Donald Yacktman, a well-known value investor and founder of the AMG Yacktman Fund Class I (YACKX), takes the "forward rate of return" into consideration when he wants to appraise the attractiveness of a stock. He calculates this valuation ratio as "normalized free cash flow yield plus real growth plus inflation."
Value investors may be interested in the three stocks listed below, as their forward rate of return is at least twice the return on 20-year high quality market (HQM) corporate bonds, which stands at 3.05% as of the writing of this article.
ASE Technology Holding Co Ltd
The first stock to consider is ASE Technology Holding Co Ltd (ASX, Financial), a Taiwanese provider of various semiconductor packaging and testing, as well as electronic manufacturing services to semiconductors manufacturers internationally.
ASE's forward rate of return is 23.3%, which ranks higher than 92% of the companies that operate in the semiconductors industry.
ASE's share price increased 5.65% over the past year to close at $5.61 on Wednesday for a market cap of $11.97 billion. The 52-week range is $3.17 to $5.78. Its price-earnings ratio is 66.36 (versus the industry median of 30.27), its price-book ratio is 1.65 (versus the industry median of 2.53) and its price-sales ratio is 0.77 (versus the industry median of 2.43).
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $5.82 per share.
Ken Fisher is the largest fund holder of the company, owning 1.26% of shares outstanding. The investor is followed by SCHRODER INVESTMENT MANAGEMENT GROUP with 0.42% of shares outstanding and Schafer Cullen Capital Management Inc with 0.39% of shares outstanding.
LKQ Corp
The second stock to consider is LKQ Corp (LKQ, Financial), a Chicago, Illinois-based auto parts distributor.
LKQ's forward rate of return is 16.31%, which ranks higher than 76% of the companies that operate in the vehicles and parts industry.
LKQ's share price increased 4.03% over the past year to trade at around $37.21 at close on Wednesday for a market cap of $11.32 billion and a 52-week range of $13.31 to $38.38. Its price-earnings ratio is 18.98 (versus the industry median of 24.41), its price-book ratio is 2.1 (versus the industry median of 1.41) and its price-sales ratio is 0.97 (versus the industry median of 0.76).
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $41.56 per share.
Amid the top fund holders of the company, The Vanguard Group Inc. dominates with 9.38% of shares outstanding. It is followed by ValueAct Holdings, L.P. with 7.08% of shares outstanding and Blackrock Inc. with 6.39% of shares outstanding.
Voya Financial Inc
The third stock to consider is Voya Financial Inc (VOYA, Financial), a New York-based retirement, investment and employee benefits company.
Voya Financials' forward rate of return is 32.16%, which ranks higher than 79% of the companies that operate in the diversified financial services industry.
Voya Financials' share price went up slightly over the past year by almost 2% to trade at around $58.47 on Wednesday for a market cap of $7.38 billion and a 52-week range of $29.75 to $63.81. Its price-book ratio is 0.76 (versus the industry median of 1.27) and its price-sales ratio is 1.08 (compared to the industry median of 2.97).
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $64.62 per share.
With 8.88% of shares outstanding, The Vanguard Group Inc. is the leader in the group of top fund holders of the company. It is followed by Franklin Resources, Inc. with 7.86% of shares outstanding and Blackrock Inc. with 6% of shares outstanding.
Disclosure: I have no position in any security mentioned.
Read more here:
- A Trio of Potential Bargains
- A Trio of Opportunities Trading at Low Price-to-Free-Cash-Flow Ratios
- 3 Stocks That Could Be Bargains
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