For Immediate Release
Chicago, IL – July 13, 2023 – Stocks in this week’s article are Magna International (
MGA Quick Quote MGA - Free Report) , Paramount Group ( PGRE Quick Quote PGRE - Free Report) , Unum Group ( UNM Quick Quote UNM - Free Report) , StoneCo Ltd. ( STNE Quick Quote STNE - Free Report) and Varex Imaging Corp. ( VREX Quick Quote VREX - Free Report) . 5 Low Price-to-Book Stocks Worth Buying in July
When evaluating a company's value, investors mostly look at a stock's price-to-earnings (P/E) or price-to-Sales (P/S) ratio. While P/E is the ratio of annual earnings to stock price, P/S reflects the amount investors pay for each dollar of revenues generated by the company.
Though P/E and P/S valuation tools are more commonly used for stock selection, the price-to-book ratio (P/B ratio) is also an easy-to-use metric for identifying low-priced stocks with high-growth prospects.
P/B is the ratio of stock price to book value
It is calculated as below:
P/B ratio = market capitalization/book value of equity
The P/B ratio helps to identify low-priced stocks that have high growth prospects.
Magna International, Paramount Group, Unum Group, StoneCo Ltd. and Varex Imaging Corp. are some such stocks.
Now let us understand the concept of book value.
Understanding Book Value?
Book value is the total value that would be left over, according to the company's balance sheet, if it goes bankrupt immediately. In other words, this is what shareholders would theoretically receive if a company liquidates all its assets after paying off all its liabilities.
It is calculated by subtracting total liabilities from the total assets of a company. In most cases, this equates to the common stockholders' equity on the balance sheet. However, depending on the company's balance sheet, intangible assets should also be subtracted from the total assets to determine book value.
Understanding P/B Ratio
By comparing the book value of equity to its market price, we get an idea of whether a company is under or overpriced. However, like P/E or P/S ratio, it is always better to compare P/B ratios within industries.
A P/B ratio of less than one means that the stock is trading at less than its book value, or the stock is undervalued and, therefore 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/B ratio of 2 means that we pay $2 for every $1 of book value. Thus, the higher the P/B, the more expensive the stock.
But there is a caveat. A P/B ratio of less than one can also mean that the company is earning weak or even negative returns on its assets or that the assets are overstated, in which case the stock should be shunned because it may be destroying shareholder value. Conversely, the stock's price may be significantly high — thereby pushing the P/B ratio to more than one — in the likely case that it has become a takeover target, a good enough reason to own the stock.
Moreover, the P/B ratio isn't without limitations. It is useful for businesses — like finance, investments, insurance, and banking or manufacturing companies — with many liquid/tangible assets on the books. However, it can be misleading for firms with significant R&D expenditure, high debt, service companies, or those with negative earnings.
In any case, the ratio is not particularly relevant as a standalone number. One should analyze other ratios like P/E, P/S and debt to equity before arriving at a reasonable investment decision.
Here are our five picks out of the nine stocks that qualified the screening:
Based in Aurora, Canada,
Magna International is a manufacturer and supplier of complete automotive components. The company designs, develops and manufactures automotive systems, assemblies, modules and components, apart from engineering and assembling complete vehicles, primarily for sale to original equipment manufacturers of cars and light trucks.
Magna International has a Zacks Rank #2 and a Value Score of A. You can see
the complete list of today's Zacks #1 Rank stocks here.
Magna International has a projected 3–5 year EPS growth rate of 20.43%.
Paramount Group is a real estate investment trust focused on owning, operating and managing Class A office properties. It provides asset management, leasing, acquisitions, redevelopment and financing.
Paramount Group has a Zacks Rank #2 and a Value Score of A. The company has a projected 3-5-year EPS growth rate of 11.03%.
Headquartered in Chattanooga, TN,
Unum Group was created following the June 1999 merger of Provident Companies, Inc. and Unum Corporation. Along with disability insurance, the company provides long-term care insurance, life insurance, employer- and employee-paid group benefits and related services.
Unum Group has a projected 3–5-year EPS growth rate of 8.39%. UNM currently has a Zacks Rank #2 and a Value Score of A.
StoneCo provides financial technology solutions. The company offers an end-to-end cloud-based technology platform to conduct electronic commerce across in-store, online and mobile channels. StoneCo is based in Sao Paulo, Brazil.
STNE has a Zacks Rank #1 and a Value Score of A. STNE has a projected 3–5 year EPS growth rate of 55.15%.
Varex Imaging is an innovator, designer and manufacturer of X-ray imaging components, which include tubes, digital flat panel detectors and other image processing solutions. Its components are used in medical imaging as well as industrial and security imaging applications.
Varex Imaging has a projected 3-5-year EPS growth rate of 30%. VREX currently has a Zacks Rank #2 and a Value Score of B.
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. Click here to sign up for a free trial to the Research Wizard today For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2119660/5-low-price-to-book-stocks-worth-buying-in-july 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. About Screen of the Week
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