Undervalued Stocks

[robertbanking]

Hello you wonderful and intelligent people that make up this forum. I do hope your day is going well and you are happy.

I was using a screener to identify undervalued stocks i know stocks that have a P/B value under 1.0, the market is thought to be undervaluing them. However, how can i narrow down my filters for an undervalued stock that hopefully will continue to perform, increasing profits etc. Can anyone kindly please advise any further filters i can add to try and find good quality undervalued stocks before i review them and conduct my due diligence please? It would mean the world to me, if you kindly had a short moment to get back to me please.

Hope you are enjoying your day and very good wishes for a successful future investing. Many thanks for reading my post.

 

[Sean K]

Hello you wonderful and intelligent people that make up this forum. I do hope your day is going well and you are happy.

I was using a screener to identify undervalued stocks i know stocks that have a P/B value under 1.0, the market is thought to be undervaluing them. However, how can i narrow down my filters for an undervalued stock that hopefully will continue to perform, increasing profits etc. Can anyone kindly please advise any further filters i can add to try and find good quality undervalued stocks before i review them and conduct my due diligence please? It would mean the world to me, if you kindly had a short moment to get back to me please.

Hope you are enjoying your day and very good wishes for a successful future investing. Many thanks for reading my post.

It's 3 in the morning Robert. Where are you? I'm terribly jet-lagged, so sort of have an excuse to be up.

I would have expected you'd have a spreadsheet to work out P/B numbers. Maybe DrB is the only one here to help you out in this regard.

I'm enjoying my night, thank you.

 

[divs4ever]

D/E ( Debt vs. Equity ) is important to me , the caveat being what is the outstanding debt secured by ( giving some idea on interest repayments and lender nervousness )

i use several filters ( not always in the same combination )

since we seem to be in a period of extended inflation , i would probably veer more towards a company that can keep margins stable ( in a world of rising costs )

cheers

 

[galumay]

I am not sure P/B is going to be much use in out times, its more of a legacy metric from Graham and Dodd and early Buffett days.

There are so many metrics you can use these days, a site like TIKR or UncleStocks gives you hundreds of options. I tend to screen for quality rather than value, and then use a short hand, reverse engineered DCF to get a feel for range of value.

 

[InsvestoBoy]

Hello you wonderful and intelligent people that make up this forum. I do hope your day is going well and you are happy.

I was using a screener to identify undervalued stocks i know stocks that have a P/B value under 1.0, the market is thought to be undervaluing them. However, how can i narrow down my filters for an undervalued stock that hopefully will continue to perform, increasing profits etc. Can anyone kindly please advise any further filters i can add to try and find good quality undervalued stocks before i review them and conduct my due diligence please? It would mean the world to me, if you kindly had a short moment to get back to me please.

Hope you are enjoying your day and very good wishes for a successful future investing. Many thanks for reading my post.

Price multiples like P/E, P/B, EV/EBITDA, whatever are all only useful measures of valuation if the denominator is a "sufficient statistic" of the long term of future cash flows expected to be delivered to the holder over the life of the security.

To that end:
- Book value is really only going to represent a sufficient statistic for a small number of industries like financials and industrials. Most other industries, looking at book value is not going to represent the value of the underlying asset due to intangibles, growth, etc.
- Price is usually cheap to book for a reason. The multiple can be considered as discounting the future growth prospects of the company. i.e. stocks with a high multiple to book value are being priced accordingly by the market due to perceived higher growth prospects while stocks with a low multiple to book value are being priced by the market due to perceived negative growth prospects below the replacement value of the firm.

You aren't going to screen your way to financial success in 2023. Save your money, start reading books.

 

[robertbanking]

Thank you very much for getting back to me on this point, i am really grateful for all your replies they really mean the world to me. I hope you are all doing well.

divs4ever that is an important point i will make note of the D/E (Debt vs. Equity), as its important to note the debt situation and any interest repayments a business has. I very much also appreciate your comment about looking for companies that can keep margins stable in a period of extended inflation. That is very kind of you.

galumay thank you very much for your comments that was really helpful of you. I think thats an important point i was overlooking, to screen for quality first, then assess its value by doing a reverse engineered DCF. I very much appreciate your thoughts on this.

InsvestoBoy i very much appreciate you mentioning that book value will only be sufficient in a small number of industries like financials and industrials. As most other industries, book value is not going to represent the value of the underlying asset. I very much appreciate your point as the price is going to be cheap for a reason and stocks with a high book value are being priced accordingly due to perceived high growth prospects. Thank you very much for your comments on this, its clear multiple filters on a screener maybe helpful, but nothing beats a quality due diligence of a company and its financials.

I very much appreciate your help on my investing journey, you are all very amazing and kind people here. Hope you enjoy your day. All the best.

 

[divs4ever]

You aren't going to screen your way to financial success in 2023. Save your money, start reading books.

i have found screening useful but problematic , the problematic part being the recency of the data ( some can be up to a year old )

the useful part is finding stocks that might be worthy of further research

you could also try screening by sector as an early screen , say screen the consumer staples sector or health-care sector currently ( as the pandemic consequences flow through the market )

cheers