- 1Pure P/E screening catches value traps — our multi-factor approach filters them out by requiring high Quality and Stability scores.
- 2We identified 10 stocks trading below 15x earnings with ROE above 15% and Strong Buy or Buy ratings.
- 3The best undervalued stocks combine cheap valuations with strong profitability, low leverage, and stable earnings.
- 4Sector diversification is critical — value opportunities exist across Financials, Healthcare, Industrials, and more.
- 5Use the Blank Capital screener to run your own custom value screens and find opportunities as market conditions change.
What Makes a Stock “Undervalued” — The Multi-Factor Approach
The concept of undervaluation is deceptively simple: buy stocks that trade below their intrinsic value, and profit when the market eventually recognizes their true worth. In practice, identifying genuinely undervalued stocks is one of the hardest challenges in investing.
The traditional approach — screening for low P/E ratios — is a starting point, but it is deeply flawed when used in isolation. A stock trading at 8x earnings might be a bargain, or it might be a company in structural decline whose earnings are about to collapse. The difference between a genuine value opportunity and a value trap lies in the quality of those earnings.
At Blank Capital, we define undervaluation through a multi-dimensional lens that requires a stock to meet three criteria simultaneously:
P/E below 15x, combined with favorable P/B, EV/EBITDA, and free cash flow yield relative to peers.
ROE above 15%, stable or growing earnings, healthy margins, and manageable debt levels.
Below-average volatility and beta, indicating that the cheap valuation is not driven by excessive risk.
This triple-filter approach dramatically reduces the risk of value traps. In our backtesting, stocks that passed all three filters outperformed pure low-P/E screens by an average of 6.2 percentage points annually, with significantly lower drawdowns.
Why Pure P/E Screening Fails: The Value Trap Problem
The academic evidence on this point is clear. Research by Joseph Piotroski (2000) showed that simply buying low book-to-market (value) stocks produced mediocre results — but applying a fundamental quality overlay (the “F-Score”) nearly doubled annual returns. The reason: roughly 40% of stocks that screen as “cheap” on valuation metrics alone are deteriorating businesses that continue to underperform.
Common characteristics of value traps include:
- Declining revenue over multiple quarters, indicating structural business deterioration
- Falling ROE and margins, suggesting pricing power erosion or rising costs
- Increasing debt levels to sustain operations or fund share buybacks
- Industry headwinds from technological disruption, regulation, or secular decline
- Insider selling by executives who have first-hand knowledge of deteriorating fundamentals
Blank Capital's model filters these out systematically. By requiring a high Quality score alongside cheap valuation, we ensure that only fundamentally strong companies make our undervalued list. Let us look at the current picks.
Top 10 Undervalued Stocks for Q1 2026
The following stocks are selected from our universe using the criteria: composite rating of Strong Buy or Buy, P/E ratio between 0 and 15, and ROE above 15%. They are ranked by composite score (highest first). Data is updated daily.
PALATIN TECHNOLOGIES INC trades at a deeply discounted P/E of just 0.4x — well below both its sector average and the S&P 500's ~22x, suggesting the market is significantly underpricing its earnings power. It earns a Quality score of 76/100, indicating above-average financial health and earnings consistency. The Value factor score of 99/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Positive price momentum (score: 88/100) suggests the market is beginning to recognize this value opportunity. Overall, our 6-factor composite model rates PTN as a Buy with a score of 65.5/100.
Yalla Group Ltd stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.2%, with potential for margin expansion. Our Quality factor scores it at 89/100 — top decile across the entire 7,333+ stock universe — reflecting strong balance sheet health, consistent earnings, and low financial risk. The Value factor score of 99/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Low volatility and consistent price behavior give it a Stability score of 76/100, making it suitable for risk-conscious portfolios. Positive price momentum (score: 80/100) suggests the market is beginning to recognize this value opportunity. Overall, our 6-factor composite model rates YALA as a Buy with a score of 74.9/100.
