Benjamin Graham, the pioneer of value investing, co-author with David Dodd of "Security Analysis" and author of "The Intelligent Investor," suggested looking for stocks whose price-earnings ratio multiplied by the price-book ratio gives a result of less than 22.5. Why? Because these stocks are likely trading at discount to their intrinsic value.
Thus, the following securities have a Benjamin Graham Blended Multiplier below 22.5.
Regal Beloit
The first company is Regal Beloit Corp. (RBC, Financial).
Shares of the Beloit, Wisconsin-based manufacturer and seller of electric engines and power generation and transmission products closed at $81.73 on Friday for a market capitalization of $3.35 billion.
The stock has a Graham blended multiplier of 19.72, as the price-earnings ratio is 13.6 and the price-book ratio is 1.45. The industrial products industry has a median of 17.55 for the price-earnings ratio and of 1.48 for the price-book ratio.
Regal Beloit tops 64.2% of 1,841 competitors operating in the industrial products industry in terms of better price-earnings ratio and 50.71% of 2,384 competitors in terms of better price-book ratio.
Wall Street established an average target price of $87.14 per share, reflecting 6.6% upside within 52 weeks. Analysts recommend holding shares of Regal Beloit.
Over the past year through Nov. 29, the share price has increased 17% to above the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $66.04 to $87.31. The dividend yield is 1.42% versus the industry median of 2% as of Nov. 29. The company is currently paying a cash quarterly dividend of 30 cents per common share. Regal Beloit has been paying dividends for 35 years.
The 14-day relative strength index of 59 suggests the stock is neither overbought nor oversold.
Allegheny Technologies
The second company is Allegheny Technologies Inc. (ATI, Financial).
Shares of the Pittsburgh-based manufacturer of specialty metal materials and components closed at $23.06 on Friday for a market capitalization of $2.91 billion.
The stock has a Graham blended multiplier of 17.76, as the price-earnings ratio is 13.25 and the price-book ratio is 1.34. The industrial products industry has a median of 17.55 for the price-earnings ratio and of 1.48 for the price-book ratio.
Allegheny’s price-earnings ratio is ranked higher than 65.67% of 1,841 peers operating in the industrial products industry and its price-book ratio is ranked higher than 54.61% of 2,384 competitors.
Wall Street issued an average target price of $26.90 for shares of Allegheny Technologies. The recommendation rating is overweight.
Over the past year through Nov. 29, the share price has fallen 14%, but it is still above the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $17.03 to $29.50. The company paid its last dividend on Sept. 8, 2016.
The 14-day relative strength index of 56 suggests the stock is neither overbought nor oversold.
CBTX
The third company is CBTX Inc. (CBTX, Financial).
Shares of the Houston-based regional bank closed at $29.52 on Friday for a market capitalization of $742.7 million.
The stock has a Graham blended multiplier of 19.96, as the price-earnings ratio is 14.26 versus the industry median of 11.76, and the price-book ratio is 1.4 versus the industry median of 1.04.
CBTX beats 403 out of 1,325 competitors operating in the banks - regional industry in terms of better price-earnings ratio and 309 out of 1,411 competitors in terms of better price-book ratio.
Wall Street set an average target price of $30.67 for shares of CBTX, which reflects a 4% upside from Friday’s closing price. The recommendation rating is to hold the stock.
Over the past year through Nov. 29, the share price has fallen 14%, but it is still above the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $25.92 to $34.83. The dividend yield is 1.19% versus the industry median of 3% as of Nov. 29. Currently, the company pays a quarterly dividend of 10 cents per common share.
The 14-day relative strength index of 53 indicates the stock is neither overbought nor oversold.
Disclosure: I have no positions in any securities mentioned.
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