This glossary defines every fundamental metric used in European stock screeners — what it measures, how it is calculated, what thresholds are typically meaningful, and where European equities differ from US equities in how the metric should be interpreted. It is designed as a reference for investors building systematic screens on ScreenerHero or any other fundamental screener.
Last updated: June 2026.
Valuation metrics
P/E — Price-to-Earnings Ratio
Definition: Market price per share divided by earnings per share (EPS). The most widely used valuation metric.
Formula: P/E = Share Price / EPS (trailing 12 months)
What it measures: How much investors pay for each unit of earnings. A P/E of 15 means investors pay €15 for every €1 of annual earnings.
Typical thresholds for European equities:
- Below 10: Cheap — either a value opportunity or a business with serious problems
- 10–15: Below average — moderately cheap for a profitable business
- 15–18: Fair value range for European markets (European market average P/E is ~14–16×)
- 18–25: Moderate premium — priced in some growth
- Above 25: Growth-premium territory — requires above-average earnings growth to justify
European-specific context: European equities trade at a structural discount to US equities (~21× S&P 500 P/E vs. ~14–15× Stoxx Europe 600). A "cheap" threshold for European equities is lower in absolute terms than for US equities. A P/E of 12 on a European industrial is not remarkable; the same P/E on a US industrial would be very cheap.
Limitations: P/E is meaningless for loss-making companies. It is distorted by one-off items (asset sales, write-downs), tax rate differences across countries, and capital structure (debt increases EPS but also increases risk). Always use alongside EV/EBITDA.
Screener use: Filter P/E below 12–15 for value screens. Filter above 15 for quality or growth screens where you're willing to pay a premium.
Forward P/E
Definition: Share price divided by consensus forecast EPS for the next 12 months.
Formula: Forward P/E = Share Price / Consensus EPS (next 12 months)
What it measures: How expensive the stock is relative to expected (not historical) earnings.
European-specific context: Forward P/E is most useful for large-cap companies with multiple analyst estimates. For European small and microcap companies — which often have zero to two analysts — consensus estimates are unavailable or unreliable. Trailing P/E is more reliable for European small caps. Screeners that display "P/E" for small-cap European companies may be using trailing, forward, or a mixture — always verify.
P/B — Price-to-Book Ratio
Definition: Market capitalisation divided by book value (total shareholders' equity).
Formula: P/B = Market Cap / Book Value of Equity
What it measures: The premium or discount at which a company trades relative to its accounting net asset value.
Typical thresholds:
- Below 1.0: Trading below book value — classic net-net territory for value investors. Signals the market values assets less than their accounting value; may be justified (asset impairment risk) or represent genuine undervaluation
- 1.0–2.0: Modest premium to book — reasonable for profitable businesses
- 2.0–5.0: Significant premium — priced in earnings power above asset value
- Above 5.0: Asset-light businesses (software, platforms) where book value has limited relevance
European-specific context: European banks and financials often trade near or below 1.0× P/B — structural in European banking due to legacy NPL (non-performing loan) concerns and low ROE. European industrials trade at 1.5–3.0× P/B typically. Value-focused European screens commonly use P/B below 1.5 as a filter.
Limitations: Book value is based on historical cost accounting. For asset-light businesses (software, brands, consulting), book value is irrelevant — the company's value is in intangibles not fully reflected on the balance sheet. Most useful for asset-heavy industries: banks, industrials, real estate, utilities.
EV/EBITDA — Enterprise Value to EBITDA
Definition: Enterprise Value (market cap + net debt) divided by EBITDA (earnings before interest, taxes, depreciation, and amortisation).
Formula: EV/EBITDA = (Market Cap + Net Debt - Cash) / EBITDA
What it measures: How expensive the whole business is (including its debt obligations) relative to its operating cash-generation capacity, before the effects of capital structure, taxes, and accounting choices.
