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Alberto Abaterusso
Alberto Abaterusso
Articles (2544) 

3 High Earnings Return Stocks Allure the Value Investor

These companies are cheap according to Peter Lynch

November 27, 2019 | About:

Picking stocks that more than double the earnings return that 20-year high-quality corporate bonds grant to their possessors enhances the number of possibilities to find value opportunities.

The 20-year high-quality corporate bonds offer an average monthly spot rate of 3.49% as of Nov. 26. These securities represent corporate loans issued by triple-A, double-A and single-A companies with a very low risk of bankruptcy.

Therefore, the following stocks grant earnings return of more than 6.98% and are trading their earnings for less than 14.33 times their price. The earnings return is the inverse of the price-earnings ratio.

PulteGroup

Shares of PulteGroup Inc (NYSE:PHM) closed at $40.09 on Tuesday for a market capitalization of $10.86 billion. The Atlanta, Georgia-based homebuilders in the US has an earnings yield of 8.2% versus the industry median of 9.7% and a price-earnings ratio of 12.22 versus the industry median of 10.35.

The stock has grown 85.34% over the past five years through Nov. 26. Regardless of the significant growth, the share price is still cheap based on the Peter Lynch chart.

GuruFocus assigned a very positive rating of 7 out of 10 for both the company's financial strength and its profitability.

The stock has a forward dividend yield of 1.12% as of Tuesday.

Wall Street issued a hold recommendation rating for shares of PulteGroup Inc with an average target price of $40.12.

Barrett Business Services

Shares of Barrett Business Services Inc (NASDAQ:BBSI) closed at $88.56 on Tuesday for a market capitalization of $663.7 million.

The Vancouver-based provider of business management solutions to small and mid-sized US companies has an earnings yield of 7.8% versus the industry median of 5.8% and a price-earnings ratio of 12.74 versus the industry median of 17.18.

The share price skyrocketed 306% over the past five years, but it seems to be still cheap based on the Peter Lynch chart.

GuruFocus assigned a positive rating of 6 out of 10 for the company’s financial strength and a very positive rating of 7 out of 10 for its profitability.

The stock has a forward dividend yield of 1.36% as of Tuesday.

Wall Street issued a buy recommendation rating for shares of Barrett Business Services Inc and an average target price of $116.33 per unit.

SB One

Shares of SB One Bancorp (NASDAQ:SBBX) closed at $23.1 on Tuesday with a market capitalization of $217.2 million. The Rockaway, New Jersey-based regional bank has an earnings yield of 9.2% versus the industry median of 8.5% and a price-earnings ratio of 10.9 versus the industry median of 11.77.

The stock still seems cheap based on the Peter Lynch chart, despite a strong 130% rise in its share price over the past five years.

GuruFocus assigned the US regional bank a low financial strength rating of 2 out of 10, but a moderate profitability rating of 4 out of 10.

The stock offers a forward dividend yield of 1.45% as of Nov. 26. SB One has paid dividends for more than 2 decades and increased them since 2016.

Wall Street analysts issued an overweight recommendation rating for shares of SB One Bancorp and have set an average target price of $26.63 per share reflecting 15.3% growth from Tuesday’s closing price.

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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