5 low book value stocks to buy as 2022 approaches


In value analysis, although price-to-earnings (P / E) and price-to-sell (P / S) are the most popular with investors, price-to-book ratio (P / B ratio) under – rated 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 below:

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.

The P / B ratio helps identify low-priced stocks that have high growth prospects. ASE Technology Holding ASX, Bookmark Jewelers Limited GIS, Celestica CLS, DXC Technology Company DXC and Atlas Corp. ATCO are just a few of those choices.

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, depending on 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 overvalued 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 significantly 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, this 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. One should analyze other ratios such as P / E, P / S and debt / equity before making a reasonable investment decision.

Screening parameters

Price to Book (Common Equity) below the X-Industry median: A lower P / B than 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 / profit using an F (1) estimate lower than the X-Industry median: The P / E (F1) ratio values ​​a company based on its current share price relative to its estimated earnings per share – a lower ratio than the industry is considered better.

PEG less than 1: The PEG relates the P / E ratio to the company’s future growth rate. The PEG ratio gives a more complete picture than the P / E ratio. 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 ranking, offer the best opportunities in the investment space. valuable.

Here are our five choices among the 13 actions that qualified the screening:

ASE Technology Holding is a semiconductor assembly and test manufacturing service provider.

ASE Technology Holding has a projected 3 to 5 year EPS growth rate of 26.9%. ASE Technology Holding currently has a Zacks Rank # 2 and a Value Score of A. You can view the full list of Zacks # 1 Rank stocks today here.

Jewelers Signet rings Limited is a retailer of diamond jewelry, watches and other products. Signet Jewelers has a projected 3 to 5 year EPS growth rate of 8.0%.

Signet Jewelers currently has a Zacks # 1 rank and a value score of A.

Celestica is one of the largest electronics manufacturing services companies in the world, serving the computer and communications industries.

Celestica has a Zacks Rank # 2 and a Value Score of A. Celestica has a projected 3 to 5 year EPS growth rate of 10.2%.

DXC Technology Company provides information technology services and solutions primarily in North America, Europe, Asia and Australia. DXC Technology Company has a Zacks Rank # 2 and a Value Score of A.

DXC Technology Company was formed by the amalgamation of Computer Sciences Corporation (“CSC”) and the Enterprise Services Division of Hewlett Packard Enterprise (“HPE”), which was completed on April 1, 2017. DXC Technology Company a a forecast of 3-5- annual EPS growth rate of 27.4%.

Atlas Corp. is an asset management company, which operates as an independent owner and manager of container ships.

Atlas Corp. has a projected 3 to 5 year EPS growth rate of 27.9%. Atlas Corp currently has a Zacks Rank # 1 and a Value Score of A.

Get the rest of the actions on the list and start testing this idea and others. All of this can be done with Research Wizard stock picking and backtesting software.

The Research Assistant is a great place to start. It’s easy to use. Everything is in plain language. And it’s very intuitive. Start your research assistant trial today. And the next time you read an economic report, open the research assistant, plug in your findings, and see what gems come out of it.

Click here to sign up for a free trial of the Research Assistant today.

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

Breakout Biotech Stocks with Triple-Digit Profit Potential

The biotech industry is expected to exceed $ 2.4 trillion by 2028, as scientists develop treatments for thousands of diseases. They are also finding ways to modify the human genome to literally erase our vulnerability to these diseases.

Zacks just released Century of Biology: 7 Biotech Stocks To Buy Now To Help Investors Profit From 7 Stocks That Are Ready to Outperform. Recommendations from previous editions of this report produced gains of + 205%, + 258%, and + 477%. The actions in this report could perform even better.

See these 7 revolutionary actions now >>

Click to get this free report

Signet Jewelers Limited (SIG): Free Stock Analysis Report

Celestica, Inc. (CLS): Free Stock Analysis Report

ASE Technology Holding Co., Ltd. (ASX): Free Stock Analysis Report

DXC technology company. (DXC): Free Stock Analysis Report

Atlas Corp. (ATCO): Free Stock Analysis Report

To read this article on Zacks.com, click here.

Zacks investment research

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


Comments are closed.