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2 Value Stocks to Buy Ahead of Key Earnings Releases
The stock market encountered a momentary halt on Monday as key indices retreated after strong gains in recent weeks. The Dow Jones Industrial Average and the S&P 500, which reached record highs on Friday, faced downward pressure from rising Treasury yields and investor concerns over high valuations and future rate cuts. This cautious sentiment arises as investors prepare for a crucial earnings week, with major S&P 500 companies like Tesla, Inc. and The Coca-Cola Co. set to report their results.
The S&P 500 slipped 0.18% to close at 5,853.98. The Dow Jones Industrial Average experienced a more substantial decline, dropping 344.31 points or 0.80%, to settle at 42,931.60. In contrast, the tech-heavy Nasdaq Composite managed to break the trend, registering a modest gain of 0.27%, up 50.45 points, to finish at 18,540.01.
As the market took a breather, investors are advised to remain vigilant, keeping an eye on both corporate earnings and the evolving political landscape. In this environment, value stocks stand out as a compelling investment option. Trading below their intrinsic value, these stocks offer a margin of safety during market fluctuations.
When evaluating value stocks, one of the most effective valuation metrics is the Price to Cash Flow (P/CF) ratio. Companies like JD.com, Inc. and KB Home boast a low P/CF ratio. The P/CF ratio evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better.
Price to Cash Flow Reflects Financial Health
Value investing is considered one of the best practices when it comes to picking stocks. It is essentially about selecting stocks that are fundamentally sound but have been beaten down by some external factors. Such stocks are poised to bounce back as and when investors recognize the inherent value of companies. Certainly, the value investment strategy best suits investors with a long-term horizon.
There are different valuation metrics to determine a stock’s inherent strength. Still, a random selection of a ratio cannot serve your purpose if you want a realistic assessment of a company’s financial position. For this, the Price to Cash Flow (or P/CF) ratio is one of the key metrics.
Price-to-Cash-Flow metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better. One of the important factors that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing a company's financial health.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. Net cash flow unveils how much money a company is actually generating and how effectively management is deploying the same.
Positive cash flow indicates an increase in a company’s liquid assets. It gives the company the means to settle debt, meet its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
Here are two stocks that qualified the screening:
JD.com, a leading supply chain-based technology and service provider, sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 24%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for JD’s current financial year sales and earnings per share (EPS) suggests growth of 4.7% and 27.2%, respectively, from the year-ago period. JD has a Value Score of A. Shares of JD have surged 60% in the past year.
KB Home, one of the largest and most recognized homebuilders in the United States, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for KB Home's current financial year sales and EPS suggests growth of 7.6% and 19.8%, respectively, from the year-ago period. KBH has a Value Score of A. Shares of KBH have rallied 87.7% in the past year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks.com featured highlights Tesla, Coca-Cola, JD.com and KB Home
For Immediate Release
Chicago, IL – October 23, 2024 – Stocks in this week’s article are Tesla, Inc. (TSLA - Free Report) , The Coca-Cola Co. (KO - Free Report) , JD.com, Inc. (JD - Free Report) and KB Home (KBH - Free Report) .
2 Value Stocks to Buy Ahead of Key Earnings Releases
The stock market encountered a momentary halt on Monday as key indices retreated after strong gains in recent weeks. The Dow Jones Industrial Average and the S&P 500, which reached record highs on Friday, faced downward pressure from rising Treasury yields and investor concerns over high valuations and future rate cuts. This cautious sentiment arises as investors prepare for a crucial earnings week, with major S&P 500 companies like Tesla, Inc. and The Coca-Cola Co. set to report their results.
The S&P 500 slipped 0.18% to close at 5,853.98. The Dow Jones Industrial Average experienced a more substantial decline, dropping 344.31 points or 0.80%, to settle at 42,931.60. In contrast, the tech-heavy Nasdaq Composite managed to break the trend, registering a modest gain of 0.27%, up 50.45 points, to finish at 18,540.01.
As the market took a breather, investors are advised to remain vigilant, keeping an eye on both corporate earnings and the evolving political landscape. In this environment, value stocks stand out as a compelling investment option. Trading below their intrinsic value, these stocks offer a margin of safety during market fluctuations.
When evaluating value stocks, one of the most effective valuation metrics is the Price to Cash Flow (P/CF) ratio. Companies like JD.com, Inc. and KB Home boast a low P/CF ratio. The P/CF ratio evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better.
Price to Cash Flow Reflects Financial Health
Value investing is considered one of the best practices when it comes to picking stocks. It is essentially about selecting stocks that are fundamentally sound but have been beaten down by some external factors. Such stocks are poised to bounce back as and when investors recognize the inherent value of companies. Certainly, the value investment strategy best suits investors with a long-term horizon.
There are different valuation metrics to determine a stock’s inherent strength. Still, a random selection of a ratio cannot serve your purpose if you want a realistic assessment of a company’s financial position. For this, the Price to Cash Flow (or P/CF) ratio is one of the key metrics.
Price-to-Cash-Flow metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per-share basis — the lower the number, the better. One of the important factors that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing a company's financial health.
Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. However, cash flow is reliable. Net cash flow unveils how much money a company is actually generating and how effectively management is deploying the same.
Positive cash flow indicates an increase in a company’s liquid assets. It gives the company the means to settle debt, meet its expenses, reinvest in its business, endure downturns and finally pay back its shareholders. Negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these moves.
Here are two stocks that qualified the screening:
JD.com, a leading supply chain-based technology and service provider, sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 24%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for JD’s current financial year sales and earnings per share (EPS) suggests growth of 4.7% and 27.2%, respectively, from the year-ago period. JD has a Value Score of A. Shares of JD have surged 60% in the past year.
KB Home, one of the largest and most recognized homebuilders in the United States, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for KB Home's current financial year sales and EPS suggests growth of 7.6% and 19.8%, respectively, from the year-ago period. KBH has a Value Score of A. Shares of KBH have rallied 87.7% in the past year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2355263/2-value-stocks-to-buy-ahead-of-key-earnings-releases
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.