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5 High Earnings Yield Stocks to Drive Value in Your Portfolio
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Wall Street experienced a positive first half of 2023, marked by significant gains in major indices, with the S&P 500, Nasdaq and Dow Jones gaining roughly 14%, 30%, and 3%, respectively. In fact, Nasdaq is on track to achieve its best first-half performance in 40 years, primarily fueled by optimism surrounding artificial intelligence and its impact on the market.
Yesterday, Federal Reserve Chair Jerome Powell conveyed an optimistic outlook for the U.S. economy, downplaying the likelihood of a recession, despite acknowledging its possibility. His confidence echoed in the results of the Federal Reserve’s stress tests, which the nation's 23 largest banks passed, indicating resilience in the banking system even amid the failures of Silicon Valley Bank, Signature Bank and First Republic Bank.
However, despite initial perceptions of a less-hawkish Fed, concerns about rising rates cannot be ruled out. Powell reiterated yesterday that further rate hikes are likely if inflation continues to run hot, indicating the Fed's continued commitment to combating inflation.
This mix of positive economic performance and looming inflationary concerns creates a complex landscape for investors. In this context, a value investing approach could offer a strategic advantage. By focusing on stocks that are undervalued relative to their intrinsic worth, investors may find opportunities to benefit from future market corrections and navigate potential interest rate hikes.
One key metric in value investing is earnings yield, which allows investors to evaluate the earnings potential of a company relative to its market price. Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA - Free Report) , Inspired Entertainment, Inc. (INSE - Free Report) , Copa Holdings, S.A. (CPA - Free Report) , Assurant Inc. (AIZ - Free Report) and Park-Ohio Holdings Corp. (PKOH - Free Report) are a few top high earnings yield picks for value investors.
Understanding Earnings Yield
Earnings yield is a financial ratio that measures the earnings generated by a company relative to its market price. It is calculated by dividing earnings per share (EPS) by current market price per share and expressing it as a percentage. The higher the earnings yield, the greater the return potential for investors.
By using the earnings yield metric, value investors can identify stocks that have the potential to deliver attractive returns. A high earnings yield implies that a company's earnings are relatively high compared to its market price, indicating an undervalued stock. Conversely, a low earnings yield suggests that the stock may be overvalued.
However, it is crucial to consider other factors when evaluating a stock's potential, such as the company's competitive advantage, financial stability and growth prospects. The earnings yield should be used in conjunction with other fundamental analysis tools to make well-informed investment decisions.
Importantly, earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor. It should be noted that earnings yield is an important tool for investors with exposure to both stocks and bonds. In fact, with regard to this, earnings yield can be more illuminating than the traditional P/E ratio, as the former facilitates the comparison of stocks with fixed-income securities.
By incorporating the earnings yield metric into their investment approach, value investors can unearth hidden gems and position themselves for success in the ever-changing market.
The Winning Strategy
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Here we have highlighted five of the 34 stocks that qualified the screen:
Loma Negra is a cement manufacturer, focusing on the production and commercialization of cement, masonry cement, aggregates, concrete and lime. The Zacks Consensus Estimate for LOMA’s 2023 earnings implies year-over-year growth of 784.6%. Estimates for 2023 and 2024 earnings per share have moved up by 18 cents and 25 cents, respectively, over the past 60 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of A.
Inspired Entertainment is a games technology company, engaged in supplying Virtual Sports, Mobile Gaming and Server-Based Gaming systems to regulated lottery, betting and gaming operators. The Zacks Consensus Estimate for INSE’s 2023 earnings implies year-over-year growth of 42.9%. Estimates for 2023 and 2024 earnings per share have moved up by 14 cents each over the past 60 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of A.
Copa Holdings is a Panama City-based company, which provides airline passenger and cargo services. The Zacks Consensus Estimate for CPA’s 2023 earnings implies year-over-year growth of 84%. Estimates for 2023 and 2024 earnings per share have moved up by 39 cents and 67 cents, respectively, over the past 30 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of B.
Assurant is a global provider of risk management solutions in the housing and lifestyle markets, protecting people’s homes and the goods they buy. The Zacks Consensus Estimate for AIZ’s 2023 earnings implies year-over-year growth of 22%. Estimates for 2023 and 2024 earnings per share have moved up by 32 cents and 87 cents, respectively, over the past 30 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of B.
Park-Ohio is a manufacturer of capital equipment with a unit dedicated to supply-chain management outsourcing. The Zacks Consensus Estimate for PKOH’s 2023 earnings implies year-over-year growth of 63%. Estimates for 2023 and 2024 earnings per share have moved up by 29 cents and 15 cents, respectively, over the past 60 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of B.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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5 High Earnings Yield Stocks to Drive Value in Your Portfolio
Wall Street experienced a positive first half of 2023, marked by significant gains in major indices, with the S&P 500, Nasdaq and Dow Jones gaining roughly 14%, 30%, and 3%, respectively. In fact, Nasdaq is on track to achieve its best first-half performance in 40 years, primarily fueled by optimism surrounding artificial intelligence and its impact on the market.
