Source: Reproduces criteria from Piotroski (2000), "Value Investing"
Low-PBR stocks are a mixed bag (genuinely cheap, or dying). Screening out the "dying" ones with a 9-point financial health check (F-Score) improved low-PBR returns by +7.5% annualized in the original paper. A score of 8+ marks the honor roll.
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Data comes from annual securities reports disclosed on EDINET (Japan FSA). Price-related values are as of each company's fiscal year-end (back-calculated from the disclosed trailing PER), not live quotes. Coverage: all TSE-listed companies, with names added progressively.
One point each (0-9 total) for: positive ROA, positive operating cash flow, improving ROA, earnings quality (operating CF > net income), falling debt ratio, improving current ratio, no share dilution, improving gross margin, and improving asset turnover. Low-PBR stocks mix genuinely cheap names with dying ones, and the F-Score is meant to separate quality within that group. The original paper reports that combining low PBR with an F-Score of 8+ improved returns by +7.5% annualized. (Source: Piotroski (2000) "Value Investing: The Use of Historical Financial Statement Information")
Market cap divided by net assets. At 1.0x the share price equals the book liquidation value; below 1.0x, the arithmetic says breaking the company up and distributing its assets would yield more than its market cap. Book value is measured at historical cost, though, and captures neither unrealized gains on land nor intangibles like brand — so trading below 1.0x does not automatically mean cheap (in structurally declining industries it is the norm). It is also the central metric in the Tokyo Stock Exchange's 2023 reform request. (Source: Standard financial ratio (central metric of the Tokyo Stock Exchange's 2023 request on "management conscious of cost of capital and stock price"))