5 promising stocks at book value to buy now
Given the surge in stocks over the past three months, fears of overvaluation are now commonplace. Therefore, it would be prudent to ensure the value quotient in your investment strategies. In the analysis of value stocks, most investors use the P / E ratio to look for lucrative stocks, but there are other ratios that an investor can consider such as the price to sell (P / S) ratio and the price / book value (P / B) ratio.
The P / S ratio is simply the price divided by the sales. One of the reasons that the price / sales ratio is a better choice is that it looks at sales rather than profits like the P / E ratio does. However, the price to book ratio (P / N ratio), while used less often, is also an easy-to-use valuation tool for identifying low-priced stocks with good returns.
The P / B ratio is calculated as follows:
P / B ratio = market capitalization / book value of equity
What is book value?
There are several ways to define the 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 ââwhether 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.
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 values ââa 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 links 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 Score Equal to A or B: Our research shows that stocks with a value score of A or B when combined with a Zacks # 1 or 2 rank offer the best opportunities in the value investing space. .
Here are five of the eight actions that qualified the screening:
Alexion Pharmaceutical ALXN, a leading biotech, has a 3-5 year BPA growth rate of 17.8%. He currently has a Zacks Rank # 2 and a Value Score of B. You can see the full list of today’s Zacks # 1 Rank stocks here.
Adient plc ADNT, the world’s largest supplier of automotive seats, forecast a 3-5 year EPS growth rate of 32.1%. He currently has a Zacks Rank # 2 and a Value Score of B
Affiliated Managers Group AMG, a global asset manager, is currently a # 2 ranked stock by Zacks. It has a 3-5 year BPA growth rate of 15% and a value score of A.
Canadian solar CSIQ, a solar company, has a projected 3 to 5 year EPS growth rate of 32%. He currently has a Zacks Rank # 2 and a Value Score of B
Meritage Houses MTH, a homebuilding company, has a Zacks Rank # 2 and a Value Score of A. The company has a 3 to 5 year projected EPS growth rate of 20.7%.
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Canadian Solar Inc. (CSIQ): Free Stock Analysis Report
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