S&P 500 Value Screener

May 4, 2015 Update: The sectors are now inversely weighted according to each sector's weight in the S&P 500, for a better representation of undervalued sectors.

Inspired by Paul Novell's composite value score (VC2) that he bases many of his systems on, including the "Trending Value System", I created a screener that attempts to showcase currently undervalued stocks of the S&P 500. Note that Paul's systems aren't only restricted to S&P 500, but because of the dynamic data pull, Google Sheets isn't too happy with data for thousands of stocks.

Paul bases his composite value score on the insights of several quant researchers (including the book "What Works on Wall Street") that choosing stocks based on a composite of value metrics over time outperforms portfolios based on solely one metric.

Determining a valuation of a company is often difficult, especially when trying to compare valuations across sectors and industry groups. Some like to look at the price-to-earnings ratio (P/E), but a lot of tech stocks often trade at seemingly premium value. Some like price-to-book (P/B), but REITs often trade below their book values. There seems to be trade-off's with each valuation metric.

I've attempted to create a valuation score similar to Paul's composite value metrics, which takes into account price-to-earnings (P/E), price-to-book (P/B), price-to-sales (P/S), price-to-free cash flow (P/FCF), enterprise value-per-earnings before interest, taxes, depreciation and amortization (EV/EBITDA) and dividend yield.

Each metric is ranked by percentage, 100% is granted to the best ranking stock. If data (dynamically pulled from FinViz and Yahoo Finance) for a metric is missing, a value of 50% is assigned for that metric, to reduce an unfair bias against the stock.

All the metrics are then summed up and once again ranked from 0-100% to provide a "Valuation and Yield Rank". The last column: "Trending Value Rank", similar to Paul's "Trending Value System", takes the top decile (50 stocks) of the "Valuation & Yield Rank", and ranks them by their 6-month performance.

I've also added a second sheet, "Undervalued Sectors", which shows the sectors of the 50 currently highest ranked stocks. Whether you decide to sort the stocks (from Z-A) by valuation and yield alone, or also taking into account recent price performance, it would seem that as of May 2, 2015, "Financials" and "Basic Materials" boast some of the best valued stocks of the S&P 500.

QH S&P Value Screener