Yesterday, Federal Reserve Chair Jerome Powell conveyed an optimistic outlook for the U.S. economy, downplaying the likelihood of a recession, despite acknowledging its possibility. His confidence echoed in the results of the Federal Reserve’s stress tests, which the nation's 23 largest banks passed, indicating resilience in the banking system even amid the failures of Silicon Valley Bank, Signature Bank and First Republic Bank.
However, despite initial perceptions of a less-hawkish Fed, concerns about rising rates cannot be ruled out. Powell reiterated yesterday that further rate hikes are likely if inflation continues to run hot, indicating the Fed's continued commitment to combating inflation.
This mix of positive economic performance and looming inflationary concerns creates a complex landscape for investors. In this context, a value investing approach could offer a strategic advantage. By focusing on stocks that are undervalued relative to their intrinsic worth, investors may find opportunities to benefit from future market corrections and navigate potential interest rate hikes.
One key metric in value investing is earnings yield, which allows investors to evaluate the earnings potential of a company relative to its market price. Loma Negra Compañía Industrial Argentina Sociedad Anónima (LOMA - Free Report) , Inspired Entertainment, Inc. (INSE - Free Report) , Copa Holdings, S.A. (CPA - Free Report) , Assurant Inc. (AIZ - Free Report) and Park-Ohio Holdings Corp. (PKOH - Free Report) are a few top high earnings yield picks for value investors.
Understanding Earnings Yield
Earnings yield is a financial ratio that measures the earnings generated by a company relative to its market price. It is calculated by dividing earnings per share (EPS) by current market price per share and expressing it as a percentage. The higher the earnings yield, the greater the return potential for investors.
By using the earnings yield metric, value investors can identify stocks that have the potential to deliver attractive returns. A high earnings yield implies that a company's earnings are relatively high compared to its market price, indicating an undervalued stock. Conversely, a low earnings yield suggests that the stock may be overvalued.
However, it is crucial to consider other factors when evaluating a stock's potential, such as the company's competitive advantage, financial stability and growth prospects. The earnings yield should be used in conjunction with other fundamental analysis tools to make well-informed investment decisions.
Importantly, earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor. It should be noted that earnings yield is an important tool for investors with exposure to both stocks and bonds. In fact, with regard to this, earnings yield can be more illuminating than the traditional P/E ratio, as the former facilitates the comparison of stocks with fixed-income securities.
By incorporating the earnings yield metric into their investment approach, value investors can unearth hidden gems and position themselves for success in the ever-changing market.
The Winning Strategy
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Picks
Here we have highlighted five of the 34 stocks that qualified the screen:
Loma Negra is a cement manufacturer, focusing on the production and commercialization of cement, masonry cement, aggregates, concrete and lime. The Zacks Consensus Estimate for LOMA’s 2023 earnings implies year-over-year growth of 784.6%. Estimates for 2023 and 2024 earnings per share have moved up by 18 cents and 25 cents, respectively, over the past 60 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of A.
Inspired Entertainment is a games technology company, engaged in supplying Virtual Sports, Mobile Gaming and Server-Based Gaming systems to regulated lottery, betting and gaming operators. The Zacks Consensus Estimate for INSE’s 2023 earnings implies year-over-year growth of 42.9%. Estimates for 2023 and 2024 earnings per share have moved up by 14 cents each over the past 60 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of A.
Copa Holdings is a Panama City-based company, which provides airline passenger and cargo services. The Zacks Consensus Estimate for CPA’s 2023 earnings implies year-over-year growth of 84%. Estimates for 2023 and 2024 earnings per share have moved up by 39 cents and 67 cents, respectively, over the past 30 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of B.
Assurant is a global provider of risk management solutions in the housing and lifestyle markets, protecting people’s homes and the goods they buy. The Zacks Consensus Estimate for AIZ’s 2023 earnings implies year-over-year growth of 22%. Estimates for 2023 and 2024 earnings per share have moved up by 32 cents and 87 cents, respectively, over the past 30 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of B.
Park-Ohio is a manufacturer of capital equipment with a unit dedicated to supply-chain management outsourcing. The Zacks Consensus Estimate for PKOH’s 2023 earnings implies year-over-year growth of 63%. Estimates for 2023 and 2024 earnings per share have moved up by 29 cents and 15 cents, respectively, over the past 60 days. The stock currently flaunts a Zacks Rank #1 and has a Value Score of B.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.