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A low valuation ratio is a question about why price is low. Supporting balance-sheet observations can narrow the list, but they do not make accounting value realizable.
What are value characteristics?
Value characteristics are prices that appear low relative to earnings, cash flow, assets, or a model estimate. Each denominator embodies accounting choices and business assumptions. A screen identifies statistical candidates; valuation requires normalized cash economics and a path by which owners can receive value.
How does the price-to-book value screen work?
The Inverted P/B With Liquidity and Equity Ratio interpretation requires a high inverse price-to-book reading, a high current ratio, and high equity relative to assets. All use the configured latest values and must fire.
A match combines a low market price relative to accounting book value with two balance-sheet supports. Book value can include goodwill, acquired intangibles, deferred tax assets, stale property values, and assets that cannot be sold independently. Current ratio is a date-specific stock, not a cash-flow schedule.
Inverted P/B With Liquidity And Equity Ratio
Inverted P/B is high (price below the P/B scale) while current assets exceed current liabilities by a wide margin and equity is in the upper part of its industry's equity-to-assets range
How does the Graham-number screen work?
The At Graham Number With Cash Backing and Equity interpretation requires price at or below its configured Graham-number ceiling, annual operating cash flow elevated relative to positive net income, and a high equity-to-assets ratio.
The Graham number is a historical rule of thumb using earnings and book value. It does not fit every asset-light, cyclical, loss-making, or high-growth business. The cash-to-income observation is one-year and can be driven by working capital.
At Graham Number With Cash Backing And Equity
Current price is at or below the Graham Number model ceiling (√(22.5 × EPS × BVPS)) while OCF exceeds net income and equity is in the upper part of its industry's equity-to-assets range
How should you combine value filters?
Choose the valuation anchor that fits the business; do not require both automatically. Adding panels unions all observation requirements under AND logic and can create an arbitrary hybrid. A zero result means no company in the evaluated universe met the selected configuration with available data.
How do you test asset and earnings quality?
Reconcile book assets to their economic use and recoverability. Review goodwill, intangibles, receivables, inventory, property, provisions, pensions, leases, guarantees, and contingent liabilities. IAS 36 provides the impairment framework, but recorded amounts are not automatic liquidation values.
Normalize earnings and operating cash across a full cycle. The SEC's Form 10-K guide identifies the audited statements, risk factors, and management discussion used to examine recurring results and accounting judgments.
What creates value traps?
Structural decline, obsolete assets, underinvestment, customer loss, debt maturities, litigation, regulation, dilution, poor governance, and capital misallocation can keep price below book or a formula ceiling. A cyclical peak can make earnings look cheap just before they fall.
What can a value screen not tell you?
The panels do not calculate intrinsic value, tangible liquidation proceeds, normalized return on capital, catalyst probability, or downside timing. They do not show whether management will distribute, reinvest, or destroy available value.
Use CompanyGraph to create a disciplined candidate list, then test business viability, asset recoverability, obligations, cash conversion, governance, and a range of values rather than one ratio.