Typical thresholds for European equities:
- Below 5×: Very cheap — unusual for healthy businesses; investigate why
- 5–8×: Cheap — a sound business at a meaningful discount
- 8–12×: Fair value range for most European sectors
- 12–18×: Growth premium
- Above 18×: High-growth or very high-quality businesses
Why it's preferred over P/E for cross-market screens: EV/EBITDA accounts for debt (EV includes net debt), is not affected by tax rate differences across countries, and excludes depreciation and amortisation (which vary dramatically across industries and accounting policies). For comparing a German industrial against a French utility against a Spanish bank — all with different tax rates and capital structures — EV/EBITDA provides a more apples-to-apples comparison than P/E.
European-specific context: European real estate companies (REIT equivalents) are better valued on FFO (Funds from Operations) or NAV (Net Asset Value) than EV/EBITDA. Banks and insurance companies are not meaningfully evaluated with EV/EBITDA — use P/E and P/B for financials.
EV/Revenue (EV/Sales)
Definition: Enterprise Value divided by annual revenue.
Formula: EV/Revenue = (Market Cap + Net Debt - Cash) / Annual Revenue
What it measures: How expensive the business is relative to its top-line sales.
Typical thresholds:
- Below 0.5×: Very cheap — implies the business earns significant revenue relative to enterprise value
- 0.5–2×: Reasonable range for most profitable businesses
- 2–5×: Growth premium — typical for fast-growing software or platform companies
- Above 5×: Typical for high-growth SaaS; implies significant future margin expansion expected
Use case: Most useful for pre-profit or low-margin growth companies where EV/EBITDA and P/E are not meaningful. Also useful for comparing businesses with very different margin profiles within the same sector.
Price-to-Sales (P/S)
Definition: Market capitalisation divided by annual revenue.
Formula: P/S = Market Cap / Annual Revenue
Difference from EV/Revenue: P/S uses market cap (equity value only), not enterprise value. EV/Revenue is more theoretically correct because it accounts for debt.
Use case: Quick screening filter for growth companies. Less common in European fundamental screening than EV/Revenue.
PEG Ratio — Price/Earnings to Growth
Definition: P/E ratio divided by the expected earnings growth rate.
Formula: PEG = P/E / Earnings Growth Rate (%)
What it measures: Whether the P/E is justified by the growth rate. PEG of 1.0 means the P/E equals the growth rate — often cited as "fair value" for a growth company.
Typical thresholds:
- Below 0.5: Potentially undervalued relative to growth
- 0.5–1.0: Attractively priced growth
- 1.0–2.0: Fair to somewhat expensive for the growth rate
- Above 2.5: Priced in a lot of future growth acceleration
Limitations: Relies on forward earnings growth estimates — for European small caps with no analyst coverage, forward estimates are unavailable or unreliable.
Price-to-FCF (Price-to-Free Cash Flow)
Definition: Market capitalisation divided by annual free cash flow.
Formula: P/FCF = Market Cap / Free Cash Flow
What it measures: How much investors pay for each unit of free cash flow — actual cash generated by the business after capital expenditure.
Typical thresholds:
- Below 10×: Cheap — significant cash generation relative to market price
- 10–20×: Fair value range
- Above 25×: Growth premium or capital-intensive business reinvesting heavily
Why free cash flow matters: Reported earnings can be manipulated through accounting choices (depreciation rates, revenue recognition timing). Free cash flow is more resistant to manipulation because cash either arrives or it doesn't. Value investors often weight Price-to-FCF above P/E for this reason.
EV/EBIT
Definition: Enterprise Value divided by EBIT (earnings before interest and taxes — but after depreciation).
Formula: EV/EBIT = (Market Cap + Net Debt - Cash) / EBIT
Difference from EV/EBITDA: Includes depreciation and amortisation. More conservative than EV/EBITDA for capital-intensive businesses where depreciation represents real economic cost (machinery wears out and must be replaced). Less distorted by accounting choices for D&A than EV/EBITDA.
Profitability metrics
ROE — Return on Equity
Definition: Net income divided by average shareholders' equity.
