How jini uses P/E, P/B, and ROE — why easy names matter

The problem: "Is low P/E the same as undervalued?"

You hear it all the time in investing circles: "Low P/E means undervalued", "High ROE means it's a good company", "P/B below 1 is always a buy."

These claims are half true and half false. Cheap stocks are often cheap for a reason. If a company is collapsing, its low P/E doesn't mean it's undervalued—it means the stock price is falling faster than earnings. That's why jini shows you both: easy-language names (for first-time visitors) and technical terms (for verification).

Why pair easy names with jargon

1. Technical terms are a barrier to entry

P/E ratio, P/B ratio, ROIC—they're precise but sound like alien language to newcomers. "What the current price is in multiples of earnings" or "what percentage return the company gets on shareholder money" makes instant sense.

jini displays easy names in large type and technical terms in small type because:

• First-time visitors: Can understand from the easy name alone
• Verification step: Can Google the technical term or cross-check with other sources
• Learning: Seeing the same term repeatedly, you naturally absorb it

2. Term choice is deliberate

Take ROE (return on equity), shown as "self-capital returns" alongside the technical term. Why?

• ROE is calculated as net income ÷ shareholder equity = net income ÷ self-capital
• The technical term is what you'll find in other sources
• "Shareholder money" is intuitive but "equity" is the standard term

P/E, P/B, and ROE are supporting metrics only

jini's core belief: A score is not a verdict. Always consider all 8 areas together.

The P/E trap

Stock A: P/E of 8× (market average is 15×)  → looks cheap
Stock B: P/E of 12× (market average is 15×) → looks average

But actually:
Stock A: Earnings are collapsing → the low P/E isn't bargain pricing, it's a stock crash
Stock B: Stable earnings + solid finances → fairly priced

jini distinguishes them across 8 areas:

1. Growth — A is negative, B is positive
2. Profitability — A is declining, B is stable
3. Earnings quality — A has weak cash conversion, B is solid
4. Cash flow — A is deteriorating, B is stable
5. Financial health — A shows warning signs, B is safe
6. Valuation — Only A looks cheap by P/E, B is fair
7. Market expectations — A's high expectations already priced in, B's are modest
8. Risk — A's volatility is climbing, B is stable

To call A "undervalued," its growth/profit/cash metrics would need to not be declining—and they usually are. That's a Value Trap.

Why ROE matters (but not alone)

A high ROE means the company generates profit efficiently on shareholder capital. jini's thresholds:

• 8% or above: Market average (covers cost of capital)
• 15% or above: Strong (value-creating level)
• 25% or above: Top tier

But high ROE can come from two different sources:

1. Good reason — Strong operational efficiency and competitive advantage (e.g., tech leader)
2. Bad reason — Heavy debt load that artificially inflates ROE before financial collapse (e.g., a overleveraged company)

This difference emerges in the Financial Health area (debt ratios, short-term liquidity, interest coverage).

How jini combines metrics

First gate: "Is the business quality acceptable?"

Quality score = Does this company make money well?

• Combines growth, profitability, earnings quality, cash flow, financial health
• Falls below 45 points? "Looks cheap but risky" warning (threshold: 45)

Second gate: "Is the price actually cheap?"

Valuation score = Is today's price fair for this quality level?

• Price vs. company's own 3-year average
• Price vs. peer companies
• Cash return yield (at today's price, what % cash comes back annually)

Third gate: "What is the market pricing in?"

Market expectations (implied growth) = How fast must this company grow to justify today's price?

• Compare to analyst consensus
• Negative gap = market's growth requirement is below forecast (safe)
• Positive gap = market expects more than consensus (risky if it misses)

Final gates before an undervalued verdict

For jini to call something undervalued, it must pass:

• Quality score ≥ 45
• Financial health score ≥ 40
• Bear scenario downside ≥ −30% (bottom is not too catastrophic)

Miss any gate, and the verdict is downgraded.

Practical checklist

When reading a stock page, don't just check P/E, P/B, ROE. Follow this order:

1. Top of page "at-a-glance" summary

   • Is quality 🟢, price 🟡, confidence 🔴?

2. Expand "Financial analysis · score" (▸)

   • Are growth/profit/cash/financial health all reasonable?
   • Especially check financial health (debt ratios, interest coverage)

3. Check "market expectations"

   • Is the expectation gap negative? (Room for upside surprise?)

4. Review "fair value + verdict"

   • What's the 5-level verdict?
   • Is confidence HIGH? (Do methods agree?)

5. Adjust safety margin (optional)

   • Default is 15%/30% — does that match your risk tolerance?
   • Change it and watch the verdict recalculate instantly

Bottom line: Look at structure, not single numbers

P/E of 8 is not undervalued. Undervalued is: "The business is solid (Quality score high) AND the price is low (Valuation score high) AND the market isn't pricing in unrealistic growth (Expectation gap negative)" — all three at once.

jini pairs metrics with easy names because we want you unafraid of numbers and clear on what they mean. That understanding is your first defense against bad decisions.

For a walkthrough of how to read the numbers together, see Turning the numbers into a strategy.