When investors pick stocks with a market capitalization of more than $2 billion but less than 1.5 times book value, they have probably unearthed high-quality companies.
The following stocks represent companies with above-listed characteristic.
Moreover, GuruFocus has rated these businesses with a positive score of 6 to 7 regarding their profitability. This suggests that these companies are generating income above expectations and that they will continue to do so for several years.
Ebara
The first company under consideration is Ebara Corp. (EBCOY, Financial). Shares of the Japanese manufacturer and seller of industrial machinery worldwide closed at $15.14 on Wednesday for a market capitalization of $2.9 billion.
The price-book ratio of 1.21 is lower than the industry median of 1.46. It is ranked higher than 1,132 out of 1,919 companies operating in the diversified industrials industry.
The share price increased 38% so far this year to levels that probably are not so cheap anymore according to the Peter Lynch chart.
The company has a GuruFocus financial strength rating of 7 out of 10 and a profitability rating of 6 out of 10.
On Sept. 24, the company paid a semi-annual dividend of 14 cents per common share, generating a 1.84% forward dividend yield as of Wednesday.
Telephone and Data Systems
The second company is Telephone and Data Systems Inc. (TDS, Financial). Shares of the Chicago-based telecommunications company closed at $26.68 on Wednesday for a market capitalization of $3.06 billion.
The price-book ratio of 0.67 is below the industry median of 1.9 and outperforms 360 out of 413 companies that operate in the telecom services industry.
The stock is down 18% so far this year. Nonetheless, the share price seems to not be trading cheaply, according to the Peter Lynch chart.
The stock has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10.
Wall Street recommends an overweight rating for shares of Telephone and Data Systems, Inc. with an average target price of approximately $39.
The stock has a forward dividend yield of 2.47% according to the share price at close on Wednesday. The yield results from a 16.5 cash quarterly dividend the company paid per common share held on Sept. 30.
Parsley Energy
The third company is Parsley Energy Inc. (PE). Shares of the Austin, Texas-based independent oil and gas producer with claims in west Texas and south east New Mexico closed at $15.69 on Wednesday for a market capitalization of $4.97 billion.
The price-book ratio of 0.81 is slightly below the industry median of 0.9 and tops 262 out of a total of 508 competitors that operate in the oil and gas exploration and production industry.
The stock is down nearly 2% so far this year. Nevertheless, the Peter Lynch chart indicates the stock is not at its cheapest.
The stock has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10.
Sell-side analysts in Wall Street recommend buying shares of Parsley Energy, Inc. and have set an average target price of $24.25.
Parsley Energy paid 3 cents cash quarterly dividend per common share on Sept. 30, the first distribution ever according to GuruFocus, producing a 0.76% forward dividend yield based on Wednesday’s closing share price.
Disclosure: I have no positions in any securities mentioned.
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