How to screen ASX stocks for value
A stock screen does one job: it narrows a long list of companies to a short list worth reading about. It cannot tell you what to buy. Used well, it saves hours; used badly, it hands you a list of companies that are cheap for good reasons.
This guide walks through a practical way to screen ASX shares for value with ShareSift, using live results from the ASX 20 and from ASX mid and small caps.
Step 1 — Start with the market view
The simplest starting point is the ASX market page, which ranks the ASX 20 — Australia's twenty largest listed companies — by ShareSift's value score, a 0–100 measure of how cheap a company looks on conventional measures, balanced against basic quality and health.
At the time of writing the top of that list read:
| Company | Value score | P/E | Dividend yield | Return on equity | F-Score |
|---|---|---|---|---|---|
| Fortescue (FMG) | 77 | 12.1 | 6.7% | 14% | 3 |
| QBE Insurance (QBE) | 70 | 11.6 | 4.7% | 19% | 3 |
| Woodside Energy (WDS) | 66 | 13.5 | 5.2% | 8% | 5 |
| Santos (STO) | 52 | 26.7 | 3.6% | 5% | 4 |
| REA Group (REA) | 45 | 30.3 | 2.2% | 35% | 5 |
The value scores are the easy part to read. The column that matters most is the one on the right.
Step 2 — Check whether cheap is also improving
Look again at Fortescue. It has the highest value score in the ASX 20: a low price for its earnings and a large dividend. But its Piotroski F-Score is 3 out of 9 — on most of the nine year-on-year checks of profitability, debt and efficiency, its accounts got worse.
That combination — cheap and deteriorating — is what investors call a value trap. The price is low because the market expects the earnings behind it to fall; for an iron ore miner, that usually means the iron ore price. The low P/E is calculated on last year's profit, and last year's profit may not repeat.
This does not mean Fortescue is a poor investment. It means the screen has done its job by raising the right question: are these earnings sustainable? The answer lives in the iron ore market, not in the screen.
The rule of thumb: treat a high value score as interesting only when the F-Score is 6 or more. Cheap and improving is a very different proposition from cheap and getting worse.
Step 3 — Know which companies the scores do not fit
Several of the largest ASX companies are banks and insurers, and the standard measures fit them poorly. A bank does not report a current ratio or EV/EBITDA in the usual way, and ShareSift counts a missing figure as a failed test — so banks score low on the value score for reasons that have little to do with value. Their operating cash flow also swings with customer deposits and loans, which distorts the F-Score.
QBE, second in the list above, is an insurer and shows the same F-Score caveat. For banks and insurers, rely more on the sector comparison shown on each stock page — P/E and price-to-book against other financial companies — than on the value score or F-Score.
Step 4 — Look beyond the ASX 20
The largest companies are the most heavily researched, which makes them the hardest place to find something the market has missed. Smaller companies get less attention.
The ASX hidden-value screen looks at ASX mid and small caps and keeps only those carrying at least one hidden-value flag — signals such as low analyst coverage, a high free-cash-flow yield or a price well below analyst targets. At the time of writing it listed 14 companies, including:
| Company | Value score | P/E | Yield | F-Score | Flag |
|---|---|---|---|---|---|
| AGL Energy (AGL) | 69 | 7.3 | 6.4% | 5 | Below analyst target |
| Mineral Resources (MIN) | 67 | 9.5 | 1.6% | 5 | Below analyst target |
| Stockland (SGP) | 64 | 10.0 | 6.1% | 4 | Below analyst target |
| Sonic Healthcare (SHL) | 42 | 15.0 | 5.9% | 7 | High FCF yield |
Notice how differently these read. Sonic Healthcare has a modest value score but the strongest F-Score on the list (7) and a high free-cash-flow yield — a business generating plenty of cash relative to its price, and improving. AGL has a much higher value score but a middling F-Score, and its flag is "below analyst target", which most often appears on a stock that has recently fallen. Neither reading is a verdict; each points you towards different questions.
Step 5 — Build your own screen
Once you know what you are looking for, set your own filters in the screener. A reasonable starting point for value with a quality check:
- Trailing P/E under 15, and positive
- Price-to-book under 2
- Piotroski F-Score of 6 or more
- Debt-to-equity under 100%
- optionally, dividend yield above 3% if income matters to you
Save the screen, and ShareSift will show you which companies have entered or left it next time you run it. You can also ask to be alerted by email or browser notification when a new name enters.
If you are not sure where to start, the Help me choose guide on the home page asks three questions and sets sensible filters for you, explaining each one.
Step 6 — Read before you act
Every name a screen returns is the start of research, not the end of it. For each one, at minimum:
- Read why it qualified. Each stock page shows which value tests passed and failed, and every F-Score check.
- Ask why it is cheap. Is the market wrong, or does it know something the last annual report does not show?
- Check the date of the figures. Screens run on the last reported accounts.
- Look at the sector, not the whole market, for comparison.
Common mistakes
- Sorting by value score and stopping there. The top of a value ranking is where the value traps gather.
- Ignoring how companies report. Banks, insurers and property trusts all distort standard measures.
- Treating one year as a trend. A single great year of cash flow or a single bad year of earnings can move every measure.
- Forgetting the data is delayed. ShareSift's prices are delayed and its fundamentals are as last reported.
This information is general in nature and does not take into account your objectives, financial situation or needs. ShareSift is not a financial adviser and does not hold an Australian Financial Services Licence. Companies named are examples of how the screens work, not recommendations. Consider whether any information is appropriate for you and seek independent advice before making an investment decision.