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Alberto Abaterusso
Alberto Abaterusso
Articles (2317) 

3 Stock Picks Trading Below Their Earnings Power Values

They provide significant margins of safety

September 27, 2020 | About:

The Earnings Power Value (EPV) metric helps investors to assess whether or not a stock is fairly priced by the market.

The creation of the EPV metric has been attributed to Bruce Greenwald, a professor at Columbia University and a recognized value investor. Greenwald was in search of ways to bypass the series of guesswork choices that are necessary when applying the discounted cash flow valuation model. The EPV is calculated as the adjusted earnings divided by the weighted average cost of capital.

Below are three stocks that appear to be fairly priced, as their share prices stand below their respective EPVs.

Citigroup Inc

The first stock that meets the criteria is Citigroup Inc (NYSE:C), an American bank major.

Citigroup Inc's EPV is $144.49 per share (as of June 29), which is higher compared to the share price of $42.02 at close on Friday for a margin of safety of nearly 71%.

After a 39.2% decline that the share price reported over the past year, the market capitalization is $87.48 billion. The 52-week range is $32 to $83.11.

GuruFocus has assigned a score of 3 out of 10 to the company's financial strength and 4 out of 10 to its profitability.

On Wall Street, the stock has a buy recommendation rating with an average target price of $68.19 per share.

VANGUARD GROUP INC leads the group of the company's top fund holders with 8.28% of shares outstanding. It is followed by BlackRock Inc. with 7.78% of shares outstanding and by STATE STREET CORP with 4.34%.

KeyCorp

The second stock that qualifies is KeyCorp (NYSE:KEY), the Cleveland, Ohio-based parent company of KeyBank, which is a regional provider of banking services.

KeyCorp's EPV of $23.34 per share (as of June 29) is higher compared to Friday's closing share price of $11.71, for a margin of safety of 49.83%.

As a result of a 34.4% decline that the share price endured over the past year, the market capitalization is now $11.43 billion and the 52-week range is $7.45 to $20.53.

GuruFocus has assigned a score of 2 out of 10 to the company's financial strength rating and of 5 out of 10 to its profitability rating.

On Wall Street, the stock has a hold recommendation rating with an average target price of $13.83 per share.

VANGUARD GROUP INC leads the group of top fund holders of the company, holding 11.63% of shares outstanding. It is followed by BlackRock Inc. with 8.69% and by STATE STREET CORP with 4.92%.

ViacomCBS Inc

The third stock that makes the cut is ViacomCBS Inc (NASDAQ:VIAC), a New York-based global media and entertainment company.

ViacomCBS Inc's EPV is $51.45 per share (as of June 29), which is above the share price of $29.53 at close on Friday, yielding a margin of safety of 42.6%.

Following a nearly 27% decline in the share price that occurred over the past year, the market capitalization now trades at $18.31 billion and the 52-week range is $10.10 to $44.94.

GuruFocus has assigned a score of 4 out of 10 to the financial strength rating and a score of 8 out of 10 to the profitability rating of the company.

On Wall Street, the stock has an overweight recommendation rating, which means that the share price is foreseen to outperform, with an average target price of $29.15 per share.

VANGUARD GROUP INC dominates the group of top fund holders of the company, owning 9.97% of shares outstanding. It is followed by BlackRock Inc. with 7.50% and by STATE STREET CORP with 5.24%.

Disclosure: I have no position in any security mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about gold, silver and precious metals mining industries. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master's Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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