Japan Discount Screen

Read this before acting on it

Cheap vs its own history compares today's PER and PBR with the median of the company's last filed years — four for PER, three for PBR, which is what kabutan publishes free. Both must clear the threshold, not one of two. Loss years drop out of the benchmark rather than dragging it. One caution, and it bites harder in Japan than elsewhere: these are trailing multiples struck on the last filing, while the price is already trading on the company's own guidance for the current year. A business whose earnings have just turned up therefore reads expensive against its own history until the next filing catches up. The forecast figures travel with every row so you can see which case you are looking at.

Three screens, deliberately independent. Cheap vs peers asks whether a name trades below its industry median. Cheap outright ignores the neighbours and asks whether it is cheap on fixed levels. Cheap vs its own history asks whether it is cheap against itself. Japan needs all three: 銀行業, 卸売業 and 鉄鋼 trade as blocks, so a peer comparison inside them finds relative bargains in a cheap crowd, while an absolute test alone would miss a quality name that has simply de-rated. None gates another; the Screen column lists every one a row cleared.

Financials qualify on a weaker bar. Enterprise value is meaningless for a bank, so EV/EBITDA is suppressed for them — which means a strict both-metrics rule would exclude every bank, insurer, broker and holdco no matter how far below book it traded. Those names clear the absolute screen on PBR and ROE alone and are marked pbr+roe.

Low PBR with low ROE is not a discount. It is a company not earning its cost of capital, priced accordingly — which is the entire premise of the TSE's March 2023 request that companies below book disclose what they intend to do about it. The ROE floor removes the worst of it, but a name just above the line is still worth checking by hand. The fair-PBR test uses an 8% cost of equity, the Ito Review's figure, so fair value is exactly 1.0x book at 8% ROE.

The exchange has already done the classification. Industry is JPX's own 33業種 code, not a vendor's guess, and banks, brokers and insurers are named exactly rather than matched on a substring — so the rule that suppresses EV/EBITDA for financials is exact. ETFs, REITs, infrastructure funds, TOKYO PRO Market and foreign listings never enter the universe at all, because JPX files them under their own market categories.

Cash flow and buybacks count. P/FCF - market value over the last filed free cash flow - is a fourth peer metric beside the other three, and the relative test still asks for 20% below peers on at least two of the metrics a company has. The outright screen's payout test is the shareholder yield: dividends plus buybacks less shares issued, over market value, so a company returning cash by buying back stock is not failed for a low dividend, and one buying back only what it issues to employees gets no credit. Where no cash-flow statement was filed the dividend yield stands in.

A one-off tag means the P/E was restated. When net profit runs well above operating profit after tax - a tax credit, an investment gain, an asset sale - and the company's earlier years do not show the same gap, the row is scored on operating profit after tax instead. Its P/E and ROE in the table are already on that basis; hover the tag for the size of the gap. A company whose profit always sits above its operating line (an equity-method holding) is left alone.

Peer medians are winsorized and exclude the stock itself. A metric with fewer than peers is left unscored rather than benchmarked against noise. Research tool, not investment advice.