Benjamin Graham, the father of value investing, recommended multiplying the price-earnings ratio of the stock by its price-book ratio to create the so-called “Graham blended multiplier.” When this indicator yields a value that stands below the threshold of 22.5, the stock is likely trading at a discount to its intrinsic value.
Thus, value investors may want to consider the following stocks as their Graham blended multiplier is below 22.5.
LKQ Corp
The first company that meets these criteria is LKQ Corp (LKQ, Financial).
Shares of the Chicago-based auto parts distributor closed at a price of $24.90 per unit on March 13 for a market capitalization of $7.65 billion.
The stock has a Graham blended multiplier of 21.8, as the price-earnings ratio is 14.23 and the price-book ratio is 1.53. The industry has a median of 13.62 for the price-earnings ratio and a median of 1.04 for the price-book ratio.
Over the past year through March 13, the share price lost 12% and is now below the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $23.31 to $36.63. LKQ Corp does not pay a dividend.
Wall Street issued a buy recommendation rating for shares of LKQ Corp and has established an average target price of $40 per share.
nVent Electric PLC
The second company that meets the screening criteria is nVent Electric PLC (NVT, Financial).
Shares of the British global manufacturer and marketer of electrical connection and protection products closed at a price of $19.04 per unit on March 13 for a market capitalization of $3.23 billion.
The stock has a Graham blended multiplier of 18.3, as the price-earnings ratio is 14.76 and the price-book ratio is 1.24. The industry has a median of 17 for the price-earnings ratio and of 1.42 for the price-book ratio.
Over the past year through March 13, the share price has fallen 30% and it now trades below the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $16.05 to $28.75. As of Friday, the forward dividend yield is 3.68%, as the company pays a 17.5 cents quarterly cash dividend per common share. The next dividend will be paid on May 8.
Wall Street issued an overweight recommendation rating for shares of nVent Electric PLC and has set an average target price of $28.83.
Secoo Holding Ltd
The third company that meets the above-listed criteria is Secoo Holding Ltd (SECO, Financial).
Shares of the Chinese operator of an online and offline shopping platform closed at a price of $5.13 per unit on March 13 for a market capitalization of $257.73 million.
The stock has a Graham blended multiplier of 13.52, as the price-earnings ratio is 11.66 and the price-book ratio is 1.16. The industry has a median of 15.39 for the price-earnings ratio and of 1.23 for the price-book ratio.
In the past year through March 13, the share price has dropped 40% to below the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $4.33 to $10.52. Secoo Holding Ltd does pay dividends.
Wall Street issued a buy recommendation rating for shares of Secoo Holding Ltd and has established an average target price of 62.37 Chinese Yuan ($8.90) per share.
Disclosure: I have no positions in any securities mentioned.
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