Last Thursday we wrote that Berkshire Hathaway (BRK.A)(BRK.B) was traded at the lowest valuation in decades. In the article we pointed out that Berkshire was traded at about book value, which is the lowest price to book value (P/B) ratio in decades. This Monday Berkshire made a surprising announcement saying that it will buy back shares at below 110% of the book value.
Apparently Buffett thinks that Berkshire Hathaway is worth much more than its book value. In this article we would like to highlight some of the other stocks that are currently traded at historical low P/B ratios, just as Berkshire Hathaway was last Friday.
UGI Corporation (UGI)
UGI Corporation is a holding company that operates propane distribution, gas and electric utility, energy marketing and related businesses through subsidiaries. UGI Corp. has a market cap of $3.06 billion; its shares were traded at around $27.36 with a P/E ratio of 12.2 and P/S ratio of 0.5. The dividend yield of UGI Corp. stocks is 3.8%. UGI had an annual average earnings growth of 9.4% over the past 10 years. GuruFocus rated UGI Corp. the business predictability rank of 3-star.
As we can see from the 10-year valuation band below, UGI is sold at its historical low P/B ratio. Over the past 10 years, UGI was able to grow its revenue from $2.4 billion to $5.9 billion a year. The book value of the company grew much faster. The shareholder’s equity grew from $256 million in 2001 to its current $2.3 billion.
UGI was able to increase its dividends from $0.34 per share per year in 1988 to $1.02. The payout ratio sits comfortably at about 40%.
Walmart Stores (WMT)
The world’s largest retailer Walmart is not only sold at its historical low P/B ratio, it is also at historical low P/E and P/S ratios. Check out the details at the 10-year valuation page of Walmart. You can also see the ratio chart below.
Walmart has frequently been criticized for its stock performance (or the lack of it). At the beginning of 2000, Walmart stock was traded at $70 a share. After more than 11 years, the stock is now at $51.
A lot of people don’t realize that over the past 11 years Walmart has more than doubled its revenue. Its earnings has more tripled due to margin expansions. In the mean time, Walmart aggressively bought back its shares. In fiscal year 2010 alone, it spent $14 billion buying back shares. Because of the buyback, the earnings per share has increased by four times over the past 11 years. With earnings increase and stock price decline, Walmart's valuation level is about 1/5 of what it was in 2000.
If holding Walmart was disappointing in the past decade, we will not be surprised if it is rewarding in the next one. In the meantime, the dividend yield of Walmart is now at a historical high, close to 3%.
WMS Industries Inc. (WMS)
WMS Industries Inc. current businesses are reported in the following three operating segments: gaming; pinball and cabinets; and contract manufacturing. WMS Industries Inc. has a market cap of $1.08 billion; its shares were traded at around $18.95 with a P/E ratio of 11.4 and P/S ratio of 1.4.
Similar to Walmart, WMS Industries is traded at its lowest level of P/B, P/S and P/E ratios in decades. WMS has an even higher growth rate. The revenue per share grew steadily over the past decade and has quadrupled. Earnings per share also grew seven times.
WMS has a great balance sheet. As of June 30, it has more than $105 million in cash and no debt.
WMS is now traded at similar level as it was in the market crash of 2009. Its insiders seem to be bullish about the company. CEO, COO, CFO and directors are buying shares at higher prices.
If you go through our list of companies that are sold at historical low P/B and P/S ratios, we found many outstanding companies are now traded at historical lows. Other examples include Johnson & Johnson (JNJ) and Microsoft (MSFT). For the complete list, check out GuruFocus historical low P/S and historical low P/B screeners.