/us-undervalued-growth-screener

Sector-Specific Valuation and KPI Rules

Apply these rules in addition to the common framework. A sector-specific metric replaces, rather than decorates, an inappropriate generic metric.

1. SaaS and Software

Required KPIs

• ARR and ARR growth
• Net revenue retention (NRR)
• Gross retention
• RPO and current RPO
• Subscription versus services mix
• Gross margin
• FCF margin
• Rule of 40
• SBC / revenue
• Diluted-share growth
• Capitalized software development
• Customer concentration

Valuation

Use EV/revenue only as a secondary measure. Prefer EV/FCF, FCF yield, normalized operating margin, and per-share FCF growth once FCF is positive.

Red flags

• ARR growth falling faster than revenue growth
• NRR below 100%
• SBC / revenue above 15% without rapid decline
• FCF driven mainly by SBC or deferred revenue
• GAAP losses masked by recurring adjusted exclusions

2. Semiconductors and Semiconductor Equipment

Required KPIs

• Inventory and inventory days
• Book-to-bill
• Backlog
• Utilization
• Lead times
• Channel inventory
• Customer capex
• End-market mix
• Product mix
• Gross-margin cycle
• Customer concentration

Valuation

Use normalized/mid-cycle EPS, EBIT, and FCF. A low trailing P/E at peak margins is not cheap.

Red flags

• Inventory growth exceeding revenue growth
• Backlog cancellation or book-to-bill below 1
• Margin well above historical median without structural evidence
• Customer capex rolling over

3. Industrials and Capital Goods

Required KPIs

• Orders
• Backlog
• Book-to-bill
• Organic growth
• Price and volume
• Utilization
• Customer capex
• Aftermarket/service mix
• Working-capital requirements

Valuation

Use EV/EBIT, EV/FCF, and normalized EPS. For highly cyclical businesses calculate mid-cycle margins.

4. Retail, Restaurants, and Consumer Companies

Required KPIs

• Comparable sales
• Traffic
• Average ticket
• Unit growth
• Store-level margin
• New-unit payback
• Inventory turnover
• Markdown rate
• Customer-acquisition cost
• Direct-to-consumer mix
• International growth

Valuation

Use P/E and FCF yield with lease-aware enterprise value where material. Distinguish growth from unit expansion, price, traffic, and mix.

Red flags

• Price-led comps with declining traffic
• Inventory rising faster than sales
• New-unit returns deteriorating
• Buybacks funded by leverage while store economics weaken

5. Healthcare Services and Medical Devices

Required KPIs

• Procedure or patient volume
• Reimbursement trends
• Utilization
• Installed base
• Consumable/recurring revenue
• Pipeline or product-launch milestones
• Gross margin
• Regulatory actions
• Customer or payer concentration

Valuation

Use P/E, EV/EBIT, and EV/FCF. For product-concentrated businesses, scenario-test loss of exclusivity or reimbursement changes.

6. Commercial Biotechnology and Specialty Pharmaceuticals

Eligibility

Exclude pre-revenue or development-stage companies. Admit only businesses with meaningful commercial revenue and a valid earnings/standard-FCF framework.

Required KPIs

• Product-level revenue and growth
• Top-product revenue concentration (top_product_revenue_pct)
• Prescription, patient, or demand growth
• Gross-to-net deductions
• Market share
• Nearest material loss-of-exclusivity date (nearest_material_loe_date)
• ANDA/patent settlement or litigation status
• Next-generation formulation, indication, or lifecycle-extension strategy
• Replacement pipeline probability and milestones
• R&D and launch intensity
• Acquisition integration and contingent obligations
• Source IDs supporting concentration and LOE

Valuation and Risk

Use P/E and standard FCF only when operating economics are established. Do not mix a current GAAP metric with future adjusted consensus. Treat product concentration and LOE as structural risk even when near-term growth is strong. Do not count pipeline NPV as certain value.

The evaluator applies a sector penalty when the top product is at least 50% of revenue and nearest material LOE is within five years; missing sourced concentration/LOE evidence is review-required in strict mode.

7. Payments, Marketplaces, and Money Movement

Required KPIs

• TPV or payment volume and growth
• Revenue/TPV and gross-profit/TPV
• Current and prior gross-profit take rate (gross_profit_to_tpv_pct, gross_profit_to_tpv_prior_pct)
• Transaction count and active merchants/users
• Cross-border, country, and FX exposure
• Credit or chargeback losses where applicable
• Corporate cash and marketable securities
• Customer/merchant/settlement funds and restricted cash
• Standard FCF versus company-adjusted FCF
• Working-capital normalization
• Dilution and SBC
• Source IDs for cash classification and take rates

Valuation and Risk

Use corporate cash only for net-debt analysis; settlement float is not shareholder cash. A revenue surge caused by lower-margin pass-through volume is not equivalent to gross-profit growth. Track gross-profit/TPV and operating leverage. If the take rate declines, explain whether mix, geography, competition, or accounting presentation caused it.

