Screening Chinese Stocks for Small Size, Profitability, and High ROE

Summary

This Chinese equity screening recipe combines daily amplitude above 1%, market capitalization no greater than 10 billion yuan, positive earnings, and return on equity above 15% for five consecutive years. The article frames the screen as a way to find smaller profitable firms with a persistent record of strong capital returns. It supplies formula and Python examples, then suggests broadening the assessment with valuation, cash flow, and predicted earnings growth measures.

No historical simulation, portfolio results, or evidence of predictive power is reported. The article notes that historical profitability may not persist, high ROE alone can obscure valuation concerns, and the strict criteria may leave few candidates. Its suggested refinements remain broad and are not fully specified as testable rules. The code examples also differ in their stated lookback and filters, so the precise screening definition would need to be reconciled before implementation or evaluation.

Key ideas

• The core screen combines amplitude above 1%, a market-cap ceiling of 10 billion yuan, positive earnings, and ROE above 15% for five years.
• The article proposes adding valuation, cash flow, and earnings-growth measures to assess candidates more broadly.
• It warns that past profitability may not predict future performance and that high ROE can distract from valuation risk.
• The strict criteria may produce few eligible stocks.
• The document provides example formulas but no backtest or performance evidence.

Tags

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