When investors choose stocks with a market capitalization of more than $5 billion but are trading at less than 1.5 times book value, they most likely have discovered high-quality companies.
Moreover, GuruFocus has rated these stocks with a positive score of 6 out of 10 regarding their profitability, suggesting these businesses are profitable and will likely continue to be for the next several years.
Wall Street sell-side analysts have issued recommendation ratings ranging between overweight and moderate buy, which bolster expectations that these stocks will deliver positive returns. The overweight recommendation rating means the stock is expected to outperform either its industry or the overall market.
CEMEX
The first company to consider is CEMEX S.A.B. de C.V. (CX, Financial). Shares of the Mexican building materials company closed at $3.71 on Monday for a market capitalization of $5.52 billion.
The price-book ratio is 0.57 compared to the industry median of 1.05. It is ranked higher than 268 out of 348 companies operating in the building materials industry.
Over the past five years, the stock has lost 67%. According to the Peter Lynch chart, the stock is cheap.Â
On June 18, the company paid an annual dividend of 5 cents per share, generating a 1.34% forward dividend yield as of Monday.
Wall Street issued an overweight recommendation rating with an average target price of $4.99 per share.
Huaneng Power
The second company is Huaneng Power International Inc. (HNP, Financial). Shares of the Chinese producer and provider of electricity and heat to grid companies in China as well as Singapore and Pakistan closed at $19.71 on Monday for a market capitalization of $7.74 billion.
The price-book ratio is 0.96 compared to the industry median of 1.34. It tops 196 out of 302 competitors that operate in the utilities - independent power producers industry.
The stock has fallen 59% over the past five years. Regardless of the decline, the shares are still not cheap based on the Peter Lynch chart.
On Sept. 9, the company paid an annual cash dividend of 59.6 cents per common share, producing a forward dividend yield of 3.03% as of Monday.
Wall Street issued an overweight rating for shares of Huaneng Power International with an average target price of approximately $28.50.
TechnipFMC
The third company is TechnipFMC PLC (FTI, Financial). Shares of the London-based provider of equipment and services to companies operating in the oil and gas industry closed at $19.50 on Monday for a market capitalization of $8.62 billion.
The price-book ratio of 0.86 is lower than the industry median of 0.94 and tops 615 out of a total of 1,143 companies that operate in the oil and gas equipment and services industry.
The stock has tumbled nearly 45% over the past five years, but according to the Peter Lynch chart, the shares are still not cheap.
Sell-side analysts on Wall Street issued a moderate buy rating for shares of TechnipFMC and have established an average target price of $30.42.
TechnipFMC will pay a quarterly dividend of 13 cents per common share to its shareholders on Dec. 4, producing a 2.67% forward dividend yield as of Monday.
Disclosure: I have no positions in any securities mentioned.
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