Benjamin Graham suggested that when the result of a stock’s Graham blended multiplier (calculated by dividing the price-earnings ratio by the price-book ratio) is lower than 22.5, it may be worth acquiring shares because the stock is considered undervalued by the market.
Benjamin Graham is considered the pioneer of value investing. The American investor, economist and professor is the co-author (along with David Dodd) of the book Security Analysis (1934) and the sole author of The Intelligent Investor (1949), representing the primary works of reference for value investors.
Wall Street sell-side analysts issued positive recommendation ratings for the following securities, which provides another sign that we could be in the presence of value.
First Internet Bancorp
The first company is First Internet Bancorp (INBK, Financial). Shares of the Fishers, Indiana-based US regional bank closed at $22.95 on Friday for a market capitalization of $223.57 million.
The stock has a Graham blended multiplier of 8.35, as the price-earnings ratio is 10.71 and the price-book ratio is 0.78. The Banks industry has a median of 11.89 for the price-earnings ratio and of 1.04 for the price-book ratio.
First Internet Bancorp tops 58.4% of competitors operating in the Banks industry in terms of better price-earnings ratio and 68% of competitors in terms of better price-book ratio.
Wall Street established an average target price of $28.25 per share of First Internet Bancorp, reflecting 23% upside within 52 weeks. The recommendation rating is overweight, which means that the stock is foreseen to outperform either its industry or the entire market within 52 weeks.
In the past year through Nov. 8, the share price has fallen 8%, but it is still above the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $17.56 to $27.17. The dividend yield is 1.05% versus the industry median of 3.01% as of Nov. 8. The company is currently paying a cash quarterly dividend of 6 cents per common share. First Internet Bancorp has been paying dividends for more than 6 years.
The 14-day relative strength index of 60 suggests the stock is neither overbought nor oversold.
SM Energy Company
The second company is SM Energy Company (SM, Financial). The stock of the Denver-based oil and gas independent explorer and producer in North American onshore traded at $9.81 per share at close on Friday for a market capitalization of $1.11 billion.
The stock has a Graham blended multiplier of 1.89, as the price-earnings ratio is 4.97 versus the industry median of 10.83, and the price-book ratio is 0.38 versus the industry median of 0.95.
SM Energy Company beats 78.7% of competitors operating in the oil & gas industry in terms of better price-earnings ratio and 82% of competitors in terms of better price-book ratio.
Wall Street set an average target price of $13.63 for shares of SM Energy Company, which reflects a 39% upside from Friday ’s closing price. The recommendation rating is overweight.
In the past year through Nov. 8, the share price has fallen 54% to below the 200- and 100-day simple moving average lines, but it is still slightly above the 50-day line.
The 52-week range is $6.85 to $24.5. The dividend yield is 1.02% versus the industry median of 4.2% as of Nov. 8. Currently, the stock pays a semi-annual dividend of 5 cents per common share. SM Energy Company has been paying dividends since March 1993 and has continuously increased the payment since 2018.
The 14-day relative strength index of 62 indicates the stock is neither overbought nor oversold.
Nomura Holdings
The third company is Nomura Holdings, Inc. (NMR, Financial). Shares of the Japanese provider of financial services to individuals, worldwide companies and public organizations closed at $4.78 on Friday for a market capitalization of $15.45 billion.
The stock has a Graham blended multiplier of 11.2, as the price-earnings ratio is 17.77 and the price-book ratio is 0.63. The Capital Markets industry has a median of 16.82 for the price-earnings ratio and of 1.03 for the price-book ratio.
Nomura Holdings’ price-earnings ratio is ranked higher than 54% of peers operating in the Capital Markets industry and its price-book ratio is ranked higher than 67% of peers in the industry.
Wall Street produced an average target price of $4.54 for shares of Nomura Holdings. The recommendation rating is to hold the stock.
In the past year through Nov. 8, the share price has climbed 6% to above the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $3.05 to $4.82.
The dividend yield is 1.13% versus the industry median of 2.65% as of Nov. 8. The company has been paying dividends since 1984 and has continuously increased the payment since 2018. On June 13 earlier this year, Nomura Holdings, Inc. paid 2.8 cents semi-annual dividend per common share.
The 14-day relative strength index of 65 suggests the stock is neither overbought nor oversold.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- 3 Low Price-Book Stocks for Value Investors
- A Trio of Cheap High Earnings Yield Stocks
- 3 Stocks to Enhance Your Portfolio's Quality
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