When looking for stocks that are trading at reasonable prices, one tool investors can use is the earnings power value metric.
The EPV was built by Bruce Greenwald, a former professor at Columbia University and a well-known value investor who was in search of ways to bypass the series of guesswork choices that must be made when applying the discounted cash flow valuation model. The EPV is calculated as the adjusted earnings divided by the weighted average cost of capital.
The stocks listed below seem to be reasonably priced as their share prices are trading lower than their respective EPVs.
First Horizon
The first stock that holds the criteria is First Horizon Corp. (FHN, Financial), a Memphis, Tennessee-based regional bank.
First Horizon's EPV is $30.37 per share (as of the March 2021 quarter), which is higher than the share price of $18.90 at close on Tuesday for a margin of safety of about 37.77%.
Due to a 156.10% share price increase, which took place over the past year, the market capitalization is $10.44 billion. The 52-week range is $6.93 to $19.44.
GuruFocus has assigned a score of 3 out of 10 to the company's financial strength and 5 out of 10 to its profitability.
Wall Street sell-side analysts issued a median recommendation rating of buy with an average target price of $20.86 per share for the stock.
SVB Financial Group
The second stock that has the requirement is SVB Financial Group (SIVB, Financial), a Santa Clara, California-based regional bank.
SVB Financials' EPV is $845.14 per share (as of the March 2021 quarter), which is higher than Tuesday's closing share price of $583.90, for a margin of safety of 30.91%.
Due to a 265.2% increase in the share price that happened over the past year, the market capitalization now stands at $31.71 billion. The 52-week range is $152.76 to $592.34.
GuruFocus has assigned a score of 4 out of 10 to the company's financial strength rating and of 6 out of 10 to its profitability rating.
Wall Street sell-side analysts issued a median recommendation rating of overweight for this stock and have set an average target price of $605.55 per share.
Sierra Bancorp
The third stock that holds the criteria is Sierra Bancorp (BSRR, Financial), a Porterville, California-based regional bank focusing on retail and commercial banking services for individuals and businesses.
Sierra Bancorp's EPV is $55.15 per share (as of the March 2021 quarter), which is more than double the share price of $26.85 at close on Tuesday, for a margin of safety of 51.32%.
Due to a nearly 63% increase in the share price over the past year, the market capitalization now stands at around $413.78 million. The 52-week range is $15.41 to $29.415.
GuruFocus has assigned a score of 4 out of 10 to the company's financial strength and a score of 5 out of 10 to its profitability.
Wall Street sell-side analysts issued a median recommendation rating of overweight with an average target price of $30.50 per share.
Disclosure: I have no positions in any securities mentioned.
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