If pursuing the finding of value stocks is the idea, then a good first step is screening for those with low price-earnings ratios. This is basic stuff, but in an era when growth stock mania is running the show, it’s probably a useful reminder. A lower price-earnings ratio means you’re paying less for earnings than a higher multiple, an obvious but true statement. “Cheap” is the old-school term.
There are many other metrics to consider, but this one step in the right direction greatly improves your chances of coming up with actual value. These five stocks are all traded on the New York Stock Exchange, so plenty of financial information on them is easily found. For good measure, I’ve included those paying a dividend of more than 2%.
Archer-Daniels Midland
Headquartered in Chicago and founded in 1902, Archer-Daniels Midland Co. (ADM, Financial) is in the food products business. The stock trades with a price-earnings ratios of 14, substantially below the Shiller price-earnings ratio for the Standard & Poor’s 500, which sits at 37.80. Archer-Daniels can be purchased at a price-book ratio of just 1.57.
This year’s earnings per share growth is 24.80%. The five-year earnings per share track record is 1%. Shareholder equity far exceeds long-term debt. Investors receive a 2.44% dividend yield. The GuruFocus financials summary shows the company with “5 good signs, 2 medium warning signs.”
Aflac
Aflac Inc. (AFL, Financial) has a price-earnings ratio of just 6.45 and trades at just slightly over its book value. The big life insurance company, with worldwide headquarters in Columbus, Georgia, is having earnings per share growth this year of 50.70%.
The growth rate for the past five years comes in at 17.90%. The company pays a dividend yield of 2.47%. GuruFocus’ summary of Aflac’s financials has “3 good signs and 6 medium warning signs.”
Mercury General
Mercury General Corp. (MCY, Financial) is in the property and casualty insurance business. The Brea, California-based company operates in 11 states. Now trading with a price-earnings ratio of just 6.25, its price-book ratio is a relatively low 1.44.
Mercury General has earnings per share growth this year at 17% and five-year growth of 38.10%. The dividend yield is 4.47%. The GuruFocus financials summary for the company shows “2 good signs, 1 severe warning sign.”
Tyson
Tyson Foods Inc. (TSN, Financial) is another food products company with headquarters in Arkansas and worldwide operations. The stock’s price-earnings ratio sits at 12.10. The company pays a 2.32% dividend. Earnings per share growth came in at 4.40% this year.
Five-year earnings per share growth is 13.80%. GuruFocus’ summary of financials has it with “5 good signs, 3 medium warning signs and 1 severe warning sign.”
Vale
Based in Brazil, Vale SA (VALE, Financial) has operations in 30 countries and is focused on the industrial metals and mining sector. It has a price-earnings ratio of just 4.32. Earnings per share growth this year is 500.80%.
The earnings per share growth record over the past five years is 21.20%. Right now, Vale is paying investors a dividend yield of 6.05%. A look at the GuruFocus financials summary shows “6 good signs, 1 medium warning sign.”
For those researching exchange-traded value stocks, these five appear to show potential. Whether they can continue to grow and prosper would require a deeper analysis, of course.