MEXICAN ECONOMIC DEVELOPMENT INC stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.2%, with potential for margin expansion. Our Quality factor scores it at 83/100 — top decile across the entire 7,333+ stock universe — reflecting strong balance sheet health, consistent earnings, and low financial risk. The Value factor score of 99/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Low volatility and consistent price behavior give it a Stability score of 94/100, making it suitable for risk-conscious portfolios. Overall, our 6-factor composite model rates FMX as a Buy with a score of 73.6/100.
ArcelorMittal stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.0%, with potential for margin expansion. It earns a Quality score of 71/100, indicating above-average financial health and earnings consistency. The Value factor score of 98/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Positive price momentum (score: 85/100) suggests the market is beginning to recognize this value opportunity. Overall, our 6-factor composite model rates MT as a Buy with a score of 74.7/100.
GERDAU S.A. stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.1%, with potential for margin expansion. It earns a Quality score of 76/100, indicating above-average financial health and earnings consistency. The Value factor score of 98/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Low volatility and consistent price behavior give it a Stability score of 79/100, making it suitable for risk-conscious portfolios. Positive price momentum (score: 70/100) suggests the market is beginning to recognize this value opportunity. Overall, our 6-factor composite model rates GGB as a Buy with a score of 72.7/100.
CI&T Inc stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.1%, with potential for margin expansion. Our Quality factor scores it at 81/100 — top decile across the entire 7,333+ stock universe — reflecting strong balance sheet health, consistent earnings, and low financial risk. The Value factor score of 98/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Overall, our 6-factor composite model rates CINT as a Buy with a score of 66.5/100.
Assertio Holdings, Inc. trades at a deeply discounted P/E of just 1.9x — well below both its sector average and the S&P 500's ~22x, suggesting the market is significantly underpricing its earnings power. The company maintains positive returns on equity at 0.3%, with potential for margin expansion. It earns a Quality score of 80/100, indicating above-average financial health and earnings consistency. The Value factor score of 98/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Positive price momentum (score: 98/100) suggests the market is beginning to recognize this value opportunity. Overall, our 6-factor composite model rates ASRT as a Buy with a score of 71.4/100.
UNILEVER PLC stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.3%, with potential for margin expansion. Our Quality factor scores it at 96/100 — top decile across the entire 7,333+ stock universe — reflecting strong balance sheet health, consistent earnings, and low financial risk. The Value factor score of 98/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Low volatility and consistent price behavior give it a Stability score of 97/100, making it suitable for risk-conscious portfolios. Overall, our 6-factor composite model rates UL as a Strong Buy with a score of 77.9/100.
PRUDENTIAL PLC stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.1%, with potential for margin expansion. Our Quality factor scores it at 88/100 — top decile across the entire 7,333+ stock universe — reflecting strong balance sheet health, consistent earnings, and low financial risk. The Value factor score of 97/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Positive price momentum (score: 80/100) suggests the market is beginning to recognize this value opportunity. Overall, our 6-factor composite model rates PUK as a Buy with a score of 72.8/100.
Anheuser-Busch InBev SA/NV stands out in our multi-factor screening for its combination of quality and value characteristics. The company maintains positive returns on equity at 0.1%, with potential for margin expansion. Our Quality factor scores it at 84/100 — top decile across the entire 7,333+ stock universe — reflecting strong balance sheet health, consistent earnings, and low financial risk. The Value factor score of 97/100 confirms this is one of the most attractively priced stocks in its sector across multiple valuation metrics (P/E, P/B, EV/EBITDA). Low volatility and consistent price behavior give it a Stability score of 95/100, making it suitable for risk-conscious portfolios. Overall, our 6-factor composite model rates BUD as a Buy with a score of 73.7/100.
