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Leverage Earnings Yield in Value Investing With These 4 Stocks
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Value investing stands as a beacon of wisdom in the realm of finance, offering a steadfast strategy for investors seeking undervalued assets in a sea of market fluctuations. The philosophy underlying this approach is simple: identify assets trading below their intrinsic worth and acquire them at a bargain. This philosophy rests on the belief that market valuations frequently deviate from fundamental realities, presenting opportunities for discerning investors to profit from these dislocations over time.
One essential tool in the value investor's toolbox is earnings yield. This metric acts as a compass, helping investors navigate the vast expanse of investment options by providing insights into the profitability of a stock relative to its market price. Earnings yield is calculated by dividing a company's earnings per share (EPS) by its current stock price. The formula can be expressed as Earnings Yield = Earnings Per Share (EPS)/Current Stock Price.
This formula illuminates the profitability of an investment, revealing the amount of profit generated per dollar invested in the stock. Essentially, earnings yield serves as the inverse of the price-to-earnings (P/E) ratio. A high earnings yield suggests that the stock may be undervalued, offering investors an opportunity for potential growth, while a low earnings yield may signal overvaluation, prompting caution among investors.
Moreover, earnings yield serves as a versatile tool for comparative analysis, allowing investors to juxtapose market index performance with the 10-year Treasury yield. This comparison enables value investors to gauge the relative attractiveness of stocks compared to fixed-income securities. When the earnings yield of the market index surpasses the bond yield, it may signal favorable conditions for investing in stocks. This insight is particularly valuable for investors with diversified portfolios, encompassing both equities and bonds.
By integrating earnings yield into their investment approach, value investors gain a nuanced understanding of market dynamics, uncovering hidden gems amid the noise of market sentiment.
Pilgrim's Pride Corporation (PPC - Free Report) , SkyWest Inc (SKYW - Free Report) , Goodyear Tire (GT - Free Report) and Celanese Corporation (CE - Free Report) are a few solid high earnings yield picks for value investors.
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 four of the 26 stocks that qualified the screening:
Pilgrim’s Pride: Headquartered In Colorado, Pilgrim’s Pride is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. Its focus on key customers is a pathway for refining its portfolio and creating competitive advantages. The company has been steadily augmenting the marketing support of its brands as they expand and enter new regions. Additionally, it continues to explore M&A opportunities for diversification and resort to frequent supply-chain improvements to enhance efficiency and reduce costs.
The Zacks Consensus Estimate for PPC’s 2024 earnings implies year-over-year growth of 62.4%. Estimates for 2024 earnings per share have moved up by 1 cent over the past 30 days. Pilgrim’s Pride currently sports a Zacks Rank #1 and has a Value Score of A.
SkyWest: Based in Utah, SkyWest operates as a regional airline in the United States. The company’s fleet modernization efforts are commendable. By 2026-end, SkyWest is likely to operate a total of 258 E175 aircraft. We are impressed by SKYW's efforts to reward its shareholders through buybacks. Upbeat passenger volumes also bode well. SkyWest's eco-friendly partnership with Eve Air promises zero carbon emissions and improved urban life. Together, they aim to advance sustainable aviation through eVTOL development and optimized operations.
The Zacks Consensus Estimate for SkyWest’s 2024 sales and earnings implies year-over-year growth of 13% and 625%, respectively. Estimates for 2024 earnings per share have moved up by 22 cents over the past seven days. SKYW currently sports a Zacks Rank #1 and has a Value Score of A.
Goodyear: Headquartered in Ohio, Goodyear is one of the leading tire manufacturers in the world. With the acquisition of Cooper Tire, Goodyear has strengthened its leadership position in the U.S. market as well as expanded its foothold in the global tire industry. We are optimistic about the Goodyear Forward plan, designed to optimize the portfolio, enhance margins, and reduce leverage, thereby aiming to unlock significant value for shareholders.The company's electrification strides are also praiseworthy. Collaborations with companies like Plus, AutoFleet, Formant, ZF and Gatik demonstrate Goodyear’s efforts to cater to the changing dynamics of the auto industry.
The Zacks Consensus Estimate for GT’s 2024 sales and earnings implies year-over-year growth of 3% and 2,152.6%, respectively. Estimates for 2024 earnings per share have moved up by 15 cents over the past 30 days. Goodyear currently sports a Zacks Rank #1 and has a Value Score of A.
Celanese: Texas-based Celanese is a leading producer of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Celanese is poised for continued growth, bolstered by its commitment to productivity enhancement, strategic investments in high-return organic projects, and targeted acquisitions. The company remains steadfast in its pursuit of operational efficiency through rigorous productivity programs, marked by the implementation of cost-reduction capital projects. The acquisition of the majority of DuPont’s Mobility & Materials business has allowed CE to enhance its growth in high-value applications.
