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5 Value Stocks With Strong Earnings Yield to Rev Up Returns
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In the realm of investment strategies, a tried-and-true approach is value investing, which involves identifying stocks trading below their intrinsic value. This method is rooted in the belief that the market often misjudges stock prices in the short term.
Value investing adopts a long-term perspective, evaluating companies based on fundamental strength, earnings potential and financials to determine their intrinsic value. The goal is to profit by investing in stocks that seem undervalued, eventually yielding substantial returns as the stock price aligns with its intrinsic value, reflecting the actual fundamentals.
While the P/E ratio is a common metric for selecting undervalued stocks with significant upside potential, another intriguing ratio in the arsenal of value investors is earnings yield. This metric serves as a crucial indicator, aiding investors in discerning whether a stock is a hidden gem or a potential financial pitfall.
Investors can explore high earnings yield stocks like GigaCloud Technology Inc. (GCT - Free Report) , SkyWest (SKYW - Free Report) , Ramaco Resources Inc. (METC - Free Report) , Eastman Chemical Company (EMN - Free Report) and Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) to potentially secure attractive long-term rewards.
Calculated as annual earnings per share (EPS) divided by market price, this percentage metric gauges the anticipated yield from earnings for each invested dollar in a stock. When comparing similar stocks, those with higher earnings yield are perceived as undervalued, while lower earnings yield indicates overpricing.
Although earnings yield is essentially the reciprocal of the P/E ratio, it provides additional insight by facilitating comparisons with fixed-income securities. Investors often juxtapose a stock's earnings yield with prevailing interest rates, such as the current 10-year Treasury yield, to assess its return on investment relative to nearly risk-free returns. If a stock's yield is lower than the 10-year Treasury yield, it is deemed overvalued compared to bonds. Conversely, a higher stock yield suggests undervaluation, making investing in the stock market a preferable choice for a value investor in such a scenario.
By incorporating earnings yield into their investment strategy, value investors can uncover hidden opportunities and strategically position themselves for success in the dynamic market environment.
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 discuss five of the 15 stocks that qualified the screening:
GigaCloud is a pioneer of global end-to-end B2B e-commerce solutions for large parcel merchandise. Its platform integrates various aspects of e-commerce, including product discovery, payment processing and logistics, to streamline the buying and selling process for large items.
The Zacks Consensus Estimate for GCT’s 2024 sales and earnings implies year-over-year growth of 48% and 26.3%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 27 cents over the past seven days. GigaCloud currently sports a Zacks Rank #1 and has a Value Score of B.
SkyWest, headquartered in Utah, operates a regional airline in the United States. Its fleet modernization efforts are commendable. By 2026-end, SkyWest is likely to operate a total of 258 E175 aircraft. SKYW repurchased 9.6 million shares in the first nine months of 2023.
The Zacks Consensus Estimate for SKYW’s 2024 sales and earnings implies year-over-year growth of 12% and 912%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 4 cents over the past 30 days. SkyWest currently sports a Zacks Rank #1 and has a Value Score of A.
Ramaco is the developer of high-quality, low-cost metallurgical coal and is poised to benefit from improving metallurgical coal demand. To meet the rising demand for met coal, the company intends to increase production from the expected range of 3.9-4.4 million tons to 6.5 million tons in the medium term.
The Zacks Consensus Estimate for METC’s 2024 sales and earnings implies year-over-year growth of 10% and 23.4%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 14 cents over the past 60 days. Ramaco currently sports a Zacks Rank #1 and has a Value Score of B.
Eastman Chemical manufactures and sells chemicals, plastics and fibers. The company is benefiting from its innovation-driven growth model, operational execution and cost-management actions.It also remains focused on maintaining a disciplined approach to capital allocation.
The Zacks Consensus Estimate for EMN’s 2024 sales and earnings implies year-over-year growth of 4% and 25%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by a penny over the past seven days. Eastman Chemical currently carries a Zacks Rank #2 and has a Value Score of A.
Catalyst is a commercial-stage biopharmaceutical company, focused on the development and commercialization of therapies targeting rare neurological diseases and disorders, such as LEMS, epilepsy (initially infantile spasms) and Tourette syndrome.
The Zacks Consensus Estimate for CPRX’s 2024 sales and earnings implies year-over-year growth of 16.4% and 27.6%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 5 cents over the past 30 days. Catalyst currently carries a Zacks Rank #2 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 Value Stocks With Strong Earnings Yield to Rev Up Returns
In the realm of investment strategies, a tried-and-true approach is value investing, which involves identifying stocks trading below their intrinsic value. This method is rooted in the belief that the market often misjudges stock prices in the short term.