Formula: ROE = Net Income / Average Shareholders' Equity
What it measures: How efficiently management generates profit from shareholders' funds.
Typical thresholds:
- Below 5%: Poor — returns barely above risk-free rate
- 5–10%: Below average
- 10–15%: Average for European equities
- 15–20%: Good — management generating meaningful returns on capital
- Above 20%: Excellent — implies significant competitive advantage
European-specific context: ROE for European equities averages 10–14%, lower than US equivalents (15–18%) due to sector composition (more industrials, fewer tech), higher leverage in some sectors (banks), and structurally lower growth. A ROE of 15%+ for a European company is genuinely impressive.
Limitations: ROE can be inflated by high debt (leverage increases ROE but also increases risk). A company with 90% debt financing may show high ROE while actually earning poor returns on the underlying business. Use alongside ROIC for a more complete picture.
ROIC — Return on Invested Capital
Definition: Net operating profit after tax (NOPAT) divided by invested capital (equity + debt - cash).
Formula: ROIC = NOPAT / (Equity + Debt - Cash)
What it measures: How efficiently the business earns returns on all capital employed — both equity and debt. The theoretically correct measure of business quality.
Typical thresholds:
- Below 5%: Destroying value (below most estimates of the cost of capital)
- 5–10%: Marginal value creation
- 10–15%: Good quality business
- 15–25%: High-quality business with competitive advantages
- Above 25%: Exceptional — significant competitive moat implied
Why ROIC beats ROE: ROIC cannot be artificially inflated by taking on debt. It measures returns on the total capital base, making it a purer measure of business quality than ROE. Warren Buffett's emphasis on high-quality businesses consistently earning above their cost of capital is essentially an emphasis on ROIC. See: ROIC Quality Investing Guide.
Operating Margin
Definition: Operating profit (EBIT) divided by revenue.
Formula: Operating Margin = EBIT / Revenue × 100
What it measures: How much operating profit the business generates from each unit of revenue, before the effects of financing costs and taxes.
Typical thresholds by European sector:
- Utilities: 10–20% (regulated revenue, capital-intensive)
- Financials: Measured differently (NIM, cost-to-income ratio)
- Industrials / Manufacturing: 5–15%
- Consumer staples: 10–18%
- Technology / Software: 15–35%
- Healthcare / Pharma: 15–30%
- Mining / Resources: Highly cyclical — 5–40%+ depending on commodity cycle
Screener use: Operating margin above 0% as a filter eliminates pre-profit companies from fundamental screens. Operating margin above 10% biases toward quality businesses.
Net Margin
Definition: Net income divided by revenue.
Formula: Net Margin = Net Income / Revenue × 100
What it measures: The percentage of revenue that becomes profit after all costs, including financing and taxes.
Difference from operating margin: Net margin includes interest expense, tax expense, and extraordinary items. It is more affected by capital structure (high debt companies have lower net margins due to interest costs) and tax rates (which vary across European countries).
European-specific context: Tax rates vary significantly across European countries — Ireland (12.5% corporate tax), Hungary (9%), Germany (~30%), France (~25%), UK (25%). A German company and an Irish company in the same sector with the same operating margin will show different net margins due purely to tax rates. EV/EBITDA and operating margin are more reliable for cross-country comparison than net margin.
Gross Margin
Definition: Gross profit (revenue minus cost of goods sold) divided by revenue.
Formula: Gross Margin = (Revenue - COGS) / Revenue × 100
What it measures: How much revenue remains after direct production costs, before operating expenses (SG&A, R&D, etc.).
Typical thresholds by type:
- Below 20%: Low — typical for distribution, trading, commodity businesses
- 20–40%: Moderate — typical for manufacturing, consumer goods
- 40–70%: High — typical for healthcare, branded consumer, specialty chemicals
- Above 70%: Very high — typical for software, platforms, branded luxury goods
Why it matters: Gross margin reveals the pricing power and structural economics of the core business, independent of cost management decisions. A company with 60% gross margin has structural advantages over a 20% gross margin competitor — it can afford more R&D, marketing, and still generate operating profit.
