In order to increase your chances to unearth value opportunities, you may want to consider stocks whose earnings returns have significantly topped the monthly sport rate (3.5% as of April 30) that the 20-year high-quality market corporate bonds grant to their holders. These investment-grade bonds have been issued by companies that possess a high capacity to repay their loans, implying a considerably low investment risk for both bondholders and shareholders.
Thus, investors may want to have a look at the following stocks, as their earnings returns have recently more than doubled the above-mentioned monthly spot rate of 3.5%. These stocks also have price-earnings ratios of less than 14.3.
Verizon Communications Inc
Shares of Verizon Communications Inc (VZ, Financial) closed at a price of $58.12 per unit on Wednesday for a market capitalization of $240.5 billion.
The New York-based telecommunication services company offers an earnings yield of 7.6% and has a price-earnings ratio of 13.12.
Year to date, the share price has fallen by 5.3%, but Wall Street sell-side analysts forecast that it will rebound, hitting a $60.83 price target.
GuruFocus assigned a moderate rating of 4 out of 10 for the company's financial strength and a very good rating of 7 out of 10 for its profitability.
ePlus Inc
Shares of ePlus Inc (PLUS, Financial) closed at a price of $73.79 per unit on Wednesday for a market capitalization of $997.11 million.
Based in Herndon, Virginia, ePlus is an application software company focusing on improving the information technology environment and supply chain processes of U.S. organizations. The stock offers an earnings yield of 7.2% and has a price-earnings ratio of 13.95.
Year to date, the share price has dropped by 12.4%, but Wall Street sell-side analysts have recommended an overweight rating for this stock, indicating an expectation for shares to rise.
GuruFocus assigned a very good rating of 7 out of 10 for the company’s financial strength and a higher rating of 8 out of 10 for its profitability.
GeoPark Ltd
Shares of GeoPark Ltd (GPRK, Financial) closed at a price of $9.36 per unit on Wednesday for a market capitalization of $566.77 million.
The Chilean oil and gas explorer, developer and producer with mineral interests in South America offers an earnings yield of 9.5% and a price-earnings ratio of 10.53.
Year to date, the share price has declined by 57.5%. However, Wall Street sell-side analysts forecast that it will bounce back, reaching a price target of $17.69 per share.
GuruFocus assigned the stock a moderate rating of 4 out of 10 for its financial strength and a very good rating of 7 out of 10 for its profitability.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- 3 Low Price-Book Ratio Stocks for the Value Investor
- 3 Small Caps Growing Earnings Fast
- 3 Stocks With Low Forward Price-Earnings Ratios
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