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4 Stocks Trading Below Earnings Power Value

These businesses appear to be fairly priced

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May 13, 2022
Summary
  • Citigroup Inc., Paramount Global, Bank of New York Mellon Corp and Truist Financial Corp 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.
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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 earnings power values.

Citigroup Inc.

The first stock that meets the criteria is Citigroup Inc. (

C, Financial), a New York-based American bank major.

Citigroup Inc.’s earnings power value is $106.01 per share (as of the March 2022 quarter), which is above the share price of $46.56 as of the end of trading on Thursday, for a margin safety of about 55.1%.

After a 37.83% drop in the share price over the past year, the market capitalization is $92.06 billion. The 52-week range is $45.39 to $80.29.

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GuruFocus has assigned a score of 3 out of 10 to the company's financial strength and 5 out of 10 to its profitability.

Vanguard Group Inc., BlackRock Inc. and Susquehanna International Group, LLP are among the largest institutional shareholders of the company with 8.50%, 8.49% and 4.95% of total shares outstanding, respectively.

Paramount Global

The second stock that makes the cut is Paramount Global (

PARA, Financial), a New York-based global media and entertainment company.

Paramount Global’s earnings power value is $66.38 per share (as of the March 2022 quarter), which is above the share price of $27.12 as of the end of regular trading hours on Thursday, for a margin of safety of 57.32%.

Following a 27.24% decline in the share price over the past year, the market capitalization is now $18.48 billion. The 52-week range is $26.11 to $47.45.

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GuruFocus has assigned a score of 5 out of 10 to the company's financial strength and 9 out of 10 to its profitability.

Vanguard Group Inc, Susquehanna International Group, LLP and BlackRock Inc. are among the largest institutional shareholders of the company with 10.07%, 8.71% and 6.97% of total shares outstanding, respectively.

Bank of New York Mellon Corp

The third stock that qualifies is Bank of New York Mellon Corp. (

BK, Financial), a New York-based provider of various financial products and services to American and international clients.

Bank of New York Mellon Corp.’s earnings power value is $200.18 per share (as of the March 2022 quester), which is above the share price of $42.81 as of the end of regular hours on Thursday, determining a margin of safety of about 78.25%.

After shares declined 15.99% over the past year, the market capitalization is approximately $35.25 billion. The 52-week range is $41.76 to $64.63.

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

Warren Buffett (Trades, Portfolio), Vanguard Group Inc. and Dodge & Cox are among the largest fund holders of the company with 8.96%, 8.15% and 7.21% of shares outstanding, respectively.

Truist Financial Corp

The fourth stock that qualifies is Truist Financial Corp. (

TFC, Financial), a Charlotte, North Carolina-based regional bank serving individuals, small and mid-size businesses as well as private and public organizations in the Southeastern and Mid-Atlantic United States.

Truist Financial Corp.’s earnings power value is $54.99 per share (as of the March 2022 quarter), which is above the share price of $46.47 as of the end of regular hours on Thursday, determining a margin of safety of about 15.31%.

After shares dropped 24.35% over the past year, the market capitalization is approximately $62.24 billion. The 52-week range is $45.51 to $68.95.

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

Vanguard Group Inc., BlackRock Inc. and State Street Corp. are among the largest institutional shareholders of the company with 8.77%, 7.24% and 4.79% of total shares outstanding, respectively.

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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
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