EBITDA Margin
Definition: EBITDA divided by revenue.
Formula: EBITDA Margin = EBITDA / Revenue × 100
What it measures: Operating profitability excluding the effects of depreciation, amortisation, interest, and taxes.
Use case: Most useful for comparing capital-intensive businesses across different countries, where depreciation policies and tax rates differ. EBITDA margin is widely used in M&A analysis for this reason.
Leverage and financial health metrics
Debt/Equity Ratio
Definition: Total debt divided by total shareholders' equity.
Formula: Debt/Equity = Total Debt / Total Shareholders' Equity
What it measures: The proportion of financing provided by creditors vs. shareholders.
Typical thresholds:
- Below 0.3: Conservative — minimal leverage
- 0.3–1.0: Moderate — common for profitable industrials and consumer companies
- 1.0–2.0: Elevated — leverage is a meaningful consideration
- Above 2.0: High leverage — typical for utilities, real estate, and heavily capital-intensive businesses; high risk for cyclical businesses
European-specific context: European banks are not meaningfully evaluated with Debt/Equity — their business model involves holding large deposits (liabilities) against loan books (assets). Debt/Equity is most useful for non-financial companies.
Net Debt / EBITDA
Definition: Net debt (total debt minus cash) divided by EBITDA.
Formula: Net Debt/EBITDA = (Total Debt - Cash) / EBITDA
What it measures: How many years of EBITDA it would take to pay off net debt. The standard leverage metric used by banks, rating agencies, and M&A professionals.
Typical thresholds:
- Below 1×: Low leverage — very comfortable
- 1–2×: Moderate — healthy for most businesses
- 2–3×: Elevated — manageable but becoming a constraint on financial flexibility
- 3–4×: High — common in private equity buyouts; becomes stressful if EBITDA falls
- Above 4×: Very high — structural concern for cyclical businesses; normal for regulated utilities
Current Ratio
Definition: Current assets divided by current liabilities.
Formula: Current Ratio = Current Assets / Current Liabilities
What it measures: Ability to meet short-term obligations with short-term assets.
Typical thresholds:
- Below 1.0: Current liabilities exceed current assets — short-term liquidity concern
- 1.0–1.5: Adequate but tight
- 1.5–3.0: Healthy
- Above 3.0: Conservative; may signal excess cash or slow inventory turnover
Quick Ratio (Acid Test)
Definition: (Current assets minus inventory) divided by current liabilities.
Formula: Quick Ratio = (Current Assets - Inventory) / Current Liabilities
What it measures: Short-term liquidity without relying on inventory liquidation — a more conservative measure than current ratio. Important for businesses with slow-moving inventory (manufacturing, retail).
Income and dividend metrics
Dividend Yield
Definition: Annual dividends per share divided by share price.
Formula: Dividend Yield = Annual Dividend per Share / Share Price × 100
What it measures: The income return from dividends as a percentage of investment.
Typical thresholds for European equities:
- Below 1%: Low or no income — growth-oriented company
- 1–3%: Modest income
- 3–5%: Meaningful income — common for European quality dividend payers
- 5–8%: High yield — attractive if sustainable; investigate payout ratio
- Above 8%: Very high yield — often a yield trap (price has fallen on bad news, yield appears high)
European-specific context: European equities offer structurally higher dividend yields than US equities. The Stoxx Europe 600 dividend yield (~3.5%) consistently exceeds the S&P 500 (~1.3–1.5%). Spain and the UK have historically offered the highest-yielding dividend markets in Europe.
Key warning: High dividend yield alone is insufficient. Always combine with payout ratio and cash flow coverage to identify sustainable dividends.
Payout Ratio
Definition: Dividends paid as a percentage of net earnings.
Formula: Payout Ratio = Dividends per Share / EPS × 100
What it measures: What proportion of earnings is distributed to shareholders vs. retained.
