cash flow and leverage.
These exact rules run over every stock daily.
After signing up for free, you can copy the full profile in the rule editor, adjust its thresholds, and save it as your own starting profile.
See and copy all rules for freeIndex, start = 100
The backtest shows a total return of +157.6%. The MSCI World reaches +240.1% over the same period.
The same strategy with the same settings, started at every possible date. Each dot is a separate run over 5 years.
The periods overlap heavily, neighbouring runs share almost all periods. The spread therefore looks smaller than it would for independent periods. Past results say nothing about future ones.
Strategy calculated without fees and taxes, dividends reinvested.
Point-in-time composition since June 30, 2009: each period uses the members at that time. Stocks that left the market early may be missing, which favours the result.
Historical period, quarterly rebalancing. Past performance is not a reliable indicator of future results.
Purely mechanical rule application, no curated-list effect: stocks with a high match can fall just like any other stock.
Dots per card, in this order: Profitability, Growth, Valuation, Balance sheet & risk. Filled means at least one rule in the category is met.
For value investors who distrust a single ratio and want a broad evidence base instead of one multiple. Anyone who wants to see today's matches without their own profile can find them in the list at /lists/undervalued-stocks.
Anyone trying to find undervalued stocks quickly hits the limits of a single ratio: a low P/E can be a value trap just as easily as a genuine bargain. The Multi-Factor Check therefore combines a sector comparison on P/E and P/B with classic substance criteria in the tradition of Benjamin Graham, including the book-value mark, a current ratio of at least 2 and low leverage, plus PEG as a counter-check on whether a low P/E is simply explained by weak growth. That way, undervalued stocks can be screened without relying on a single multiple alone. Five deduction rules sort out typical value traps: loss years, collapsing profits or revenue, negative free cash flow and high leverage. Financials, real estate and utilities are excluded because EV/EBIT, current ratio and leverage need structurally different yardsticks there.
The starting point is an exclusion rule: financials, real estate and utilities fall out of the universe entirely, because EV/EBIT, current ratio and debt-to-equity need structurally different yardsticks there than in the rest of the market. For every other stock, nine plus criteria apply: up to +2 points for a P/E below the sector median (only for a positive P/E), +1 for a P/B below the sector median, up to +2 for an EV/EBIT below 8 (including net-cash cases with negative enterprise value), +1 for an EV/EBIT between 8 and 12, +1 each for the absolute Graham marks P/E between 1 and 12 and P/B between 0.1 and 1.2, +1 for a PEG below 1, and +1 each for a current ratio of at least 2 and a debt-to-equity ratio below 0.5.
Five deduction rules filter out typical value traps: −2 points for a net loss over the last twelve months, −1 for a profit decline of more than 20% versus the prior year, −1 for a revenue decline of more than 5%, −1 for negative free cash flow, and −1 for a debt-to-equity ratio of 2 or above. If a metric is missing, that criterion stays neutral instead of automatically counting against the stock, so thinly covered names are not systematically penalised. The upper threshold is a uniform 7 points across all size classes, the lower threshold 3. Ties are broken by the lower P/E.
Sector-relative valuation: P/E below sector median (+2, only for P/E > 0), P/B below sector median (+1, only for P/B > 0).
Absolute valuation marks: EV/EBIT below 8 (+2, including net-cash cases), EV/EBIT 8 to 12 (+1), P/E between 1 and 12 (+1), P/B between 0.1 and 1.2 (+1).
Growth counter-check and balance sheet: PEG below 1 (+1), current ratio of at least 2 (+1), debt-to-equity below 0.5 (+1).
Value-trap deductions: net loss (−2), profit decline above 20% (−1), revenue decline above 5% (−1), negative free cash flow (−1), debt-to-equity at 2 or above (−1).
The Multi-Factor Check does not mirror a single published formula. It combines a widely recognised, multi-dimensional definition of undervaluation: Graham's substance criteria (book-value mark, current ratio, low leverage), a sector comparison on P/E and P/B, and PEG as a growth counter-check. The combination addresses a known weakness of single multiples: a low P/E alone says nothing about whether the market is pricing in weak growth or genuine undervaluation, and PEG brings the two together.
The strength lies in the breadth: a stock has to be cheap and solid on several dimensions at once to score many points, a single low multiple is not enough. The flip side is the same breadth: thinly covered small caps are more likely to be missing individual metrics. Treating missing values as neutral avoids penalising them, but it can also mean a stock scores comparatively high despite the data gaps.
Excluding financials, real estate and utilities means the strategy makes no statement about these three sectors, not that they are overvalued by definition.
For value investors who distrust a single ratio and prefer checking several independent signals at once, even if that narrows the match list compared with a single-factor model.