Four reads applied to the same low P/B screen . each one tells you which side of the cohort the stock sits
The screen sorts by price. The read tells you what the price is missing. One ratio is one number. Pair it with the cashflow, the balance sheet and the sector tape and the cheap stock either confesses or rerates.
READ 01
Free cashflow trend
rising 3Y
FCF rebased after one-off capex or working capital reset. Trend is up before earnings catch up.
falling 3Y
FCF declining despite stable headline EPS. Earnings dressed by accruals. The cashflow does not lie.
READ 02
Return on capital
ROCE above WACC
Business still earns its cost of capital. Discount is sentiment not structural.
ROCE below WACC
Capital deployed at returns under what the financing costs. Compounds the wrong way.
net debt falling
Free cashflow paying down debt. Cycle low absorbed without dilution.
net debt rising
Funding the dividend or the operating loss. Balance sheet absorbs what the income statement hides.
READ 04
Sector earnings tape
cyclical trough
Sector earnings at a cycle low with capacity exiting. Forward print rebases higher.
structural decline
Substitution risk or regulatory cap. Forward earnings carry a permanent haircut not a rebase.
Indian value factor . NIFTY 500 split on P/B trailing . illustrative
14.6
Bottom 30 by P/B with rising FCF . 10Y CAGR pct
3.2
Bottom 30 by P/B with falling FCF . 10Y CAGR pct
11.9
NIFTY 500 TRI . same window . 10Y CAGR pct
11.4
Spread . value vs trap . 10Y CAGR pp
Two cohorts inside one screen. Same multiple. Different cashflow story. The headline ratio is the doorway. The four reads are the room. Card three has the rules for walking the room.