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Uncover Value Opportunities With These 5 Earnings Yield Gems
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When it comes to investment in the stock market, one strategy that has withstood the test of time and proven its worth is value investing. Pioneered by legendary investors like Benjamin Graham and Warren Buffett, value investing revolves around identifying undervalued stocks that have the potential to generate significant long-term returns
This investment approach is rooted in the belief that the market sometimes misprices stocks, presenting opportunities for prudent investors. Instead of chasing high-flying, overvalued stocks, value investors focus on companies with solid fundamentals that are trading below their intrinsic value. Value investors maintain a long-term perspective as they hold undervalued stocks until their true worth is acknowledged by the market. This strategic patience enables them to capitalize on the stock’s price appreciation over time.
Harnessing the Power of Earnings Yield
In the search for undervalued stocks with promising growth potential, the price-to-earnings (P/E) ratio is a widely used valuation metric. However, there is another intriguing ratio that value investors can employ to identify attractively priced stocks and that is earnings yield. While the P/E ratio focuses on the price investors are willing to pay per unit of earnings, the earnings yield takes the inverse approach, highlighting the earnings generated relative to the stock's current price.
Earnings yield is calculated by dividing a company's earnings per share (EPS) by its current market price per share, expressed as a percentage.A high earnings yield suggests that the stock is priced relatively low compared to its earnings potential, indicating a potential opportunity for value investors. Earnings yield allows investors to compare different investment options within the same industry or across sectors. By evaluating the earnings potential relative to the market price, investors can identify companies with higher earnings yields, which may offer better value and potential returns.
Earnings yield 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.
Dave & Buster's Entertainment (PLAY - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) , Kelly Services, Inc. (KELYA - Free Report) , Livent Corporation and Jazz Pharmaceuticals (JAZZ - Free Report) are a few top high earnings yield picks for value investors.
The Selection Criteria
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 27 stocks that qualified the screen:
Dave & Buster's Entertainment is a leading owner and operator of high-volume venues in North America, combining dining and entertainment for both adults and families. The Zacks Consensus Estimate for PLAY’s 2023 earnings implies year-over-year growth of 28%. Estimates for 2023 and 2024 earnings per share have moved up by 7 and 11 cents, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of A.
Urban Outfitters is a Philadelphia-based lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts products. The Zacks Consensus Estimate for URBN’s 2023 earnings implies year-over-year growth of 57.1%. Estimates for 2023 and 2024 earnings per share have moved up by 29 and 19 cents, respectively, over the past 60 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Kelly Services is a global leader in providing workforce solutions. It has offices located in major cities in the United States. The Zacks Consensus Estimate for KELYA’s 2023 earnings implies year-over-year growth of 21.8%. Estimates for 2023 and 2024 earnings per share have moved up by 14 cents each over the past 60 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Livent is a fully-integrated lithium company manufacturing lithium for applications in batteries, agrochemicals, aerospace alloys, polymers and various industrial applications. The Zacks Consensus Estimate for LTHM’s 2023 earnings implies year-over-year growth of 50.7%. Estimates for 2023 and 2024 earnings per share have moved up by 6 cents each over the past seven days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Jazz is an Ireland-based specialty biopharmaceutical company with a focus on areas of neuroscience and oncology. The Zacks Consensus Estimate for JAZZ’s 2023 earnings implies year-over-year growth of 32.5%. Estimates for 2023 and 2024 earnings per share have moved up by 5 and 3 cents, respectively, over the past 60 days. The stock currently sports 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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Uncover Value Opportunities With These 5 Earnings Yield Gems
When it comes to investment in the stock market, one strategy that has withstood the test of time and proven its worth is value investing. Pioneered by legendary investors like Benjamin Graham and Warren Buffett, value investing revolves around identifying undervalued stocks that have the potential to generate significant long-term returns
This investment approach is rooted in the belief that the market sometimes misprices stocks, presenting opportunities for prudent investors. Instead of chasing high-flying, overvalued stocks, value investors focus on companies with solid fundamentals that are trading below their intrinsic value. Value investors maintain a long-term perspective as they hold undervalued stocks until their true worth is acknowledged by the market. This strategic patience enables them to capitalize on the stock’s price appreciation over time.
Harnessing the Power of Earnings Yield
In the search for undervalued stocks with promising growth potential, the price-to-earnings (P/E) ratio is a widely used valuation metric. However, there is another intriguing ratio that value investors can employ to identify attractively priced stocks and that is earnings yield. While the P/E ratio focuses on the price investors are willing to pay per unit of earnings, the earnings yield takes the inverse approach, highlighting the earnings generated relative to the stock's current price.
Earnings yield is calculated by dividing a company's earnings per share (EPS) by its current market price per share, expressed as a percentage.A high earnings yield suggests that the stock is priced relatively low compared to its earnings potential, indicating a potential opportunity for value investors. Earnings yield allows investors to compare different investment options within the same industry or across sectors. By evaluating the earnings potential relative to the market price, investors can identify companies with higher earnings yields, which may offer better value and potential returns.
Earnings yield 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.
Dave & Buster's Entertainment (PLAY - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) , Kelly Services, Inc. (KELYA - Free Report) , Livent Corporation and Jazz Pharmaceuticals (JAZZ - Free Report) are a few top high earnings yield picks for value investors.
The Selection Criteria
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 27 stocks that qualified the screen:
Dave & Buster's Entertainment is a leading owner and operator of high-volume venues in North America, combining dining and entertainment for both adults and families. The Zacks Consensus Estimate for PLAY’s 2023 earnings implies year-over-year growth of 28%. Estimates for 2023 and 2024 earnings per share have moved up by 7 and 11 cents, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of A.
Urban Outfitters is a Philadelphia-based lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts products. The Zacks Consensus Estimate for URBN’s 2023 earnings implies year-over-year growth of 57.1%. Estimates for 2023 and 2024 earnings per share have moved up by 29 and 19 cents, respectively, over the past 60 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Kelly Services is a global leader in providing workforce solutions. It has offices located in major cities in the United States. The Zacks Consensus Estimate for KELYA’s 2023 earnings implies year-over-year growth of 21.8%. Estimates for 2023 and 2024 earnings per share have moved up by 14 cents each over the past 60 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Livent is a fully-integrated lithium company manufacturing lithium for applications in batteries, agrochemicals, aerospace alloys, polymers and various industrial applications. The Zacks Consensus Estimate for LTHM’s 2023 earnings implies year-over-year growth of 50.7%. Estimates for 2023 and 2024 earnings per share have moved up by 6 cents each over the past seven days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Jazz is an Ireland-based specialty biopharmaceutical company with a focus on areas of neuroscience and oncology. The Zacks Consensus Estimate for JAZZ’s 2023 earnings implies year-over-year growth of 32.5%. Estimates for 2023 and 2024 earnings per share have moved up by 5 and 3 cents, respectively, over the past 60 days. The stock currently sports 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.