Strict mode requires sourced separation of corporate and settlement cash.

8. Banks

Do not use EV/EBITDA.

Required KPIs

• P/TBV and P/book
• ROTCE and ROE
• Net interest margin
• Deposit beta
• Deposit mix and uninsured deposits
• Loan growth
• Nonperforming loans
• Net charge-offs
• Provision expense
• CET1
• Commercial real-estate exposure
• Securities marks and accumulated other comprehensive income

Scenario basis

Use TBV per share or book value per share and an appropriate P/TBV or P/book multiple. Model credit and deposit stress.

9. Insurance

Required KPIs

• P/book or P/TBV
• ROE
• Combined ratio
• Underwriting income
• Reserve development
• Investment income
• Catastrophe exposure
• Premium growth
• Retention

Scenario basis

Use book/TBV per share or normalized EPS. Adjust for reserve quality and catastrophe-cycle conditions.

10. REITs

Do not use ordinary EPS or P/E as the primary basis.

Required KPIs

• P/FFO and P/AFFO
• AFFO growth
• NAV premium/discount
• Same-store NOI
• Occupancy
• Leasing spreads
• Lease maturities
• Net debt / EBITDA
• Fixed-charge coverage
• Dividend payout

Scenario basis

Use AFFO per share or NAV per share. Include refinancing and cap-rate sensitivity.

11. Business Development Companies (BDCs)

Required KPIs

• Price/NAV
• Net investment income per share
• Non-accruals
• Portfolio yield
• Debt/equity
• Interest coverage
• First-lien exposure
• Payment-in-kind income
• Dividend coverage
• NAV trend

Scenario basis

Use NAV per share or normalized NII per share. Do not use industrial-company EV/EBITDA.

12. MLPs and Midstream Partnerships

Required KPIs

• Distributable cash flow per unit
• Distribution coverage
• Leverage
• Contracted versus commodity-sensitive cash flow
• Counterparty concentration
• Maintenance versus growth capex
• Unit issuance/buybacks
• IDRs or sponsor conflicts

Scenario basis

Prefer DCF per unit, FCF per unit, and EV/EBITDA on a consistently defined basis. Treat tax structure separately.

13. Energy, Mining, Materials, Chemicals, Steel, and Shipping

Required KPIs

• Commodity or freight prices
• Production/volume
• Realized price
• Unit costs
• Capacity/utilization
• Capital intensity
• Maintenance capex
• Reserve life where relevant
• Contract coverage
• Balance-sheet sensitivity

Valuation

Use normalized commodity assumptions and mid-cycle margins. Do not annualize a spot-price windfall.

14. Homebuilders and Housing-Related Companies

Required KPIs

• Orders and cancellations
• Backlog
• Community count
• ASP
• Gross margin excluding unusual items
• Incentives
• Land inventory
• Net debt/capital
• Mortgage-rate sensitivity

Valuation

Use normalized EPS, book value, and land-cycle analysis. A low P/E at peak closings may be misleading.

15. Advertising, Staffing, Transportation, Airlines, and Autos

These are normally cyclicality score 3 to 5.

Required KPIs

• Volume and utilization
• Price/yield
• Customer budget or hiring trends
• Capacity
• Load factor or miles/hours where relevant
• Used-asset values
• Backlog/order intake
• Labor and fuel/input costs

Use normalized operating margins and recession drawdown history.

16. Auto Dealerships and Floorplan Debt

Do not apply general-company net-debt/EBITDA mechanically to auto dealers. Obtain a sourced sector-adjusted leverage measure that explicitly excludes inventory floorplan financing when appropriate.

Required schema-v3 fields:

• adjusted_net_debt_to_ebitda
• floorplan_debt_excluded = true
• source IDs

Without these fields, route the candidate to review_required, not screened_out solely because unadjusted leverage appears high.

17. Commercial Biopharma LOE Stress

When a top product contributes at least 50% of revenue and a material LOE is within five years:

• calculate or source product concentration,
• record the nearest material LOE date,
• distinguish base patent, pediatric exclusivity, settlements, formulation/use patents, and replacement products,
• calculate 6x and 8x year-3 metric stress cases in addition to the generic 20% multiple-contraction case.

Product concentration may be derived as:

top product revenue / total revenue

only when both values share the same period and source evidence.

v3.5 Normalization Rules

• Normalize biopharma, pharma, biotechnology, royalty_biopharma, and drug_delivery_platform to commercial_biopharma when commercial product or royalty economics exist.
• Commercial biopharma requires sourced product/revenue-stream concentration, nearest material LOE, and configured 6x/8x stress scenarios.
• peak_profit_risk=true forces mid-cycle normalization regardless of the numeric cyclicality score.
• Sector evidence is part of the data-quality score and can cap it at 65 when missing.