Screening for stocks that are more than doubling 20-year high-quality corporate bonds' earnings yields enhances the likelihood of gaining impressive margins.
These bonds represent corporate loans issued by companies that are triple-A, double-A and single-A-rated.
The Federal Reserve Bank of St. Louis indicated the 20-year bond’s monthly average spot rate is 3.82%. Therefore, the following securities have an earnings yield of more than 7.64% and a price-earnings ratio below 13.09 as of Aug. 16.
What’s more, the Peter Lynch line indicates these stocks are not expensive.
Itau Unibanco Holding SA (ITUB, Financial) closed at $8.58 per share on Friday for a market capitalization of $77.82 billion. The Brazilian bank has an earnings yield of 9.07% versus the industry median of 8.79% and a price-earnings ratio of 11.03 versus the industry median of 11.38.
Further, the price-book ratio is 2.22 versus the industry median of 1.01, and the price-sales ratio is 2.61 compared to the industry median of 2.81.
The share price has declined 6.11% so far this year. The closing price on Friday was 30.6% off the 52-week low of $6.57 and 25.9% from the 52-week high of $10.80.
The stock appears to be priced fairly, according to the Peter Lynch chart.
GuruFocus assigned a low rating of 3.4 out of 10 for financial strength and a very low rating of 2 out of 10 for profitability and growth, requiring investor’s cautiousness.
The stock has an overweight recommendation rating and an average target price of $10.98.
US Bancorp (USB, Financial) closed at $52.28 per share on Friday for a market capitalization of $82.38 billion. The Minneapolis-based regional bank has an earnings yield of 8.13% versus the industry median of 8.79% and a price-earnings ratio of 12.30 versus the industry median of 11.38.
The stock has a price-book ratio of 1.79 versus the industry median of 1.00 and a price-sales ratio of 3.69 compared to the industry median of 2.79.
The stock is up 14.40% so far this year. The closing share price on Friday was 21.2% above the 52-week low of $43.14 and 10.58% from the 52-week high of $57.81.
According to the Peter Lynch chart, the stock does not appear to be expensive.
US Bancorp has a GuruFocus financial strength rating of 3 out of 10 and profitability and growth rating of 2 out of 10. Very low ratings necessitate investors be careful with this stock.
The stock has a hold recommendation rating and an average target price of $56.83 per share.
Raymond James Financial Inc. (RJF, Financial) closed at $75.75 on Friday with a market capitalization of $10.52 billion. The Saint Petersburg, Florida-based financial services company has an earnings yield of 9.32% versus the industry median of 6.47% and a price-earnings ratio of 10.73 versus the industry median of 15.45.
The stock also has a price-book ratio of 1.64 versus the industry median of 1.06 and a price-sales ratio of 1.47 versus the industry median of 3.
Year to date, the stock has gained 1.8%. The closing share price on Friday was 9.6% above the 52-week low of $69.11 and 27.74% from the 52-week high of $96.76.
The stock appears to be cheap based on the Peter Lynch chart.
GuruFocus assigned a financial strength rating of 4.4 out of 10 and a profitability and growth rating of 2 out of 10. As a result of the low scores for profitability and growth, investors need to be careful with the stock.
The stock has an overweight recommendation rating and an average target price of $99.75.
Disclosure: I have no positions in any securities mentioned.
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