A Trio of Stocks Trading Below Earnings Power Value

These businesses appear to be fairly priced

Author's Avatar
Jan 11, 2022
Summary
  • Southside Bancshares, Companhia Brasileira De Distribuicao and Celestica are trading below their earnings power values.
  • The EPV was popularized by Bruce Greenwald, a former professor at Columbia University and a prominent value investor.
  • It is calculated as the adjusted earnings divided by the weighted average cost of capital.
  • It allows investors to bypass a series of guesswork choices that must be made when evaluating the intrinsic value of a stock through the discounted cash flow model.
Article's Main Image

When screening the market for stocks that are trading at or below their fair prices, one tool investors can use is the earnings power value.

The earnings power value was popularized by Bruce Greenwald, a former professor at Columbia University and a well-known value investor. He was looking for ways to bypass the series of guesswork choices that must be made when trying to appraise the intrinsic value of a stock through the discounted cash flow valuation model. The metric is calculated as adjusted earnings divided by the weighted average cost of capital.

The following stocks seem reasonably priced as their share prices are trading lower than their respective EPVs.

Southside Bancshares

The first stock that meets the criteria is Southside Bancshares Inc, (

SBSI, Financial), a Tyler, Texas-based regional bank.

Southside Bancshares' earnings power value is $58.32 per share (as of the September 2021 quarter), which is above the share price of $44.2 as of the end of trading on Monday, for a margin safety of about 25.11%.

Due to a 30.44% jump in the share price over the past year, the market capitalization is $1.41 billion. The 52-week range is $30.98 to $45.36.

1480964954759700480.png

GuruFocus has assigned a score of 2 out of 10 to the company's financial strength and 5 out of 10 to its profitability.

BlackRock Inc., Vanguard Group Inc. and the iShares Core S&P Small-Cap ETF are among the largest institutional shareholders of the company with 14.84%, 7.56%and 6.43% of total shares outstanding.

Companhia Brasileira De Distribuicao

The second stock that makes the cut is Companhia Brasileira De Distribuicao (

CBD, Financial), a Brazilian operator of a chain of department stores where consumers can purchase food, clothing, home appliances, electronics and other products.

Also known as GPA, the company's earnings power value is $4.66 per share (as of the September 2021 quarter), which is above the share price of $3.44 as of the end of regular trading hours on Monday, for a margin of safety of 50.47%.

Following a 12.4% decline in the share price over the past year, the market capitalization is now $931.61 million. The 52-week range is $3.37 to $17.46.

1480964957934788608.png

GuruFocus has assigned a score of 4 out of 10 to the company's financial strength and 6 out of 10 to its profitability.

Harding Loevner LP, Vanguard and Crossmark Global Holdings Inc. are among the largest shareholders of the company with 1.31%, 0.44% and 0.35% of shares outstanding.

Celestica

The third stock that qualifies is Celestica Inc. (

CLS, Financial), a Toronto-based provider of hardware platform and supply chain solutions for several industries in North America and internationally, including aerospace and defense, industrial and energy. The company also serves biotechnology, capital equipment, original equipment manufacturers and cloud-based providers.

Celestica’s earnings power value is $22.03 per share (as of September 2021), which is above the share price of $10.89 as of the end of regular hours on Monday, determining a margin of safety of about 49.29%.

After shares rose 34.90% over the past year, the market capitalization is approximately $1.40 billion. The 52-week range is $7.01 to $12.04.

1480964962775015424.png

GuruFocus has assigned a score of 5 out of 10 to the company's financial strength and 8 out of 10 to its profitability.

Letko, Brosseau & Associates Inc.,

Richard Pzena (Trades, Portfolio) and Donald Smith & Co. are among the largest fund holders of the company with 11%, 6.98% and 3.99% of shares outstanding.

Also check out:

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
Rating:
0 / 5 (0 votes)
Author's Avatar
WRITTEN BY

GuruFocus Screeners

Related Articles