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Alberto Abaterusso
Alberto Abaterusso
Articles (2538) 

3 Companies With High Earnings Yields

Lithia Motors tops the list

September 30, 2019 | About:

To find value opportunities, investors should search for stocks with earnings yields that at least double the returns of 20-year high-quality market corporate bonds.

The bonds represent corporate loans issued by triple-A, double-A and single-A-rated companies, which are unlikely to have financial difficulties. Shareholders of these companies run a very low investment risk.

According to the Federal Reserve Bank of St. Louis, holders of these bonds receive a 3.42% monthly spot rate.

As a result, the following companies have a price-earnings ratio, which is the inverse of the earnings yield, of less than 14.62.

Shares of Lithia Motors Inc. (NYSE:LAD) closed at $130.23 on Friday for a market capitalization of $3.02 billion. The Medford, Oregon-based retailer of new and used vehicles in the U.S. has an earnings yield of 8.8% compared to the industry median of 7.4% and a price-earnings ratio of 11.39 versus the industry median of 13.56.

The stock also has a price-book ratio of 2.35 versus the industry median of 1.12 and a price-sales ratio of 0.25 versus the industry median of 0.57.

The stock has gained 70.6% year to date. The closing share price on Friday was 91.8% above the 52-week low of $67.9 and 6.9% below the 52-week high of $139.18.

The Peter Lynch chart indicates the stock is still cheap despite the impressive increase in the share price.

GuruFocus assigned a rating of 4.8 out of 10 for the company's financial strength and a 7 out of 10 rating for its profitability and growth.

Lithia Motors has an overweight recommendation rating with an average target price of $142.18.

Shares of Belden Inc. (NYSE:BDC) closed at $52.97 on Friday for a market capitalization of $2.41 billion. The St. Louis-based provider of signal transmission solutions has an earnings yield of 7.4% versus the industry median of 5.8% and a price-earnings ratio of 13.48 versus the industry median of 17.34.

The stock also has a price-book ratio of 1.46 versus the industry median of 1.51 and a price-sales ratio of 0.87 versus the industry median of 1.

The stock has climbed 27% so far this year. The closing price on Friday was 40.2% above the 52-week low of $37.79 and 37.4% below the 52-week high of $72.8.

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

Belden has a rating of 4.8 out of 10 for financial strength and a 7 out of 10 rating for its profitability and growth.

Wall Street issued an overweight recommendation rating for shares of Belden with an average target price of $55.50.

Shares of Korn Ferry (NYSE:KFY) closed at $37.62 on Friday with a market capitalization of $2.11 billion.

The Los Angeles-based provider of talent management solutions to worldwide companies has an earnings yield of 8.7% versus the industry median of 5.8% and a price-earnings ratio of 11.54 versus the industry median of 17.2.

Korn Ferry also has a price-book ratio of 1.66 versus the industry median of 2.33 and a price-sales ratio of 1.06 compared to the industry median of 0.67.

The stock has declined 4.84% so far this year. The closing price on Friday was 9.5% above the 52-week low of $34.35 and 32.7% below the 52-week high of $49.93.

The stock appears to be cheap based on the Peter Lynch chart.

GuruFocus assigned a financial strength rating of 6.6 out of 10 and a profitability and growth rating of 8 out of 10.

Analysts suggest investors adjust their positions in Korn Ferry based on an overweight rating.The average price target is $49.60.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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