If investors select stocks trading with a market capitalization of more than $10 billion (large caps) but less than 1.5 times book value, they will have higher chances of coming across value opportunities.
Thus, the value investor may want to consider the following stocks, which have also received positive recommendation ratings from analysts on Wall Street, sustaining expectations they will perform better than most of their competitors.
Bank of America
The first company to have a look at is Bank of America Corp. (BAC, Financial). Shares of the Charlotte, North Carolina-based bank traded around $33.67 on Friday for a market capitalization of $302.87 billion.
The stock has a price-book ratio of 1.25 compared to the industry median of 1.04. It is ranked higher than 474 out of 1,411 companies operating in the banks industry.
Bank of America's share price grew 91.7% over the past five years, but it is still cheap according to the Peter Lynch chart.
On Dec. 27, Bank of America will pay a quarterly dividend of 18 cents per common share to its shareholders of record as of Dec. 6, generating a 2.14% forward dividend yield and a 1.96% trailing 12-month dividend yield as of Friday.
Wall Street issued an overweight recommendation rating with an average target price of $33.98 per share. The rating means the stock is projected to outperform either its industry or the overall market within 12 months.
The Royal Bank of Scotland
The second company under consideration is The Royal Bank of Scotland Group PLC (RBSPF, Financial). Shares of the British large-scale bank closed at $2.86 on Friday for a market capitalization of $36.28 billion.
The global financial institution's price-book ratio is 0.62 versus the industry median of 1.04. Its price-book ratio beats 1,065 out of 1,411 competitors that operate in the banks- diversified industry.
The stock has fallen 52.3% over the past five years, and the shares are affordable according to Peter Lynch.
On Sept. 20, the global bank paid a semi-annual cash dividend of 0.02 British pounds (about 2.6 cents) per common share, producing a forward dividend yield of 1.75% and a trailing 12-month dividend yield of 2.46% as of Friday.
Wall Street issued a hold recommendation rating for shares of The Royal Bank of Scotland with an average target price of $2.45.
Alcon
The third company to take note of is Alcon Inc. (ALC, Financial). Shares of the Swiss developer and manufacturer of eye care products traded at $55.76 on Friday for a market capitalization of $27.17 billion.
The stock has a price-book ratio of 1.39, which positions the company better than its average competitor as the industry has a median of 3.03 for the price-book ratio. Alcon’s price-book ratio tops 447 out of 572 competitors that operate in the medical instruments and supplies industry.
The share price has declined nearly 4% over the past five years.
When the forward price-earnings ratio of 27.4 is compared to the industry median of 28.9 and the price-sales ratio of 3.73 is compared to the industry median of 3.47, it seems that the stock is not expensive.
Alcon does not pay a dividend.
Sell-side analysts on Wall Street issued a hold recommendation rating for shares of Alcon and have established an average target price of $62.07.
Disclosure: I have no positions in any securities mentioned.
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