The Zacks Consensus Estimate for Celanese’s 2024 sales and earnings implies year-over-year growth of 3.2% and 33%, respectively. Estimates for 2024 earnings per share have moved up by 2 cents over the past 30 days. CE 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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Leverage Earnings Yield in Value Investing With These 4 Stocks
Value investing stands as a beacon of wisdom in the realm of finance, offering a steadfast strategy for investors seeking undervalued assets in a sea of market fluctuations. The philosophy underlying this approach is simple: identify assets trading below their intrinsic worth and acquire them at a bargain. This philosophy rests on the belief that market valuations frequently deviate from fundamental realities, presenting opportunities for discerning investors to profit from these dislocations over time.
One essential tool in the value investor's toolbox is earnings yield. This metric acts as a compass, helping investors navigate the vast expanse of investment options by providing insights into the profitability of a stock relative to its market price. Earnings yield is calculated by dividing a company's earnings per share (EPS) by its current stock price. The formula can be expressed as Earnings Yield = Earnings Per Share (EPS)/Current Stock Price.
This formula illuminates the profitability of an investment, revealing the amount of profit generated per dollar invested in the stock. Essentially, earnings yield serves as the inverse of the price-to-earnings (P/E) ratio. A high earnings yield suggests that the stock may be undervalued, offering investors an opportunity for potential growth, while a low earnings yield may signal overvaluation, prompting caution among investors.
Moreover, earnings yield serves as a versatile tool for comparative analysis, allowing investors to juxtapose market index performance with the 10-year Treasury yield. This comparison enables value investors to gauge the relative attractiveness of stocks compared to fixed-income securities. When the earnings yield of the market index surpasses the bond yield, it may signal favorable conditions for investing in stocks. This insight is particularly valuable for investors with diversified portfolios, encompassing both equities and bonds.
By integrating earnings yield into their investment approach, value investors gain a nuanced understanding of market dynamics, uncovering hidden gems amid the noise of market sentiment.
Pilgrim's Pride Corporation (PPC - Free Report) , SkyWest Inc (SKYW - Free Report) , Goodyear Tire (GT - Free Report) and Celanese Corporation (CE - Free Report) are a few solid high earnings yield picks for value investors.
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 four of the 26 stocks that qualified the screening:
Pilgrim’s Pride: Headquartered In Colorado, Pilgrim’s Pride is engaged in the processing, production, marketing and distribution of frozen, fresh as well as value-added chicken products. Its focus on key customers is a pathway for refining its portfolio and creating competitive advantages. The company has been steadily augmenting the marketing support of its brands as they expand and enter new regions. Additionally, it continues to explore M&A opportunities for diversification and resort to frequent supply-chain improvements to enhance efficiency and reduce costs.
The Zacks Consensus Estimate for PPC’s 2024 earnings implies year-over-year growth of 62.4%. Estimates for 2024 earnings per share have moved up by 1 cent over the past 30 days. Pilgrim’s Pride currently sports a Zacks Rank #1 and has a Value Score of A.
SkyWest: Based in Utah, SkyWest operates as a regional airline in the United States. The company’s fleet modernization efforts are commendable. By 2026-end, SkyWest is likely to operate a total of 258 E175 aircraft. We are impressed by SKYW's efforts to reward its shareholders through buybacks. Upbeat passenger volumes also bode well. SkyWest's eco-friendly partnership with Eve Air promises zero carbon emissions and improved urban life. Together, they aim to advance sustainable aviation through eVTOL development and optimized operations.
The Zacks Consensus Estimate for SkyWest’s 2024 sales and earnings implies year-over-year growth of 13% and 625%, respectively. Estimates for 2024 earnings per share have moved up by 22 cents over the past seven days. SKYW currently sports a Zacks Rank #1 and has a Value Score of A.
Goodyear: Headquartered in Ohio, Goodyear is one of the leading tire manufacturers in the world. With the acquisition of Cooper Tire, Goodyear has strengthened its leadership position in the U.S. market as well as expanded its foothold in the global tire industry. We are optimistic about the Goodyear Forward plan, designed to optimize the portfolio, enhance margins, and reduce leverage, thereby aiming to unlock significant value for shareholders.The company's electrification strides are also praiseworthy. Collaborations with companies like Plus, AutoFleet, Formant, ZF and Gatik demonstrate Goodyear’s efforts to cater to the changing dynamics of the auto industry.
The Zacks Consensus Estimate for GT’s 2024 sales and earnings implies year-over-year growth of 3% and 2,152.6%, respectively. Estimates for 2024 earnings per share have moved up by 15 cents over the past 30 days. Goodyear currently sports a Zacks Rank #1 and has a Value Score of A.
Celanese: Texas-based Celanese is a leading producer of differentiated chemistry solutions and specialty materials used in most major industries and consumer applications. Celanese is poised for continued growth, bolstered by its commitment to productivity enhancement, strategic investments in high-return organic projects, and targeted acquisitions. The company remains steadfast in its pursuit of operational efficiency through rigorous productivity programs, marked by the implementation of cost-reduction capital projects. The acquisition of the majority of DuPont’s Mobility & Materials business has allowed CE to enhance its growth in high-value applications.
The Zacks Consensus Estimate for Celanese’s 2024 sales and earnings implies year-over-year growth of 3.2% and 33%, respectively. Estimates for 2024 earnings per share have moved up by 2 cents over the past 30 days. CE 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.