To increase the likelihood of discovering value opportunities, you should consider stocks whose Graham blended multiplier is 22.5 or less. Developed by Benjamin Graham, the pioneer of value investing, the multiplier equals the stock's price-earnings ratio times its price-book ratio.
The following three stocks have a Graham blended multiplier of 22.5 or less.
NorthWestern
The first stock to consider is NorthWestern Corp. (NWE, Financial), a Sioux Falls, South Dakota-based provider of electricity and natural gas to residential, commercial and industrial customers.
Shares of NorthWestern closed at $54.25 on May 15 for a market capitalization of $2.74 billion.
The stock has a Graham blended multiplier of 20.22, as the price-earnings ratio is 15.32 and the price-book ratio is 1.32. The industry has a median of 15.19 for the price-earnings ratio and a median of 1.36 for the price-book ratio.
The stock appears to be fairly valued, as its share price is near the Peter Lynch earnings line.
The 52-week range is $45.06 to $80.52.
Wall Street sell-side analysts issued a moderate buy recommendation rating for this stock and have set an average target price of $64.75 per share.
Kaiser Aluminum
The second stock to consider is Kaiser Aluminum Corp. (KALU, Financial), a Foothill Ranch, California-based manufacturer of semi-finished aluminum products for various industries.
Shares of Kaiser Aluminum closed at $58.84 on May 15 for a market capitalization of $929.06 million.
The stock has a Graham blended multiplier of 19.83, as the price-earnings ratio is 15.02 and the price-book ratio is 1.32. The industry has a median of 12.5 for the price-earnings ratio and of 1.4 for the price-book ratio.
The stock is priced fairly as it trades close to the Peter Lynch earnings line.
The 52-week range is $54.54 to $117.06.
Wall Street sell-side analysts issued a hold recommendation rating for this stock and have established an average target price of $102 per share.
TriMas
The third company to consider is TriMas Corp. (TRS, Financial), a Bloomfield Hills, Michigan-based provider of various products for several end markets worldwide, including aerospace and industrial.
Shares of TriMas closed at $19.87 on May 15 for a market capitalization of $862.55 million.
The stock has a Graham blended multiplier of 12.58 as the price-earnings ratio is 9.68 and the price-book ratio is 1.3. The industry has a median of 16.21 for the price-earnings ratio and of 1.32 for the price-book ratio.
The Peter Lynch chart shows the stock is still trading cheaply as its share price is slightly below the earnings line.
The 52-week range is $18.05 to $33.45.
Wall Street sell-side analysts issued an overweight recommendation rating for the stock and have established an average target price of $25 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- 2 Underperforming Stocks to Reduce
- This Trio of Growth Stocks May Present Value Opportunities
- 3 High-Yield Stocks for the Dividend Investor
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