High Piotroski Scores Meet Low P/E in India

Markets often pay up for stories. They don't always pay up for accounting discipline. The latest Piotroski F-Score screen for NSE/BSE companies shows that gap clearly. Eight large Indian companies now carry an F-Score of 8 out of 9 while their trailing price-to-earnings multiples sit between 10.39 and 19.16. That is not expensive for businesses generating consistent operating cash flow and improving margins. It's the kind of combination quality-at-a-price screens are built to find. The eight names read like a roll call of India's IT and banking heavyweights plus staple franchises. [TCS](/stock/TCS) (NSE: TCS), [Infosys](/stock/INFY) (NSE: INFY), [ITC](/stock/ITC) (NSE: ITC), [NTPC](/stock/NTPC) (NSE: NTPC), [SBI](/stock/SBIN) (NSE: SBIN), [HDFC Bank](/stock/HDFCBANK) (NSE: HDFCBANK), [Kotak Mahindra Bank](/stock/KOTAKBANK) (NSE: KOTAKBANK) and [Axis Bank](/stock/AXISBANK) (NSE: AXISBANK) all score 8/9. The valuation spread matters. SBI is at the bottom near 10.39 times trailing earnings. TCS sits near the top at 19.16 times. Infosys trades somewhere in the middle. That a public sector lender and a large IT exporter can both pass the same fundamental check says the screen is not betting on one macro theme. The macro setup explains part of the appeal. Foreign portfolio investors spent much of the past year shifting toward large caps with visible cash flows. The US Federal Reserve's rate path is still conditional on inflation data. Crude oil prices have moved in a wide range. For Indian investors, that has meant premium valuations in mid-cap and small-cap pockets and relatively calmer multiples in select large caps. The Piotroski screen is telling investors that some of those large caps are not just cheap on price-to-earnings. They are also producing higher returns on assets and lower debt ratios than their own history suggested. High Piotroski Scores in India Show Balance Sheet Health The F-Score is not a growth screen. It checks nine accounting signals. Profitabi...