How to Set Up (3 Steps)
- •Step 1: Search for any stock on StockAlert.pro (e.g., GOOGL, JPM, BABA)
- •Step 2: Select "P/E Ratio Below" and set your threshold (use sector context: Tech <18x, Banks <8x, Staples <16x)
- •Step 3: Choose notification method (email or SMS) and save
Done! You'll receive alerts when P/E drops below your threshold. Always verify quality metrics (ROIC, FCF, debt) before buying - low P/E alone is 42% accurate, with quality filters it jumps to 68%.
Example: Alibaba Quality Value - September 2022
- •Setup: Alibaba (BABA) P/E dropped to 9.2x (from 28x in 2020) - China regulatory fears, delisting risk, macro slowdown
- •Signal: Quality metrics intact: ROIC 18%, $25B annual FCF, $72B net cash, dominant e-commerce/cloud position
- •Alert Trigger: P/E below 10x with quality filters passing - fear-driven mispricing of proven compounder identified
- •Result: BABA rallied from $73 to $118 (+61%) over 18 months as regulatory fears faded
- •Key Insight: 9x P/E wasn't a trap - quality metrics distinguished fear-driven opportunity from structural decline
Scenario Guide
| Scenario | Quality Check | P/E Level | Example | Action |
|---|---|---|---|---|
| Quality Value | ROIC >15%, FCF+ | <15x (Tech) | BABA 9x, ROIC 18% | Buy - fear mispricing |
| Cyclical Opportunity | Margins stable, share stable | <10x (Cyclical) | JPM 2023, 8x P/E | Buy - cycle bottom |
| Value Trap | ROIC <10%, FCF negative | <8x | Ford 6x, ROIC 5% | Avoid - permanent decline |
| Sector Dislocation | Quality intact, sector hated | <70% sector avg | Energy 2020, 5-7x | Buy - rotation opportunity |
| Structural Decline | Losing share, debt rising | Any low level | Legacy retail, media | Avoid - no mean reversion |
When to Use
- •You want to screen for quality value opportunities when stocks trade below sector average P/E
- •You're hunting cyclical opportunities in quality businesses temporarily out of favor
- •You need alerts when high-ROIC businesses hit historically low valuations (GOOGL 2022, JPM 2023)
When Not to Use
- •Buying low P/E without checking ROIC (60% of low P/E stocks have ROIC <10% = traps)
- •Ignoring debt levels (P/E <10x + Debt/EBITDA >4x = dividend cuts, dilution risk)
- •Comparing P/E across sectors (Tech at 20x vs Banks at 10x - different models, incomparable)
Conclusion
Low P/E is a starting point, not a conclusion. Ford at 6x P/E lost 40% over 5 years. Alphabet at 17x P/E gained 87% in 18 months. Filter every low P/E alert by ROIC >15%, positive free cash flow, and Debt/EBITDA <3x. The trap: buying cheap without quality. The opportunity: buying quality temporarily on sale.