Screening for stocks that more than double the earnings yield of 20-year high-quality corporate bonds increases the likelihood of discovering value opportunities.
These bonds represent corporate loans issued by triple-A, double-A and single-A rated companies.
The benchmark monthly average spot rate that holders of these bonds are enjoying is 3.97%,Ă‚ according to the Federal Reserve Bank of St. Louis.
As a result, the following stocks have a price-earnings ratio, which is the inverse of the earnings yield, of less than 12.59.
Shares of the first, KAR Auction Services Inc. (KAR, Financial), closed at $25.13 on Friday for a market capitalization of $3.35 billion. The Carmel, Indiana-based used car auction and salvage auction services provider has an earnings yield of 9.3% versus the industry median of 5.6% or a price-earnings ratio of 10.75 versus the industry median of 17.77.
The price-book ratio is 2.29 versus the industry median of 1.31, and the price-sales ratio is 0.83 versus the industry median of 0.56.
The stock has gained 39% year to date. The share price at close Friday was 53.3% above the 52-week low of $16.39 and 3.5% below the 52-week high of $26.
According to the Peter Lynch chart, the stock is cheap.
GuruFocus assigned a rating of 4.4 out of 10 for the financial strength and 7 out of 10 for the profitability and growth of the company.
The stock has an overweight recommendation rating and an average target price of $27.61 per share.
Shares of Braskem SA (BRKMY, Financial) closed at $19.1 Friday for a market capitalization of $7.6 billion. The Brazilian thermoplastic resins producer has an earnings yield of 9.8% versus the industry median of 6.2% or a price-earnings ratio of 10.20 versus the industry median of 16.08.
The stock has a price-book ratio of 3.62 compared to the industry median of 1.47, a price-sales ratio of 0.50 versus the industry median of 1.04 and an enterprise value-Ebitda ratio of 6.5 versus the industry median of 9.79.
The stock is down 22% so far this year. The closing share price on Friday was 14.5% above the 52-week low of $16.68 and 59.8% below the 52-week high of $30.52.
According to the Peter Lynch chart, the stock seems cheap.
Braskem SA has a rating of 4.7 out of 10 for financial strength and 7 out of 10 for profitability and growth.
The stock has an overweight recommendation rating and an average target price of $23.52 per share.
Shares of Lazard Ltd. (LAZ, Financial) closed at $36.39 Friday with a market capitalization of $4.02 billion. The Bermuda-based global financial advisory and asset management firm has an earnings yield of 9.9% versus the industry median of 6.3% or a price-earnings ratio of 10.12 versus the industry median of 15.98.
The firm also has a price-book ratio of 6.26 versus the industry median of 1.16 and a price-sales ratio of 1.73 versus the industry median of 3.03.
The stock has fallen 1% so far this year. The closing price on Friday was 17.1% above the 52-week low of $31.07 and 50.2% below the 52-week high of $54.64.
The stock appears to be cheap based on the Peter Lynch chart.
GuruFocus assigned a financial strength rating of 4.4 out of 10 and a profitability and growth rating of 4 out of 10.
Shares of Lazard Ltd. have a hold recommendation rating and an average target price of $41.63.
Disclosure: I have no positions in any securities mentioned.
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