Understanding value stocks
A value stock has traditionally been priced lower than the stock of companies in the same industry. This indicates that the company may be undervalued as investors do not express as much interest in these companies. The most common way to check value is price / earnings multiple, or P / E. A low P / E multiple is a good indication that the titer is undervalued.
Below is a list of notable value stocks in the industrial sector:
- Tutor Perini (NYSE: TPC) – P / E: 7.66
- Kelly Services (NASDAQ: KELYA) – P / E: 9.48
- CAI International (NYSE: CAI) – P / E: 8.29
- BlueLinx Hldgs (NYSE: BXC) – P / E: 3.5
- GrafTech International (NYSE: EAF) – P / E: 8.7
Most recently, Tutor Perini reported earnings per share at 0.31, while in the fourth quarter, earnings per share were 0.69. Tutor Perini does not have a dividend yield, which investors should be aware of when considering retaining such a stock.
Most recently, Kelly Services reported earnings per share of 0.12, while in the fourth quarter, earnings per share were 0.41. Its most recent dividend yield is 1.68%, up 0.44% from 1.24% in the previous quarter.
This quarter, CAI International saw an increase in earnings per share, which was 1.76 in the fourth quarter and is now 1.85. The company’s most recent dividend yield stands at 2.63%, down 0.46% from 3.09% in the prior quarter.
BlueLinx Hldgs’ earnings per share for the first quarter stood at 6.44, while in the fourth quarter it was 2.04. BlueLinx Hldgs does not have a dividend yield, which investors should be aware of when considering holding such a stock.
GrafTech International’s earnings per share for the first quarter stood at 0.37, while in the fourth quarter it was 0.47. Most recently, the company announced a dividend yield of 0.31%, down 0.1% from the 0.41% yield in the previous quarter.
The importance: A value stock may need time to rebound from its undervalued position. The risk of investing in a value stock is that this emergence will never materialize.