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5 Stocks That Look Cheap Based on Future Earnings and Book Value

A look at potential value opportunities

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Rupert Hargreaves
Sep 17, 2021

Summary

  • These are some of the cheapest stocks on the market
  • They could offer value for investors
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With equity markets trading close to all-time highs and some stocks breaking out to new all-time highs, one could be forgiven for thinking that there are no value opportunities in this market.

However, that could not be further from the truth. There are still plenty of companies on the market that look undervalued from an earnings and book value perspective.

To find these companies, one has to move away from the headline stocks, such as Apple (

AAPL, Financial) and Microsoft (MSFT, Financial), and focus on different sections of the market.

With that in mind, here are five companies that appear cheap based on their forward price-earnings and price-book ratios. I should note that this is just an initial screen designed to be a starting point for further research. I have not conducted an exhaustive analysis on all of the equities below, and investors should always do their own due diligence before taking action in the stock market.

Genesco Inc

The first company on my list is a retailer and wholesaler of footwear and apparel, Genesco Inc (

GCO, Financial).

With a market capitalization of around $910 million at the time of writing, this is a relatively small company. Thanks to the pandemic, it reported a substantial loss of $56 million last year. With a net cash balance of $182 million, it has the funds to sustain this loss.

Analysts are forecasting a recovery this year. They expect net profit to hit $86 million. Based on this projection, the stock is trading at a forward price-earnings ratio of 10.2. It is trading at a price-book ratio of 1.5.

Big 5 Sporting Goods

Another company that looks cheap in the retail sector is Big 5 Sporting Goods (

BGFV, Financial).

Once again, this is a relatively small business. It has been able to navigate the past 12 months quite well, and analysts are forecasting a profit of $95 million for its current financial year. This means it is trading at a forward price-earnings ratio of 5.8. However, a decline in earnings is projected to 2023. Even after factoring in this decline, the stock is trading at a forward price-earnings ratio for 2023 of 7.9. It is selling at a price-book ratio of 2.1.

Abercrombie & Fitch Co

Abercrombie & Fitch Co (

ANF, Financial) also appears to offer value.

Wall Street analysts expect the specialty retailer to report a net profit of $295 million for its current financial year, around $4.50 per share. Based on these projections, the stock is selling at a forward price-earnings ratio of 8.3, which seems cheap considering its earnings potential, brand value and the fact that the group had over $761 million of the net cash on its balance sheet at the end of its last financial year.

Ternium Sa

Moving away from the retail sector, North American steel and iron ore producer Ternium Sa (

TX, Financial) is projected to earn around $3.4 billion in profits this year.

On a per share basis, that works out to $17.40. With commodity prices expected to fall in 2022 as shortages in the global economy resolve themselves, analysts are projecting a near 50% decline in earnings for 2022. Still, even after taking account of this decline, the stock is selling at a 2022 forward price-earnings ratio of just 5.2. Its price-book ratio is 1.2, and it also offers a dividend yield of 4.4%.

Titan Machinery Inc

Titan Machinery Inc (

TITN, Financial) owns and operates a network of service agricultural and construction equipment stores in the United States and Europe.

The company reported a net profit of $12 million for its 2019 fiscal year, but analysts have penciled in a figure of $48 million for fiscal 2022. Based on these projections, the stock is selling at a forward price-earnings ratio of 12, which could fall to 10.8 in 2023 if growth continues. The price-book ratio for the stock is 1.5. With governments around the world queuing up to splash the cash on infrastructure projects, I think there's a chance these growth projections could be conservative.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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