One strategy to unearth value opportunities is to screen the market for stocks with an enticing forward price-earnings ratio.
Investors may want to consider the following three stocks, as they have a forward price-earnings ratio that stands below the S&P 500 index's historical average of 15. Estimates of future earnings are based on data from Morningstar analysts.
H&R Block Inc
The first stock that meets the criteria is H&R Block Inc (HRB, Financial), a Kansas City, Missouri-based provider of assisted income tax return, do-it-yourself tax and virtual tax preparation services to the general public in North America and Australia.
H&R Block Inc has a forward price-earnings ratio of 4.25 (versus the industry median of 23.04), which results from Monday’s share price of $14.04 and analyst expectations for earnings per share (EPS) of about $3.30 for the next full fiscal year.
The stock price has fallen by 47.4% over the past year, determining a market capitalization of $2.71 billion and a 52-week range of $11.29 to $29.62.
GuruFocus has 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.
Wall Street sell-side analysts recommend a hold rating with an average price target of $18.33 per share of H&R Block Inc.
The AES Corp
The second company under consideration is The AES Corp (AES, Financial), an Arlington, Virginia-based diversified electricity generation and utility operator.
The AES Corp has a forward price-earnings ratio of 10.95 (versus the industry median of 17.83), which is the result of Monday’s closing share price of $15.12 and analyst expectations for EPS of approximately $1.38 for the next full fiscal year.
The stock price has decreased by 7.4% over the past year for a market capitalization of $10.05 billion and a 52-week range of $8.11 to $21.23.
GuruFocus assigned a low rating of 3 out of 10 to the company’s financial strength and a positive rating of 6 out of 10 to its profitability.
Wall Street sell-side analysts issued a buy recommendation rating with an average target price of $17.75 per share of The AES Corp.
Novartis AG
The third company that meets the criteria is Novartis AG (NVS, Financial), a Swiss drug giant.
Novartis AG has a forward price-earnings ratio of 14.91 (versus the industry median of 18.96), which derives from Monday’s closing share price of $83.65 and analysts' expectations for an EPS of about $5.61 for the next full fiscal year.
The stock price has fallen by almost 8% over the past year for a market capitalization of $194.92 billion and a 52-week range of $69.18 to $99.84.
GuruFocus has assigned a positive rating of 5 out of 10 for the company’s financial strength and a very good rating of 7 out of 10 for its profitability.
Wall Street sell-side analysts recommend an overweight rating with an average target price of $102.64 per share of Novartis AG.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Stocks Trading Below Intrinsic Value
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- A Trio of Capital-Intensive Stock Picks for the Value Investor
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