Benjamin Graham, the pioneer of value investing and author of "The Intelligent Investor," suggested to consider stocks whose "Graham blended multiplier," which is the price-earnings ratio multiplied by the price-book ratio, is less than or equal to 22.5, as these stocks are likely trading below their intrinsic value.
Thus, investors may want to consider the following companies that have a Graham blended multiplier of less than 22.5.
Avista Corp
The first stock to consider is Avista Corp (AVA, Financial).
Shares of the Spokane, Washington-based distributor of electricity and natural gas in several states of the U.S. closed at a price of $43.01 per unit on April 21 for a market capitalization of $2.89 billion.
The stock has a Graham blended multiplier of 21.5, as the price-earnings ratio is 14.43 and the price-book ratio is 1.49. The industry has a median of 14.6 for the price-earnings ratio and a median of 1.38 for the price-book ratio.
The Peter Lynch chart tells us that the stock is trading at reasonable valuations, as the share price is below the earnings line.
The 52-week range is $32.09 to $53. Avista Corp grants a dividend yield of 3.65% as of April 21.
Wall Street issued a hold recommendation rating for this stock and has produced an average target price of $42.33 per share.
Kennametal Inc
The second stock to consider is Kennametal Inc (KMT, Financial).
Shares of the Pittsburgh, Pennsylvania-based developer of tools, wear applications and accessories for working in extreme conditions closed at a price of $22.17 per unit on April 21 for a market capitalization of $1.84 billion.
The stock has a Graham blended multiplier of 19.9, as the price-earnings ratio is 14.12 and the price-book ratio is 1.41. The industry has a median of 15.66 for the price-earnings ratio and of 1.27 for the price-book ratio.
The Peter Lynch chart indicates that the stock is priced reasonably, as its share price trades below the earnings line.
The 52-week range is $14.45 to $42.03. Kennametal Inc grants a dividend yield of 3.59% as of April 21.
Wall Street issued an overweight recommendation rating for this stock and has set an average target price of $27.18 per share.
Imax Corp
The third company that meets the above-listed criteria is Imax Corp (IMAX, Financial).
Shares of the Canadian provider of digital and film-based motion picture technology solutions closed at a price of $11.57 per unit on April 21 for a market capitalization of $709.97 million.
The stock has a Graham blended multiplier of 19.8, as the price-earnings ratio is 15.22 and the price-book ratio is 1.3. The industry has a median of 14 for the price-earnings ratio and of 1.19 for the price-book ratio.
The Peter Lynch chart indicates that the stock is fairly priced, as its share price is trading below the earnings line.
The 52-week range is $6.01 to $25.75.
Wall Street issued an overweight recommendation rating for this stock and has established an average target price of $19.71 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Strong Performers to Consider
- 2 Underperforming Holdings to Reduce
- 3 Stocks That Have Grown Revenue Fast
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