Know what a stock is really worth

What it is: A rank correlation between our valuation signal and 12-month forward returns.

How to read it: undervalued ranks tend to outperform overvalued ranks. A positive correlation means the signal is directionally consistent across the cross-section (not just a few names).

What it is: The difference between the top 20% most undervalued and the bottom 20% most overvalued stocks, measured by their forward returns.

How to read it: This is an intuitive "portfolio-style" test: "What happens if you buy undervalued and avoid overvalued?"

What it is: The share of cases where the valuation signal gets the direction right (undervalued → positive forward return, overvalued → negative forward return).

How to read it: Above 50% indicates the signal is better than coin-flip directionally, even before position sizing or risk controls.

Note that a 100% hit rate is not realistic: an undervalued stock can become even more undervalued before it recovers (and vice versa).