Value investing adopts a long-term perspective, evaluating companies based on fundamental strength, earnings potential and financials to determine their intrinsic value. The goal is to profit by investing in stocks that seem undervalued, eventually yielding substantial returns as the stock price aligns with its intrinsic value, reflecting the actual fundamentals.
While the P/E ratio is a common metric for selecting undervalued stocks with significant upside potential, another intriguing ratio in the arsenal of value investors is earnings yield. This metric serves as a crucial indicator, aiding investors in discerning whether a stock is a hidden gem or a potential financial pitfall.
Investors can explore high earnings yield stocks like GigaCloud Technology Inc. (GCT - Free Report) , SkyWest (SKYW - Free Report) , Ramaco Resources Inc. (METC - Free Report) , Eastman Chemical Company (EMN - Free Report) and Catalyst Pharmaceuticals, Inc. (CPRX - Free Report) to potentially secure attractive long-term rewards.
Calculated as annual earnings per share (EPS) divided by market price, this percentage metric gauges the anticipated yield from earnings for each invested dollar in a stock. When comparing similar stocks, those with higher earnings yield are perceived as undervalued, while lower earnings yield indicates overpricing.
Although earnings yield is essentially the reciprocal of the P/E ratio, it provides additional insight by facilitating comparisons with fixed-income securities. Investors often juxtapose a stock's earnings yield with prevailing interest rates, such as the current 10-year Treasury yield, to assess its return on investment relative to nearly risk-free returns. If a stock's yield is lower than the 10-year Treasury yield, it is deemed overvalued compared to bonds. Conversely, a higher stock yield suggests undervaluation, making investing in the stock market a preferable choice for a value investor in such a scenario.
By incorporating earnings yield into their investment strategy, value investors can uncover hidden opportunities and strategically position themselves for success in the dynamic market environment.
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 discuss five of the 15 stocks that qualified the screening:
GigaCloud is a pioneer of global end-to-end B2B e-commerce solutions for large parcel merchandise. Its platform integrates various aspects of e-commerce, including product discovery, payment processing and logistics, to streamline the buying and selling process for large items.
The Zacks Consensus Estimate for GCT’s 2024 sales and earnings implies year-over-year growth of 48% and 26.3%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 27 cents over the past seven days. GigaCloud currently sports a Zacks Rank #1 and has a Value Score of B.
SkyWest, headquartered in Utah, operates a regional airline in the United States. Its fleet modernization efforts are commendable. By 2026-end, SkyWest is likely to operate a total of 258 E175 aircraft. SKYW repurchased 9.6 million shares in the first nine months of 2023.
The Zacks Consensus Estimate for SKYW’s 2024 sales and earnings implies year-over-year growth of 12% and 912%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 4 cents over the past 30 days. SkyWest currently sports a Zacks Rank #1 and has a Value Score of A.
Ramaco is the developer of high-quality, low-cost metallurgical coal and is poised to benefit from improving metallurgical coal demand. To meet the rising demand for met coal, the company intends to increase production from the expected range of 3.9-4.4 million tons to 6.5 million tons in the medium term.
The Zacks Consensus Estimate for METC’s 2024 sales and earnings implies year-over-year growth of 10% and 23.4%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 14 cents over the past 60 days. Ramaco currently sports a Zacks Rank #1 and has a Value Score of B.
Eastman Chemical manufactures and sells chemicals, plastics and fibers. The company is benefiting from its innovation-driven growth model, operational execution and cost-management actions.It also remains focused on maintaining a disciplined approach to capital allocation.
The Zacks Consensus Estimate for EMN’s 2024 sales and earnings implies year-over-year growth of 4% and 25%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by a penny over the past seven days. Eastman Chemical currently carries a Zacks Rank #2 and has a Value Score of A.
Catalyst is a commercial-stage biopharmaceutical company, focused on the development and commercialization of therapies targeting rare neurological diseases and disorders, such as LEMS, epilepsy (initially infantile spasms) and Tourette syndrome.
The Zacks Consensus Estimate for CPRX’s 2024 sales and earnings implies year-over-year growth of 16.4% and 27.6%, respectively, from the 2023 estimated figures. Estimates for 2024 earnings per share have moved up by 5 cents over the past 30 days. Catalyst currently carries a Zacks Rank #2 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.