To find more value opportunities, investors should look for stocks with returns that at least double 20-year high-quality market corporate bonds.
The bonds represent corporate loans issued by triple-A, double-A and single-A rated companies, which means they are unlikely to have financial problems.
The monthly average spot rate of the 20-year bond is 4.38% according to the Federal Reserve Bank of St. Louis.
Thus, since the earnings yield is the inverse of the price-earnings ratio, the following stocks are trading for less than 11.42 times earnings as of Wednesday.
These companies also benefit from a strong financial situation and have an overweight recommendation rating on Wall Street, indicating they are expected to outperform the overall market within 52 weeks. Analysts issued a price target that brings at least 10% stock appreciation versus an expected 4.4% decline in the S&P 500 index over the next 12 months from the closing price on Wednesday.
Urban Outfitters Inc. (URBN, Financial) traded around $29.7 per share on Wednesday for a market capitalization of $3.09 billion. The Philadelphia-based apparel retailer has an earnings yield of 9.2% versus the industry median of 5% and a price-earnings ratio of 10.92 versus the industry median of 19.95.
GuruFocus assigned a 9 out of 10 rating for both financial strength and profitability and growth.
The stock has an average target price of $35.65 per share, reflecting 20% upside from the closing price on Wednesday.
The company has a price-book ratio of 2.13 compared to the industry median of 1.63 and a price-sales ratio of 0.83 versus the industry median of 0.68.
The stock declined 11% over the past year. The closing price on Wednesday fell within the 52-week range of $27.60 to $52.50.
According to the Peter Lynch chart, the stock appears to be fairly priced.
Louisiana-Pacific Corp. (LPX, Financial) was trading around $24.78 on Wednesday for a market capitalization of $3.06 billion. The Nashville, Tennessee-based building materials producer has an earnings yield of 10.9% versus the industry median of 5.8% and a price-earnings ratio of 9.14 compared to the industry median of 17.1.
GuruFocus assigned a financial strength rating of 8 out of 10 and a profitability and growth rating of 6 out of 10.
The stock has an average target price of $31.11 per share, reflecting 25.5% upside from Wednesday's closing price.
The stock also has a price-book ratio of 1.98 versus the industry median of 1.28, a price-sales ratio of 1.24 compared to the industry median of 1.05 and an Enterprise value-Ebitda ratio of 3.84 versus the industry median of 10.48.
The stock has fallen 11% so far this year. The share price at close Wednesday was 18.6% above the 52-week low of $29.39 and 29.8% below the 52-week high of $32.16.
The Peter Lynch chart suggests the stock is cheap.
Hysan Development Co. Ltd. (HYSNY, Financial) traded around $11.05 on Wednesday with a market capitalization of $5.6 billion. The Chinese real estate company has an earnings yield of 13.12% versus the industry median of 9.7% and a price-earnings ratio of 7.62 compared to the industry median of 10.26.
GuruFocus assigned 7 out of 10 rating for both financial strength and profitability and growth.
The stock has an average target price of $12.16 per share, reflecting 10% upside from the closing price on Wednesday.
Hysan has a price-book ratio of 0.62 versus the industry median of 0.94 and a price-sales ratio of 11.82 versus the industry median of 2.54.
Over the past year through May 1, the stock climbed 13%. The 52-week range is $9.18 to $11.76.
Based on the Peter Lynch chart, the stock appears to be cheap.
Disclosure: I have no positions in any securities mentioned.
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