Benjamin Graham, the pioneer of value investing, co-author with David Dodd of "Security Analysis" and author of "The Intelligent Investor," recommended stocks whose price-earnings ratio multiplied by their price-book ratio yields 22.5. Why? Because these stocks most likely trade below their intrinsic value.
Thus, investors may want to consider the following stocks as their Graham blended multiplier stands below 22.5.
Flanigan'S Enterprises
The first company under consideration is Flanigan'S Enterprises Inc. (BDL, Financial), a Fort Lauderdale, Florida-based operator of full-service restaurants and package liquor stores in South Florida.
Shares were trading at a price of $20.49 each at close on Feb. 28 for a market capitalization of $38.09 million.
The stock has a Graham blended multiplier of 10.98, as the price-earnings ratio is 11.2 and the price-book ratio is 0.98. The industry has a median of 23.64 for the price-earnings ratio and a median of 2.47 for the price-book ratio.
Over the past year through Feb. 28, the stock declined 18% to trade below the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $18.5 to $25.5.
The company paid an annual dividend of 28 cents per common share in 2019, which generated a 1.37% trailing 12-month dividend yield as of Feb. 28. The company has paid dividends for about 22 years.
Bridgestone
The second company under consideration is Bridgestone Corp. (BRDCY, Financial), a Japanese manufacturer and seller of tires and rubber products.
Shares traded at a price of $16.48 per unit at close on Feb. 28 for a market capitalization of $23.21 billion.
The stock has a Graham blended multiplier of 11.08, as the price-earnings ratio is 9.55 and the price-book ratio is 1.16. The industry has a median of 14.73 for the price-earnings ratio and of 1.16 for the price-book ratio.
Over the past year through Feb. 28, the share price fell 17% to trade below the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $15.88 to $21.37.
In 2019, the company distributed two semi-annual dividends (36.3 cents per common share on April 9 and 37.7 cents per common share on Sept. 17). The dividend generates a trailing 12-month dividend yield of 2.29% as of Feb. 28. The company has been paying dividends for about 15 years.
Wall Street issued a hold recommendation rating for this stock with an average target price of $18.61 per share.
VSE
The third company under consideration is VSE Corp. (VSEC, Financial), an Alexandria, Virginia-based diversified services and supply company.
On Feb. 28, shares closed at $29.45 each, which determined a market capitalization of $323.07 million.
The stock has a Graham blended multiplier of 8.17, as the price-earnings ratio is 8.98 and the price-book ratio is 0.91. The industry has a median of 23.17 for the price-earnings ratio and of 2.04 for the price-book ratio.
Over the past 52 weeks through Feb. 28, the share price decreased 15% to trade below the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $24.06 to $41.14.
Currently, the company is paying a quarterly cash dividend of 9 cents per common share, generating a trailing 12-month dividend yield of 1.19% as of Feb. 28. The company has been paying dividends for about 35 years.
Wall Street issued a hold recommendation rating for this stock.
Disclosure: I have no positions in any securities mentioned.
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