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Image: Bigstock featured highlights RenaissanceRe Holdings, Urban Outfitters, Liberty Energy and SIGA Technologies

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For Immediate Release

Chicago, IL – March 28, 2023 – Stocks in this week’s article are RenaissanceRe Holdings (RNR - Free Report) , Urban Outfitters (URBN - Free Report) , Liberty Energy (LBRT - Free Report) and SIGA Technologies (SIGA - Free Report) .

4 High Earnings Yield Value Picks Amid Prevailing Uncertainty

In its latest FOMC meeting, the Fed jacked up interest rates by 25 bps to the 4.75-5% range. This was the ninth straight rate hike by the Fed, bringing the rate to the highest levels since 2007.  However, the Fed’s stance has turned slightly less hawkish amid the banking crisis. Only one more rate hike of 25 bps is expected this year followed by rate cuts in 2024 and 2025.

Meanwhile, the central bank also remains committed to slashing inflation to 2%. The annual inflation rate in the United States slowed to 6% in February 2023, the lowest since September 2021. However, with the jobs markets still hot and the Fed softening its tone, investors may expect a spike in inflation in the near term.  Considering persistent inflationary worries and banking chaos, there is a clear lack of clarity and the market is expected to remain volatile.

In times of such uncertainty, value investing should be one of the most effective investment approaches. It takes a long-term view and seeks to gauge the intrinsic value of companies based on their fundamental strength, earnings potential and financials. The value investing approach seeks to profit from investing in stocks that appear to be trading at a discount to their intrinsic values and eventually make handsome returns when the stock price rises toward that value, reflecting the actual fundamentals.

One of the most common valuation metrics to pick undervalued stocks with solid upside potential is the P/E ratio. However, there’s another interesting ratio that you can consider for ferreting out attractively valued stocks. And that is, earnings yield. One could invest in high earnings yield stocks like RenaissanceRe HoldingsUrban OutfittersLiberty Energy and SIGA Technologies to fetch handsome long-term rewards.

Earnings Yield More Illuminating Than P/E

Earnings yield is useful for investors concerned about the rate of return on investment. This metric, expressed in percentage, is calculated as annual earnings per share (EPS) divided by market price. This metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today. While comparing stocks, if other factors are similar, the ones with higher earnings yield are considered undervalued, while those with lower earnings yield are seen as overpriced.

While earnings yield is nothing but the reciprocal of the P/E ratio, it is albeit a little more illuminating than the traditional P/E ratio as it also facilitates the comparison of stocks with fixed-income securities. Investors often compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.

If the yield on a stock is lower than the 10-year Treasury yield, it would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued. In this situation, investing in the stock market would be a better option for a value investor.

Our Choices

Below we have highlighted four of the 78 stocks that made it through the screen:

RenaissanceRe is a provider of property-catastrophe reinsurance to insurers and reinsurers globally. It also provides specialty reinsurance on accident, health, aviation, and satellite concerns, along with homeowner’s insurance in various parts of the United States.

The Zacks Consensus Estimate for RNR’s 2023 earnings implies year-over-year growth of 218.6%. EPS estimates have moved north by $1.61 over the past 60 days. The stock currently sports a Zacks Rank #1 and has a Value Score of A.

Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts’ products. URBN’s merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms.

The Zacks Consensus Estimate for URBN’s the current fiscal year implies year-over-year growth of 41.7%. EPS estimates have moved north by 19 cents over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of A.

Liberty Energy is a premier provider of hydraulic fracturing and other auxiliary services to onshore exploration and production companies in North America.The company focuses on deploying its innovative and industry-leading technology solutions to the oil and gas industry.

The Zacks Consensus Estimate for LBRT’s 2023 earnings implies year-over-year growth of 62%. EPS estimates have moved north by 21 cents over the past 60 days. The stock currently carries a Zacks Rank #2 and has a Value Score of A.

SIGA Technologies is engaged in applying viral and bacterial genomics and sophisticated computational modeling in the design and development of novel products for the prevention and treatment of serious infectious diseases, with an emphasis on products for biological warfare defense.

The Zacks Consensus Estimate for SIGA’s 2023 earnings implies year-over-year growth of 130.4%. EPS estimates have moved up by 11 cents over the past 30 days. The stock 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.

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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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Contact: Jim Giaquinto


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