If you want to enhance your likelihood to unearth opportunities in capital-intensive industries, one method is to select stocks that are beating their competitors in terms of superior price-to-tangible-book-value ratios.
The price-to-tangible-book-value ratio is preferred to the price-book ratio as a valuation ratio for capital-intensive companies, as the appraisal of these businesses mainly derives from tangible or hard assets.
Honda Motor Co Ltd
The first stock that meets the criteria is Japanese automaker Honda Motor Co Ltd (HMC, Financial).
Honda has a price-to-tangible-book-value ratio of 0.73, which is more compelling than the industry median of 1.6.
As of Dec. 3, the stock price was $29.35 per share. The tangible book value per share was approximately $39.78 as of the most recent quarter.
The stock price increased by 2.37% over the past year, determining a market capitalization of $50.68 billion and fluctuating in a 52-week range of $19.38 to $29.80.
GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10 to the company.
On Wall Street, the stock has a buy recommendation rating with an average target price of $35.13 per share.
China Petroleum & Chemical Corp
The second stock that qualifies is China Petroleum & Chemical Corp (SNP, Financial), a Chinese producer of crude oil and natural gas.
China Petroleum & Chemical's price-to-tangible-book-value ratio of 0.53 is appealing more than the industry median of 1.
As of Dec. 3, the stock price was $46.56 per share. The tangible book value per share was $87.26 as of the most recent quarter.
The stock has declined by 15.85% over the past year for a market capitalization of $56.37 billion and a 52-week range of $38.18 to $62.22.
GuruFocus assigned a score of 5 out of 10 for the financial strength rating and of 6 out of 10 for the profitability rating of the company.
On Wall Street, the stock has a hold recommendation rating with an average target price of $53.38 per share.
South32 Ltd
The third stock that makes the cut is South32 Ltd (SOUHY, Financial), an Australian base and precious metals mining company with operations in Australia, Southern Africa and the Americas.
South32 Ltd.'s price-to-tangible-book-value ratio of 0.74 is more appealing than the industry median of 0.86.
As of Dec. 3, the stock price traded at around $9.42 per share at close, while the tangible book value per share was $9.61 as of the most recent quarter.
The stock price has risen by 7.17% over the past year, determining a market capitalization of $9.05 billion and ranging between a low of $4.79 and a high of $10.11.
GuruFocus assigned a financial strength rating of 6 out of 10 and a profitability rating of 5 out of 10 to the company.
On Wall Street, the stock has one recommendation rating of hold with a price target of $3.52 per share.
Disclosure: I have no position in any security mentioned.
Read more here:
- A Trio of Stocks Trading Below the Peter Lynch Earnings Line
- A Trio of High Return on Equity Ratio Stock Picks to Consider
- 3 Stocks Trading Below Their Earnings Power Values
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
