How do I find undervalued stocks?
Short answer
Look for good businesses first (high return on capital, durable earnings, low debt), then check whether the price leaves a margin of safety (owner-earnings yield, P/E versus its history and sector). invest-like does both for 21,000+ stocks: the Buffett-Fit Score rates quality and price, and the analysis shows the price Buffett's method would pay next to today's price.
What matters
Cheap stocks are often cheap for a reason. Screening only on low P/E finds value traps; screening on quality first finds businesses worth owning, and then you wait for a sensible price.
Useful numbers: ROIC above 15 percent, owner-earnings (free cash flow) yield above the bond yield, debt to equity below 0.5, five years of positive earnings.
Step by step
- 1Screen for quality: invest-like's Buffett, Munger and Terry Smith screens rank businesses by returns on capital and durability.
- 2Check the price: the Buffett-Fit valuation pillar and the margin-of-safety section show whether today's price is below what the business is worth on owner earnings.
- 3Cross-check: stocks that pass several investor frameworks at once (the Consensus screen) are the strongest candidates.
Questions
What ratio shows a stock is undervalued?
No single ratio. Combine an earnings-based yield (owner-earnings or FCF yield) with quality (ROIC) and debt. A low P/E alone often flags a declining business.
Is there a free undervalued stock screener?
Yes. invest-like shows the Buffett-Fit Score on every stock for free, and the Consensus screen of stocks passing 5 or more of 7 frameworks is free.
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Reviewed 2026-09-27. Educational only, not investment advice.