5 low book value stocks to buy as 2020 approaches


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In value analysis, although price / earnings (P / E) and price / sell (P / S) are most preferred by investors, the price / book ratio (P / B ratio) is under- esteemed is also an easy to use tool. valuation tool to identify low-priced stocks with exceptional returns. The ratio is used to compare the value / market price of a stock to its book value.

The P / B ratio is calculated as follows:

P / B ratio = market price per share / book value of equity per share

The P / B ratio reflects the number of times book value investors are willing to pay for a stock. So if the stock price is $ 10 and the book value of equity is $ 5, investors are willing to pay twice the book value. Now let’s understand the concept of book value.

What is book value?

Book value is the total value that would remain, according to the company’s balance sheet, in the event of immediate bankruptcy. In other words, this is what shareholders would theoretically receive if a company liquidated all of its assets after paying off all of its liabilities.

It is calculated by subtracting total liabilities from total assets of a business. In most cases, this is equivalent to common shareholders’ equity on the balance sheet. However, according to the company’s balance sheet, intangible assets must also be subtracted from total assets to determine book value.

Understanding the P / B Ratio

By comparing the book value of equity to its market price, we get an idea of ​​whether a company is undervalued or overvalued. However, like the P / E or P / S ratio, it is always best to compare P / N ratios within industries.

An AP / E ratio of less than one means the stock is trading below its book value or the stock is undervalued and therefore is a good buy. Conversely, a stock with a ratio greater than one can be interpreted as being overpriced or relatively expensive.

For example, a stock with a P / N ratio of 2 means we pay $ 2 for every $ 1 of book value. Thus, the higher the P / B, the more expensive the action.

But there is a caveat. An AP / E ratio of less than one can also mean that the company is generating low or even negative returns on its assets, or that the assets are overvalued, in which case the stock should be avoided as it can destroy shareholder value. Conversely, the share price can be considerably high – thus pushing the P / B ratio to more than one – in the probable event that it has become a takeover target, reason enough to hold the share. ‘action.

In addition, the P / B ratio is not without limits. It is useful for businesses – like finance, investment, insurance, and banking or manufacturing companies – with many liquid / tangible assets on the books. However, it can be misleading for companies with large R&D spending, high debt, service companies, or those with negative profits.

In any case, the ratio is not particularly relevant as a stand-alone number. Other ratios such as P / E, P / S and debt / equity need to be analyzed before arriving at a reasonable investment decision.

Screening parameters

Price to Book (Common Equity) below the X-Industry median:A P / B below the industry average implies that there is enough room for the stock to win.

Sales price below the X-Industry median: The P / S ratio determines the market value for every dollar of company sales / revenue – a lower ratio than the industry makes the stock attractive.

Price / earnings using the F (1) estimate lower than the X-Industry median:The P / E (F1) ratio rates a company based on its current stock price relative to its estimated earnings per share – a lower ratio than the industry is considered better.

PEG less than 1:The PEG ratio relates the P / E ratio to the company’s future growth rate. The PEG report gives a more complete picture than the P / E report. A value less than 1 indicates that the stock is undervalued and that investors should pay less for a stock that has good prospects for earnings growth.

Current price greater than or equal to $ 5: They must all trade at a minimum of $ 5 or more.

Average volume over 20 days greater than or equal to 100,000: A substantial trading volume ensures that the stock is easily tradable.

Rank of Zacks less than or equal to # 2: Zacks Rank # 1 (Strong Buy) or 2 (Buy) stocks are known to outperform regardless of the market environment.

Value Note equal to A or B: Our research shows that stocks with a value score of A or B when combined with a rank 1 or 2 of Zacks offer the best opportunities in the value investing space.

Here are six of the eight actions that qualified the screening:

Alexion ALXN, a leading biotech, has a Zacks Rank # 2 and a Value Score of B. It has a 3-5 year BPA growth rate of 14%. You can see The full list of today’s Zacks # 1 Rank stocks here.

Quanta Services PWR, one of the leading national providers of specialized contractual services, has a projected 3 to 5 year EPS growth rate of 14.5%. He currently has a Zacks # 1 ranking and a value score of B.

Pharmaceutical Jazz JAZZ, a specialty biopharmaceutical company, currently has a Zacks rank of 2. It has a 3-5 year BPA growth rate of 11.3% and a value score of A.

Changyou.com Limited CYOU, a developer and operator of online games in China, is currently ranked # 2 by Zacks. It has a 3-5 year BPA growth rate of 36.5% and a value score of A.

Legg Mason LM, a global asset management company, has a projected 3 to 5 year EPS growth rate of 11.5%. He currently has a Zacks Rank # 2 and a Value Score of A.

Navient Company NAVI, a loan, service and asset recovery management company, currently has a Zacks rank of 2. It has a 3-5 year EPS growth rate of 25% and a value score of A.

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Disclosure: Officers, directors and / or employees of Zacks Investment Research may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.

Disclosure: Information on the performance of Zacks’ portfolios and strategies can be found at: https://www.zacks.com/performance

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Changyou.com Limited (CYOU): Free Stock Analysis Report

Quanta Services, Inc. (PWR): Free Stock Analysis Report

Navient Corporation (NAVI): Free Stock Analysis Report

Legg Mason, Inc. (LM): Free Stock Analysis Report

Alexion Pharmaceuticals, Inc. (ALXN): Free Stock Analysis Report

Jazz Pharmaceuticals PLC (JAZZ): Free Stock Analysis Report

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