7 low book value choices for August
While there are a multitude of valuation metrics, the first that comes to mind is the price / earnings ratio. However, in the case of loss-making companies, the price / earnings ratio is negative. In such a scenario, the price / sales ratio could indicate the hidden strength of the business.
The price-to-book ratio (P / E ratio) is also an easy-to-use tool for identifying low-priced stocks that have strong growth prospects.
The P / B ratio is used to calculate how much an investor must pay for each dollar of a stock’s book value. It is calculated by dividing the current closing share price by the book value per share for the last quarter.
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 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.
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 the company’s 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 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 Rank 1 or 2 of Zacks offer the best opportunities in the value investing space. .
Here are seven of the 23 actions that qualified the screening:
Bassett Furniture Industries, Incorporated BSET, a furniture company, has a 3 to 5 year EPS growth rate of 16%. He currently has a Zacks Rank # 1 and a Value Score of A. You can see the full list of Zacks # 1 Rank stocks today here.
Conn’s CONN, a retailer specializing in home appliances, has a projected 3 to 5 year BPA growth rate of 23%. He currently has a Zacks # 1 rank and a value score of A.
Celestica CLS, an electronics manufacturing services company, has a projected 3 to 5 year EPS growth rate of 10.2%. He currently has a Zacks Rank # 2 and a Value Score of A.
Group 1 Automotive GPI, a leading automotive retailer, has a projected EPS growth rate of 8.4% over 3 to 5 years. He currently has a Zacks Rank # 1 and a Value Score of A.
Affiliated Managers Group AMG, a global asset management 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 15.0%.
Valley VALE, one of the largest mining companies in the world, has a Zacks Rank # 1 and a Value Score of A. The company has a 3 to 5 year projected EPS growth rate of 30.7%.
Envista Holding Company NVST, a dental products company, forecast a 3-5 year BPA growth rate of 27.4%. He currently has a Zacks Rank # 2 and a Value Score of B.
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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.
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VALE SA (VALE): Analysis report of free stocks
Celestica, Inc. (CLS): Free Stock Analysis Report
Conns, Inc. (CONN): Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI): Free Inventory Analysis Report
Affiliated Managers Group, Inc. (AMG): Free Inventory Analysis Report
Bassett Furniture Industries, Incorporated (BSET): Free Stock Analysis Report
Envista Holdings Corporation (NVST): Free share analysis report
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