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), via EDINET DB. 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")