Are blue chip Japanese stocks trading at a discount? Yes.

By James Dennin for Kapitall.

The Nikkei 225 only barely outperformed bitcoin in 2014 so far, through the end of May.

This most well known index of Japanese stocks has lost about 10.18%, rivalling the fraught digital currency and the Argentinian peso for worst-performing asset worldwide.

So, naturally, we decided to look for discounts.

The Japanese stock market has already started to rebound some, supported by a weak yen .

Throughout Tuesday the index climbed about 1%, also in part due to strong Chinese manufacturing. Still, there is a lot of ground to cover in the 10% loss. In our screen for discounted Japanese stocks we wanted to look for a few things.

We wanted blue chip stocks-companies with established and familiar reputations with investors-that paid a dividend. We also wanted to make sure that the stock looked relatively cheap for stocks with little momentum.

This meant narrowing our screen to Japanese stocks on American exchanges with a market cap of $10 billion or more.

We then looked for high ratios of levered free cash flow to enterprise value (LFCF/EV) . Levered-free cash is the amount of money a compnay has after paying off its debts and costs. Enterprise value is another way of measuring a company's size.

When a company has a high ratio of levered-free cash to enterprise value, it might be said to be undervalued. This screen left us with two stocks.

Click on the interactive chart to view data over time.

1. Canon Inc. ( CAJ , Earnings , Analysts , Financials ): Canon, Inc., through its subsidiaries, manufactures and sells network digital multifunction devices (MFDs), plain paper copying machines, laser printers, inkjet printers, cameras, and lithography equipments primarily under Canon brand in the Americas, Europe, Asia and Oceania. Market cap at $43.74B, most recent closing price at $33.03.

Levered free cash flow at $3.01B vs. enterprise value at $28.75B (implies a LFCF/EV ratio at 10.47%).

2. Sony Corporation ( SNE , Earnings , Analysts , Financials ): Designs, develops, manufactures, and sells electronic equipment, instruments, and devices for consumer, professional, and industrial markets worldwide. Market cap at $16.7B, most recent closing price at $16.18.

Levered free cash flow at $3.40B vs. enterprise value at $21.51B (implies a LFCF/EV ratio at 15.81%).

(List compiled by James Dennin. Monthly returns sourced from Zacks Investment Research, LFCF sourced from Yahoo! Finance. All other data sourced from Finviz.)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.