7 stocks at a low price compared to book value to buy in July
When assessing the value of a business, investors primarily look at the price-to-earnings (P / E) or price-to-sell (P / S) ratio of a stock. While the P / E is the ratio of annual earnings to the stock price, the P / S reflects the amount that investors pay for every dollar of income generated by the business.
Although the price-to-earnings (P / E) and price-to-sell (P / S) valuation tools are more commonly used for stock selection, the price-to-book ratio (P / B ratio) is also a measure. easy to use. to identify low-cost stocks with high growth prospects.
P / B is the ratio of the stock price to the book value
It is calculated as below:
P / B ratio = market capitalization / book value of equity
Understand 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 the 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 below 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 values 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 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 Zack # 1 or 2 rank offer the best opportunities in the value investing space.
Here are seven of the 24 actions that qualified the screening:
Ford engine F, a popular auto company, has a 3-5 year EPS growth rate of 21.8%. He currently has a Zacks Rank # 2 and a Value Score of A. You can see The full list of today’s Zacks # 1 Rank stocks here.
Boise Cascade BCC, a manufacturer of wood products and distributor of building materials, has forecast a 3-5 year BPA growth rate of 10.2%. He currently has a Zacks Rank # 1 and a Value Score of A.
Alexion ALXN, a leading biotech, has a projected 3 to 5 year BPA growth rate of 15.0%. He currently has a Zacks Rank # 2 and a Value Score of B.
Group 1 Automotive GPI, a leading automotive retailer, has a projected 3 to 5 year EPS growth rate of 15.5%. He currently has a Zacks Rank # 2 and a Value Score of A.
General Motors GM, one of the largest automakers 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 9.9%.
Valley VALE, one of the largest mining companies in the world, has a Zacks Rank # 1 and a Value Score of B. The company has a 3 to 5 year projected EPS growth rate of 33.6%.
Envista Holding Company NVST, a dental products company, forecast a 3-5 year BPA growth rate of 26.4%. He currently has a Zacks Rank # 2 and a Value Score of B.
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