Combining ROE, Price, and Valuation Filters for Stock Selection

Summary

The document proposes a stock screen combining a daily range threshold, five consecutive years of return on equity above 15%, and a close above the prior day’s low. It then expands the screen with net profit growth above 10% and a price-to-earnings ratio below 30. The intended mix is a basic price condition with profitability and valuation filters. It also gives example implementations for a Chinese stock-screening platform and Python, though those snippets are references rather than a complete, verified research workflow.

The author notes that historical conditions do not guarantee future performance, the prior low may be a weak proxy for value, and ROE can be less useful for newer or persistently loss-making businesses. Suggested refinements include adding financial measures and market context, and supplementing the price condition with volatility. No universe definition, portfolio construction, transaction costs, backtest, or performance results are reported, so the screen should be treated as a hypothesis for further testing rather than an established strategy.

Key ideas

• The initial screen combines a minimum daily high-low range, sustained ROE, and a close above the previous low.
• The expanded version adds a net profit growth threshold and a valuation ceiling.
• The author flags historical-data uncertainty and limitations of ROE for newer or loss-making firms.
• Market conditions and additional fundamentals are suggested as further filters.
• The document supplies no backtest or implementation validation, so profitability is unproven.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.