To enhance the effectiveness of their search, value investors may want to consider stocks whose "Graham blended multiplier” stands below 22.5. Developed by Benjamin Graham, the father of value investing, the multiplier equals the stock’s price-earnings ratio times its price-book ratio.
Thus, value investors should have a look at the following three stocks, as their Graham blended multipliers are below 22.5, indicating they could be value opportunities.
Magna International Inc
The first stock investors should have a look at is Magna International Inc (MGA, Financial), a Canadian developer and manufacturer of automotive systems and other components.
The stock has a Graham blended multiplier of 21.98, as the price-earnings ratio is 16.28 (versus the industry median of 15.62) and the price-book ratio is 1.35 (versus the industry median of 1.09).
Magna International Inc’s stock price traded at $48.28 per share at close on July 23 for a market capitalization of $14.41 billion.
The share price has fallen 3.2% over the past year, determining a 52-week range of $22.75 to $57.09.
The stock grants a trailing 12-month dividend yield of 3.15% and a forward dividend yield of 3.29% as of July 23.
GuruFocus assigned a positive score of 6 out of 10 to the company’s financial strength and a high score of 8 out of 10 to its profitability.
As of July, Wall Street sell-side analysts recommend an overweight rating with an average target price of $51.56 per share for the stock.
Korn Ferry
The second stock investors should take into account is Korn Ferry (KFY, Financial), a Los Angeles, California-based provider of staffing and employment services to companies and organizations worldwide.
The stock has a Graham blended multiplier of 21.60, as the price-earnings ratio is 16.12 (in line with the industry median) and the price-book ratio is 1.34 (versus the industry median of 1.61).
Korn Ferry’s stock price traded at $30.14 per share at close on July 23 for a market capitalization of $1.65 billion.
The share price has fallen by 24.2% in the past year for a 52-week range of $21.45 to $48.81.
The stock grants trailing 12-month and forward dividend yields of 1.32% as of July 23.
GuruFocus assigned a positive rating of 6 out of 10 to the company’s financial strength and a high rating of 8 out of 10 to its profitability.
As of July, Wall Street sell-side analysts recommend an overweight rating with an average target price of $35.50 per share for the stock.
Rush Enterprises Inc
The third company investors should consider is Rush Enterprises Inc (RUSHA, Financial) (RUSHB, Financial), a New Braunfels, Texas-based commercial vehicles retailer in the U.S.
The stock has a Graham blended multiplier of 21.36, as the price-earnings ratio is 14.24 (versus the industry median of 15.62) and the price-book ratio is 1.50 (versus the industry median of 1.09).
Rush Enterprises Inc traded at $48.55 per share of Class A common stock and at $41.04 per share of Class B common stock at close on July 23 for a market capitalization of $1.68 billion and of $1.69 billion, respectively.
For Class A common stock, the share price has risen 31% over the past year for a 52-week range of $27.25 to $49.79.
Class A common stock grants trailing 12-month and forward dividend yields of 1.08% as of July 23.
For Class B common stock, the share price has gained 5.1% over the past year for a 52-week range of $21.65 to $48.50.
Class B common stock grants trailing 12-month and forward dividend yields of 1.26% as of July 23.
GuruFocus assigned a moderate score of 5 out of 10 to the company’s financial strength rating and a very good score of 7 out of 10 to its profitability rating.
As of July, Wall Street sell-side analysts recommend an overweight rating with an average target price of $47.25 per share of both classes of common stock.
Disclosure: I have no positions in any securities mentioned.
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