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Zacks.com highlights: GMS, EQT, Gulfport Energy, Wintrust Financial and Capital One Financial

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For Immediate Release

Chicago, IL – November 2, 2018 - Stocks in this week’s article include: GMS Inc. (GMS - Free Report) , EQT Corp. (EQT - Free Report) , Gulfport Energy Corp. (GPOR - Free Report) , Wintrust Financial Corp. (WTFC - Free Report) and Capital One Financial Corp. (COF - Free Report) .

Screen of the Week of Zacks Investment Research:

5 Low Price-to-Book Stocks to Scoop Up for Solid Returns

Investors on the lookout for stocks with the potential for maximum growth and value investing usually use the stock’s price-to-earnings (P/E) or price-to-sales (P/S) ratio to pick stocks. 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 price to earnings (P/E) and price to sales (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

What is 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 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 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. The higher the P/B, the more expensive the stock.

But there is a caveat. A P/B ratio 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 expenditures, high-debt companies, service companies or those with negative earnings.

In any case, the ratio is not particularly relevant as a standalone number. One should also analyze other ratios like P/E, P/S, and debt to equity before arriving at a reasonable investment decision.

And that's what we're screening for today…

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/333836/5-low-pricetobook-stocks-to-scoop-up-for-solid-returns

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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.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.

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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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