Typical thresholds:
- Below 30%: Conservative — significant earnings retained for growth
- 30–60%: Balanced — common for quality dividend payers
- 60–80%: High — limited retained earnings; reduces flexibility
- Above 80%: Unsustainable for most businesses unless earnings are stable (utilities, real estate)
- Above 100%: Company paying more in dividends than it earns — debt-funded dividend, a red flag
European-specific context: Some European companies (particularly Spanish banks) have used scrip dividend programs — offering investors the choice of cash or additional shares. Scrip dividends appear as high payout ratios but are dilutive rather than cash-generative for the company.
FCF Yield (Free Cash Flow Yield)
Definition: Free cash flow per share divided by share price (or Free Cash Flow / Market Cap).
Formula: FCF Yield = Free Cash Flow / Market Cap × 100
What it measures: The "earnings yield" based on actual cash generation rather than reported earnings.
Typical thresholds:
- Below 3%: Low — limited cash return at current price
- 3–6%: Moderate
- 6–10%: Attractive — meaningful cash generation relative to market price
- Above 10%: Very high — either a genuine bargain or a business with deteriorating cash flows
Why value investors prefer FCF yield over dividend yield: FCF yield measures total cash generated by the business, which can be used for dividends, buybacks, debt repayment, or reinvestment. Dividend yield only measures the portion actually paid out. A company with 12% FCF yield and 4% dividend yield is generating substantial cash beyond its distribution.
Quality and composite metrics
Piotroski F-Score
Definition: A composite score (0–9) measuring financial strength across nine binary criteria in three categories: profitability, leverage/liquidity, and operating efficiency.
Components:
- Profitability (0–4): ROA positive, ROA improving, operating cash flow positive, accruals (operating cash flow > ROA)
- Leverage / Liquidity (0–3): Leverage decreasing, current ratio improving, no dilution (no new shares issued)
- Operating Efficiency (0–2): Gross margin improving, asset turnover improving
Scores:
- 0–2: Weak — financial distress indicators present
- 3–5: Neutral — average financial condition
- 6–7: Strong — improving fundamentals
- 8–9: Very strong — across-the-board financial improvement
European-specific use: The Piotroski F-Score is particularly useful for filtering value stocks — companies with low P/B — to distinguish improving businesses from value traps. European value screens commonly combine P/B below 1.5 with F-Score above 6 to find cheap-but-improving businesses. See: Piotroski F-Score for European Stocks.
Altman Z-Score
Definition: A formula combining five financial ratios to predict bankruptcy probability within two years.
Formula: Z = 1.2×(Working Capital/Assets) + 1.4×(Retained Earnings/Assets) + 3.3×(EBIT/Assets) + 0.6×(Market Cap/Liabilities) + 1.0×(Revenue/Assets)
Interpretation:
- Below 1.8: Distress zone — elevated bankruptcy risk
- 1.8–2.99: Grey zone — ambiguous
- Above 2.99: Safe zone — low bankruptcy risk
Limitations: The original Altman Z-Score was calibrated on US manufacturing companies in the 1960s. It is less reliable for service businesses, financial companies, and non-US equities. Modified versions exist for private companies and non-manufacturing businesses.
Graham Number
Definition: A measure of the maximum fair price for a stock based on Benjamin Graham's principles.
Formula: Graham Number = √(22.5 × EPS × BVPS)
Where BVPS = Book Value Per Share
What it measures: The upper bound of fair value based on the intersection of P/E (≤15) and P/B (≤1.5) — Graham's original combined valuation rule. Graham Number = √(15 × 1.5 × EPS × BVPS) = √(22.5 × EPS × BVPS).
Use case: Quick check for whether a stock is trading below Graham's original combined valuation criteria. A stock trading below its Graham Number passes both P/E < 15 and P/B < 1.5 simultaneously.
Growth metrics
Revenue Growth (YoY)
Definition: Percentage change in revenue compared to the same period last year.
Formula: Revenue Growth = (Current Revenue - Prior Year Revenue) / Prior Year Revenue × 100
What it measures: Organic growth (or decline) of the top line.