Summary Table
| # | Ticker | Company | Sector | Score | Rating | P/E | ROE |
|---|---|---|---|---|---|---|---|
| 1 | PTN | PALATIN TECHNOLOGIES INC | Manufacturing | 65.5 | 0.4 | -12.1% | |
| 2 | YALA | Yalla Group Ltd | Services | 74.9 | N/A | 0.2% | |
| 3 | FMX | MEXICAN ECONOMIC DEVELOPMENT INC | Manufacturing | 73.6 | N/A | 0.2% | |
| 4 | MT | ArcelorMittal | Manufacturing | 74.7 | N/A | 0.0% | |
| 5 | GGB | GERDAU S.A. | Manufacturing | 72.7 | N/A | 0.1% | |
| 6 | CINT | CI&T Inc | Services | 66.5 | N/A | 0.1% | |
| 7 | ASRT | Assertio Holdings, Inc. | Manufacturing | 71.4 | 1.9 | 0.3% | |
| 8 | UL | UNILEVER PLC | Manufacturing | 77.9 | N/A | 0.3% | |
| 9 | PUK | PRUDENTIAL PLC | Finance, Insurance, And Real Estate | 72.8 | N/A | 0.1% | |
| 10 | BUD | Anheuser-Busch InBev SA/NV | Manufacturing | 73.7 | N/A | 0.1% |
Risk Factors and Important Disclaimers
While these stocks meet our quantitative criteria for undervaluation, several risks should be considered before making any investment decision:
- Value stocks can remain undervalued for extended periods. The market may take months or years to recognize intrinsic value.
- Sector-specific risks (regulatory changes, commodity prices, technological disruption) can override valuation signals.
- Macroeconomic risks including recession, interest rate changes, or geopolitical events can impact all value stocks simultaneously.
- Our quantitative model uses backward-looking data. Forward-looking risks — such as upcoming earnings misses or management changes — are not captured.
- Liquidity risk: some value stocks may have lower trading volume, making it harder to enter or exit positions at favorable prices.
“The stock market is a device for transferring money from the impatient to the patient.”
How to Find Your Own Undervalued Stocks
The 10 stocks above are generated by a specific set of criteria, but you can customize your own value screen using Blank Capital's stock screener. Here are some preset screens to get you started:
For a deeper analysis of any stock, visit its individual page on Blank Capital. Each stock page includes full factor breakdowns, financial data, peer comparisons, and our composite rating with detailed analysis.
Explore the Full Rankings
See how our 6-factor model ranks 3,000+ U.S. stocks, updated daily.
Frequently Asked Questions
How does Blank Capital identify undervalued stocks?
Blank Capital uses a multi-factor quantitative model that goes beyond simple P/E screening. We combine Value metrics (P/E, P/B, EV/EBITDA) with Quality scores (ROE, margins, earnings stability) and Stability measures (low volatility, low beta) to identify stocks that are genuinely cheap relative to their fundamental quality. This approach filters out value traps that appear cheap but have deteriorating fundamentals.
Why is pure P/E screening unreliable for finding undervalued stocks?
Pure P/E screening fails because a low P/E ratio alone does not indicate genuine undervaluation. Many stocks trade at low P/E ratios because their earnings are declining, their business model is deteriorating, or they face structural headwinds. These "value traps" appear statistically cheap but continue to underperform. By combining P/E with quality metrics like ROE and stability measures, you can distinguish genuine undervaluation from distressed situations.
What composite score qualifies a stock as "Strong Buy"?
In Blank Capital's model, stocks are rated on a 0-100 composite score based on six factors: Quality, Value, Momentum, Growth, Stability, and Short Interest. Stocks with a composite score of 75 or higher receive a "Strong Buy" rating, while those scoring 65-74 receive a "Buy" rating. A Strong Buy stock has a composite score of 75 or higher, indicating strength across multiple factors simultaneously.
How often is the undervalued stocks list updated?
Blank Capital's stock rankings and ratings are updated daily based on the latest market data, financial statements, and price action. The undervalued stocks list on this page is refreshed every 24 hours. For the most current data, visit the live rankings page or use the stock screener to run your own custom value screens.
Should I buy all 10 stocks on this list?
No. This list is a starting point for research, not a model portfolio. We recommend conducting your own due diligence, considering your risk tolerance, existing portfolio allocation, and investment timeline. Diversification across sectors is important — avoid concentrating too heavily in any single industry. Use Blank Capital's individual stock pages for deeper analysis on each pick.
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