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Alberto Abaterusso
Alberto Abaterusso
Articles (1556) 

3 Large-Cap Stocks With a High Earnings Yield

Goldman Sachs tops the list

June 24, 2019 | About:

If you screen for stocks that are more than doubling 20-year high-quality market corporate bonds in terms of return, you have a greater chance of succeeding with your investments. These bonds represent corporate loans issued by triple-A, double-A, and single-A-rated companies.

Therefore, the benchmark is the monthly average spot rate of the 20-year bond of 4.17% according to the Federal Reserve Bank of St. Louis. As a result, the following stocks have a price-earnings ratio, which is the inverse of the earnings yield, of 11.99 or lower as of June 21.

Further, the recommendation rating for these stocks is overweight, indicating they are expected to outperform either their industries or the entire market in the coming weeks.

Shares of Goldman Sachs Group Inc. (NYSE:GS) closed at $195.94 on Friday for a market capitalization of $71.68 billion. The bank has an earnings yield of 12.3% versus the industry median of 5.7% and a price-earnings ratio of 8.16 versus the industry median of 17.59.

The price-book ratio is 0.95 versus the industry median of 1.16 and the price-sales ratio is 2.35 versus the industry median of 3.42.

The stock has gained 17% year to date. The closing price on Friday was 29.2% above the 52-week low of $151.70 and 25.1% below the 52-week high of $245.08.

According to the Peter Lynch chart, the stock is cheap.

ac48b940-9674-11e9-b677-7fea73b94dfc.png

GuruFocus assigned a rating of 4 out of 10 for the company's financial strength and a rating of 3 out of 10 for its profitability and growth.

The stock has an average target price of $228.14 per share, reflecting 16.5% upside from the closing price on Friday.

Bank of Nova Scotia (NYSE:BNS) shares closed at $54.09 on Friday for a market capitalization of $65.54 billion. The Canadian financial services company has an earnings yield of 9.4% versus the industry median of 8.1% and a price-earnings ratio of 10.67 versus the industry median of 12.36.

The company has a price-book ratio of 1.41 compared to the industry median of 1.11 and a price-sales ratio of 3.03 versus the industry median of 3.01.

The stock is up 8.5% so far this year. The closing share price on Friday was 11.9% above the 52-week low of $48.34 and 12% below the 52-week high of $60.60.

The Peter Lynch chart shows the stock is undervalued. 

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Bank of Nova Scotia has a rating of 4 out of 10 for both its financial strength and profitability and growth.

The stock has an average target price of $67 per share, which represents 23.7% upside from the closing price on Friday.

Shares of General Motors Co. (NYSE:GM) closed at $36.92 on Friday with a market capitalization of $52.37 billion. The Detroit-based automaker has an earnings yield of 17% versus the industry median of 7.5% and a price-earnings ratio of 5.87 versus the industry median of 13.25.

The company also has a price-book ratio of 1.3 versus the industry median of 1.26, a price-sales ratio of 0.36 versus the industry median of 0.63 and an enterprise value-Ebitda ratio of 5.80 compared to the industry median of 8.37.

The stock has gained 10.4% so far this year. The closing price on Friday was 20.8% above the 52-week low of $30.56 and 12.4% below the 52-week high of $41.50.

The stock doesn’t appear to be expensive based on the Peter Lynch chart.

de52cc10-9674-11e9-8e39-853f6ca4ce06.png

GuruFocus assigned a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.

Shares of General Motors have an average target price of $48.06, mirroring 30.6% upside from Friday's closing price.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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