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Alberto Abaterusso
Alberto Abaterusso
Articles (2528) 

3 Stocks that Represent Potential Bargains

They trade at compelling valuations

January 04, 2021 | About:

When screening the market in search of bargains, investors may want to pay attention to stocks holding the following criteria, as they could represent value opportunities:

  • A price-earnings ratio below 20
  • A low enterprise-value-to-Ebitda ratio compared to the historical mean of the S&P 500 over the past six and a half years (which stands at around 12.6 as of the writing of this article)
  • A solid dividend growth surpassing the S&P 500, which saw its dividend per share grow at a compound annual growth rate (CAGR) of about 5.03% over the past three years through Sept. 30.

Best Buy Co Inc

The first stock that makes the cut is Best Buy Co Inc (NYSE:BBY), a Richfield, Minnesota-based specialty retailer of various technology products in the U.S. and Mexico.

The stock price traded at $99.79 per share at close on Thursday for a market cap of $25.84 billion, a price-earnings ratio of 15.17 (versus the industry median of 22.28) and an enterprise-value-to-Ebitda ratio of 7.80 (versus the industry median of 12.41).

GuruFocus assigned a score of 6 out of 10 to the company's financial strength rating and of 7 out of 10 to its profitability rating.

Best Buy currently pays dividends to its shareholders in the amount of 55 cents per common share every quarter and has increased them by 21.3% per annum over the past three years (versus the industry median of 2.65%). The next payment will be made on Jan. 5 for a forward dividend yield of 2.2% as of Dec. 31.

On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $125.54 per share.

Cheniere Energy Partners LP

The second stock that makes the cut is Cheniere Energy Partners LP (CQP), a Houston, Texas-based liquefied natural gas midstream operator with operating activities in Louisiana.

The stock price traded at $35.25 per share at close on Thursday for a market cap of $17.06 billion, a price-earnings ratio of 14.63 (versus the industry median of 12.97) and an enterprise-value-to-Ebitda ratio of 12.4 (versus the industry median of 8.84).

GuruFocus assigned a score of 3 out of 10 to the company's financial strength rating and of 7 out of 10 to its profitability rating.

Cheniere Energy Partners LP is currently paying dividends to its shareholders in the amount of 65 cents per common share every quarter and has increased them by 12.5% per annum over the past three years (versus the industry median of 1.95%). The last payment was made last year on Nov. 13 for a trailing 12-month dividend yield of 7.28% as of Dec. 31.

On Wall Street, the stock has a median recommendation rating of hold and an average target price of $38.56 per share.

Omnicom Group Inc

The third stock to consider is Omnicom Group Inc (NYSE:OMC), a New York-based advertising agency that provides corporations with advertising, marketing and communication services.

The stock price traded at $62.37 per share at close on Thursday for a market cap of $13.41 billion, a price-earnings ratio of 14.11 (versus the industry median of 22.3) and an enterprise-value-to-Ebitda ratio of 9.24 (versus the industry median of 11.64).

GuruFocus assigned a score of 4 out of 10 to the company's financial strength rating and of 7 out of 10 to its profitability rating.

Omnicom Group Inc is currently paying dividends to its shareholders in the amount of 65 cents per common share every quarter and has increased them by 6.5% per annum over the past three years (versus a decline of 4.95% for the industry median). The next payment will be made on Jan. 11 for a forward dividend yield of 4.17% as of Dec. 31.

On Wall Street, the stock has a median recommendation rating of hold and an average target price of $62.36 per share.

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 how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. 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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