3 stocks trade at a discount to the tangible book value
In light of recent market downturns, here are three stocks I recommend that are currently at a steep discount to their tangible book value.
Cooper-Standard Holdings Inc (NYSE: CPS) is the first company I recommend in this article.
As a crucial supplier to the automotive industry, Cooper-Standard will not be able to escape the economic fallout from the coronavirus. However, the company’s position in the supply chain should allow it to recover quickly when things do eventually return to normal.
The net debt is relatively high. At the end of its last published financial period, the company reported a net debt to equity ratio of 52%, although the company’s debt-to-assets ratio was more conservative at 34%. However, in my opinion, despite the lack of balance sheet strength, it more than offsets this risk in valuation.
The stock is currently trading at a price to book ratio of 0.3. This suggests that a rise of 200% or more is offered when confidence in the market returns.
As Benjamin Graham said, there are no bad assets, just bad prices. At this level, it appears that Cooper’s price hike is offsetting the low balance sheet risk.
Fixed assets provide support
Home builder and land development firm Taylor Morrison Home (NYSE: TMHC) are also negotiating at a discount. This company has a strong balance sheet with a net debt to fixed asset ratio of 31%.
The recent liquidation took the stock to its lowest level ever (the company’s IPO in 2013). After this decline, the stock trades at a price to book ratio of 0.5. This is also a price-earnings ratio of 3, but since we don’t know the full impact of the virus outbreak on the economy, it’s hard to trust numbers like the price- profit.
Yet from a long-term perspective, as long as Taylor Morrison can weather the current economic crisis, there will always be a demand for housing. This suggests that the business will be a good investment in the long run. Its strong balance sheet should provide stability despite difficult times.
Diversified holding company
The last company I’ll be looking at in this article is BBX Capital (NYSE: BBX).
BBX is a diversified holding company, with interests in Bluegreen Corporation and Renin Holdings, LLC. It also has a real estate division. These are involved in the ownership and management of real estate and real estate development projects, as well as in investments in real estate joint ventures.
According to the company’s latest financial statements, these companies were worth $ 6 per share at the end of 2019. At the current price of $ 1.60 per share, the market suggests they are only worth 30% of that value today. hui. Based on property, plant and equipment, the share trades at a price to book ratio of 0.3.
With just $ 392 million in net debt versus $ 1.7 billion in net fixed assets at the end of the year, BBX appears to have financial leeway over whether the current economic uncertainty is.
Over the past 10 years, the company has created enormous wealth for its shareholders. When the storm clouds finally lift, there’s a good chance the company will continue to do so.
This suggests that now might be a great time for investors to make the most of this opportunity. With upside potential of over 200% from current levels, it certainly looks like the payoff is worth the risk to invest here.
Disclosure: The author does not own any mentioned action.
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This article first appeared on GuruFocus.