Every test at once
Cheap on every multiple, and something has to be changing.
The combined gate: cheap on NCAV, book, sales, EBITDA and EBIT simultaneously, generating real operating and free cash flow, unlevered, not diluting, with gross margin stable or improving — and with at least one catalyst the numbers can actually see. Deliberately strict. The near-miss list is usually where the interesting names are.
Educational research tooling, not investment advice. A screen is a filter over public data, not a recommendation.
What the Core Deep Value screen tests
Every deep-value test at once rather than one at a time: cheap on NCAV, book, sales, EBITDA and EBIT, throwing off free cash, unlevered, not diluting, margins not collapsing — and with at least one catalyst the numbers can show. Deliberately strict; the near-miss list is usually where the interesting names are.
The rules, one by one
Every rule below is applied on every scan and reported with the value it was tested against, pass or fail. Each threshold is yours to change.
- NCAV / Market Cap
- Net current asset value (current assets − total liabilities) divided by market cap. Graham's 2/3 rule means paying at most two thirds of NCAV, i.e. NCAV of about 1.5x market cap or more.
- P/B
- Market cap over book equity. Excluded when equity is negative, since a negative P/B is not a cheap one.
- Price / Sales
- Market cap over trailing revenue. Keeps negative-EV names from being cash shells with no business attached.
- EV / EBITDA
- The acquirer's multiple: what the whole business costs relative to its operating earnings. Must be positive — a negative multiple means EBITDA is negative, not that the company is cheap.
- EV / EBIT
- Enterprise value over operating profit. Stricter than EV/EBITDA because depreciation is a real cost for anything with factories, fleets or stores — EBITDA flatters exactly the asset-heavy businesses deep value keeps finding.
- FCF Yield
- Free cash flow divided by market cap. The cash actually available to owners after capex, which is what an owner earns — unlike accounting earnings, which can be produced without any.
- Current Ratio
- Current assets over current liabilities. The asset discount is only real if the company can pay next year's bills without a forced sale.
- Debt / Equity
- Total debt over shareholders' equity. Lenders rank ahead of you, so leverage can consume the discount before it closes. Companies with negative equity are excluded rather than scored as unlevered.
- Net Debt / EBITDA
- Debt less cash over EBITDA. Leverage ahead of you in the stack can destroy the thesis before it plays out. Net-cash companies score 0 rather than 'unknown'.
- Dilution
- Change in share count year over year. Positive means new shares are transferring your claim to someone else; negative means buybacks. Based on annual filings, so it lags.
- Free Cash Flow
- Cash from operations less capital expenditure, trailing twelve months. Required to be positive: a cheap company burning cash gets cheaper.
- Operating Cash Flow
- Cash generated by the business before capex. Positive OCF with positive FCF is the check that reported earnings are real rather than accrual.
- Gross-Margin Change
- Gross margin this year minus last year, in points. The screen asks for stable or improving: a falling gross margin is the classic value trap, where the multiple is low because the business is being competed away.
- Catalysts
- How many catalysts the numbers can see: buyback, earnings turnaround, debt paydown of 10%+, gross-margin recovery, revenue rising after a down year. Asset sales, spin-offs and takeovers are invisible to a screener and stay on the second-pass checklist. Without any catalyst it is a statistic, not an investment.
Who this screen is for
- Investors who want one list short enough to read every name in it.
- Anyone who treats a screen as the start of the work and reads the near misses as carefully as the passes.
- Anyone expecting a long result list — on most universes this screen returns a handful of names or none.
Core Deep Value FAQ
Which catalysts can a screener see?
Five: a shrinking share count, earnings turning positive after a loss year, total debt down more than 10% year over year, gross margin recovering by a point or more, and revenue rising again after a down year. Asset sales, spin-offs and takeovers are invisible to a screener and stay on the write-up checklist.
Why test gross margin change?
A falling gross margin is the classic value trap: the multiple is low because the business is being competed away. Requiring it stable or improving separates ignored from deteriorating.
The screen returned nothing. Is that a bug?
No. Every threshold is tunable and the near-miss panel lists what each company failed and by how much, so you can see which single rule is holding the list at zero before you loosen it.
Other screens
NCAV
Net current asset value is current assets minus every liability. When it exceeds the market cap, the market is handing you the working capital and charging nothing for the business attached to it. The liquidity and leverage rules exist so that discount survives long enough to close.
Negative EV
Enterprise value is market cap plus debt minus cash. Below zero, the cash net of debt exceeds what the shares cost — you are paid to take the operating company. The price/sales and liquidity rules are there to make sure there is a business attached and that the cash is genuinely available.
Acquirer's Multiple
EV/EBITDA is what an acquirer of the entire business pays for its operating earnings. It is used instead of P/E because it is indifferent to how the company is financed — debt and cash are already in the numerator. The screen adds conservative leverage and a share count that is not growing.
Five scans, no card.
Run Core Deep Value over the universe you choose, open any company, and read the rules it passed and the ones it did not.
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