Typical screening thresholds:
- Below 0%: Revenue declining — requires investigation
- 0–5%: Modest growth — typical for mature, slow-growth businesses
- 5–10%: Moderate growth — in line with or slightly above GDP
- 10–20%: Strong growth — above average
- Above 20%: High growth — typical for growth stocks or cyclical recovery
EPS Growth
Definition: Percentage change in earnings per share compared to the prior year.
Formula: EPS Growth = (Current EPS - Prior Year EPS) / Prior Year EPS × 100
What it measures: Growth in per-share profitability — affected by both operating performance and share count changes.
Note: EPS growth can differ materially from net income growth if a company has issued or repurchased shares. Use alongside revenue growth and margin trends to assess quality of EPS growth.
Revenue CAGR (3-year or 5-year)
Definition: Compound Annual Growth Rate of revenue over a multi-year period.
Formula: CAGR = (Ending Revenue / Starting Revenue)^(1/N) - 1
Where N = number of years
What it measures: Sustained revenue growth over a multi-year period — less susceptible to one-year outliers than YoY growth.
Screening use: 3-year revenue CAGR above 10–15% identifies businesses that have demonstrated sustained growth over a business cycle, not just a one-quarter spike.
Market structure metrics
Market Cap
Definition: Total equity value of a company. Share price × number of shares outstanding.
Size categories (European convention):
- Mega cap: Above €50B
- Large cap: €5B–€50B
- Mid cap: €1B–€5B
- Small cap: €150M–€1B
- Microcap: €10M–€150M
- Nano cap: Below €10M
Screener use: Market cap is both a quality filter (smaller companies have less liquidity and less reliable data) and an opportunity filter (smaller companies are less efficiently priced). Setting a minimum market cap of €50M–€100M for fundamental screens eliminates the most illiquid names while keeping genuine small-cap opportunities in scope.
Beta
Definition: A measure of a stock's price volatility relative to the broad market index.
Formula: Regression of stock returns against market index returns over typically 1–5 years.
Interpretation:
- Beta = 1.0: Moves in line with the market
- Beta > 1.0: More volatile than the market (magnifies market moves up and down)
- Beta < 1.0: Less volatile than the market (defensive characteristics)
- Beta < 0: Moves inversely to the market (rare; some gold mining companies)
European-specific context: Beta for European stocks is typically calculated against a European index (Stoxx 600 or local index). A high-beta European stock may have low beta against the S&P 500 and vice versa.
Volume (Average Daily Volume)
Definition: The average number of shares traded per day over a specified period (typically 30 or 90 days).
What it measures: Liquidity — how easily investors can enter and exit positions without significantly moving the price.
European-specific context: European small and microcap stocks often have very low daily volume — many names on Euronext Growth, First North, and EGM trade fewer than €50,000 per day. For individual investors this is often acceptable; for institutions, it creates position sizing constraints. Always check volume before committing capital to European microcap screens.
Short Float
Definition: Percentage of freely tradeable shares (float) that have been sold short.
What it measures: Market bearishness on a specific stock. High short float signals that many professional investors are betting the stock will fall.
Typical thresholds:
- Below 2%: Normal
- 2–10%: Elevated short interest — some bearish sentiment
- Above 10%: High short interest — significant institutional bearish positioning
- Above 20%: Very high — either company has serious problems or potential for short squeeze
European-specific context: Short-selling data is less consistently reported for European equities than for US equities. Regulatory requirements for short position disclosure vary by country. Major short positions (>0.5% of issued shares) must be reported to regulators in EU markets under the Short Selling Regulation.
IFRS vs. GAAP: key differences for European screening
European-listed companies report under IFRS (International Financial Reporting Standards), while US companies report under US GAAP. Key differences that affect screener metrics:
Goodwill amortisation: Under IFRS, goodwill is not amortised annually — it is tested for impairment. Under US GAAP (post-2001), the same rule applies. However, some older European accounting rules (particularly in Germany for companies using local HGB rules) amortise goodwill. Screeners that mix IFRS and HGB financials for German small-caps may show inconsistent EBITDA figures.
Inventory accounting: IFRS does not allow the LIFO (Last In, First Out) inventory method — only FIFO or average cost. US GAAP permits LIFO. This affects COGS and gross margin comparisons between US and European companies in inventory-heavy sectors.
Revenue recognition: IFRS 15 (Revenue from Contracts with Customers) and US GAAP ASC 606 are substantially converged since 2018. Differences remain in specific industry implementations (software, construction, telecom).
Operating lease treatment: IFRS 16 (2019 onwards) requires companies to bring operating leases onto the balance sheet — creating "right-of-use assets" and "lease liabilities." This increases both assets and liabilities, reduces net income (lease payments are replaced by depreciation + interest), and increases EBITDA (lease payments previously expensed below EBITDA are now shown above it as depreciation and interest). A company's EV/EBITDA before and after IFRS 16 adoption is not directly comparable. Screeners should use post-IFRS 16 EBITDA consistently — verify this if comparing companies across different fiscal years.
Financial instruments (IFRS 9 vs. GAAP): Differences in how financial assets are classified and measured can affect book value calculations for financial companies.
Frequently asked questions
What is the most important metric for stock screening?
There is no single most important metric — the right combination depends on the screening strategy. For value investing: EV/EBITDA and P/B. For quality investing: ROIC and operating margin. For growth investing: revenue growth and gross margin. For dividend investing: dividend yield and payout ratio. Combining two to four complementary metrics — one valuation, one profitability, one financial health — produces more reliable screens than any single filter.
Is EV/EBITDA or P/E more reliable for comparing European stocks?
EV/EBITDA is more reliable for comparing companies across different European countries because it is not affected by: (1) tax rate differences across countries, (2) capital structure differences (EV accounts for debt), and (3) depreciation policy differences (EBITDA adds back D&A). P/E is affected by all three. For cross-country European value screening, EV/EBITDA is the preferred primary valuation metric.
What does it mean when a European stock has no P/E data?
Missing P/E data for a European stock typically means one of three things: (1) the company reported a net loss — P/E is undefined for negative earnings; (2) the data provider hasn't sourced financial statements for that company, common for very small or illiquid names; or (3) the data is stale — the company hasn't reported recent results and the screener is showing incomplete data. Always check data freshness for European microcaps.
How should I handle financial companies in a screener?
Banks, insurance companies, and investment firms should not be screened on EV/EBITDA — debt is part of their operating model, not just capital structure. For financial companies, use: P/E (price relative to earnings), P/B (price relative to book value — particularly important for banks), Return on Equity (ROE — the key profitability metric for financial companies), and for banks specifically: Net Interest Margin (NIM) and Cost-to-Income ratio.
What is EBITDA and why do some analysts criticise it?
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) is criticised by investors like Warren Buffett and Charlie Munger as a misleading "fake earnings" metric because it adds back depreciation and amortisation — which are real economic costs for businesses that need to maintain or replace physical assets. A mining company with high D&A spends real cash every year replacing equipment; EBITDA pretends that cost doesn't exist. The critique is valid for capital-intensive businesses. EBITDA is most useful for asset-light businesses (software, services) where D&A represents accounting rather than cash reality, and for cross-country comparisons where consistent comparison of operating cash generation is needed.
Related guides
- How to Screen European Value Stocks — applying valuation metrics in a systematic European value screen
- ROIC Quality Investing Guide — return on invested capital as the core quality metric
- Magic Formula Investing in Europe — combining earnings yield and return on capital
- Piotroski F-Score for European Stocks — using the F-Score to identify improving value stocks
- Free Cash Flow Yield Screening — FCF-based screening in depth
- Price-to-Book Ratio Screening — P/B screening and when it works
- How to Use EV/EBITDA for European Stocks — EV/EBITDA in depth with European sector context
- Dividend Withholding Tax in Europe — tax implications for European dividend investors
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