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5 Value Stocks With High Earnings Yield to Boost Your Portfolio
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Value investing — a time-tested strategy in the world of finance — focuses on identifying undervalued assets and purchasing them at a price lower than their intrinsic value.Investors using this approach believe that the market frequently undervalues or overvalues stocks in the short term, leading to opportunities for profit for those who can identify and capitalize on these discrepancies.
One essential tool in the value investor's toolbox is earnings yield. This metric is a valuable indicator that helps investors determine whether a stock is a hidden gem or a potential financial sinkhole.
Earnings yield is calculated by dividing a company's earnings per share (EPS) by its current stock price. The formula can be expressed as:
Earnings Yield = Earnings Per Share (EPS)/Current Stock Price
This metric tells you how much profit you're getting for each dollar invested in the stock. It's essentially the inverse of the price-to-earnings (P/E) ratio. A high earnings yield indicates that the stock is undervalued, while a low earnings yield may suggest that the stock is overvalued.
Earnings yield can be used to compare market index performance with the 10-year Treasury yield, guiding value investors toward stocks when the market index yield surpasses the bond yield. This ratio offers valuable insights, especially when comparing stocks to fixed-income securities, making it a powerful tool for investors with exposure to both stocks and bonds. By integrating earnings yield into their investment approach, value investors can discover hidden opportunities and position themselves for success in the dynamic market.
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Here we discuss five of the 37 stocks that qualified the screening:
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. Management has been strengthening its direct-to-consumer business, enhancing productivity across existing channels and optimizing inventory levels. URBN’s technological advancements, strategic growth initiative, FP Movement and store-growth endeavors are also impressive.
The Zacks Consensus Estimate for URBN’s fiscal 2024 sales and earnings implies year-over-year growth of 6.5% and 83.4%, respectively. Estimates for fiscal 2024 and 2025 earnings per share have moved up by 39 cents and 34 cents, respectively, over the past 60 days. Urban Outfitters currently sports a Zacks Rank #1 and has a Value Score of A.
Adient is one of the world’s largest automotive seating suppliers. A diverse customer base and international presence have helped the company to create a strong market position. Frequent EV program wins, including platforms introduced by legacy OEMs and new entrants, are set to boost top-line growth. Its strong liquidity profile and share buyback initiative instill confidence. Adient's China operations play a crucial role in driving the company's growth.
The Zacks Consensus Estimate for ADNT’s fiscal 2023 sales and earnings implies year-over-year growth of 9% and 1,791%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 59 cents and 25 cents, respectively, over the past 90 days. Adient currently sports a Zacks Rank #1 and has a Value Score of A.
Ovintiv is an energy producer with an attractive oil and gas production portfolio in three major North American unconventional basins — Montney, Anadarko and the Permian. The Newfield acquisition has bolstered Ovintiv's scale and delivered synergy benefits. OVV has a premium inventory of high-quality, liquids-rich locations with an attractive mix of drilled but uncompleted wells, which can be quickly brought into production. The company’s cost-cut efforts should boost cash flow generation.
The Zacks Consensus Estimate for OVV’s 2024 sales and earnings implies year-over-year growth of 5% and 27%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 4 cents and 10 cents, respectively, over the past seven days. Ovintiv currently carries a Zacks Rank #2 and has a Value Score of A.
JazzPharmaceuticals is a specialty biopharmaceutical company focusing on neuroscience and oncology. The company’s sleep disorder portfolio looks strong with the availability of two commercialized drugs — Xyrem and Xywav — and several ongoing and planned development activities in the sleep therapeutic area. Jazz also markets four oncology drugs (Defitelio, Vyxeos, Rylaze and Zepzelca) and expects to generate approximately $1 billion in product sales from its oncology franchise in 2023.
The Zacks Consensus Estimate for Jazz’s 2023 sales and earnings implies year-over-year growth of 5% and 41%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 2 cents and 20 cents, respectively, over the past seven days. Jazz currently carries a Zacks Rank #2 and has a Value Score of A.
RenaissanceRe is a leading provider of reinsurance and insurance across the globe. RNR’s premiums should continue to grow on the back of solid contributions from its Property as well as Casualty and Specialty segments. Strong fee and investment income, along with strategic buyouts and a strong financial position, spark optimism. The company remains active on the capital deployment front and rewards shareholders through share buybacks or dividend payments.
The Zacks Consensus Estimate for RNR’s 2023 sales and earnings implies year-over-year growth of 14% and 308.7%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by $2.16 and 32 cents, respectively, over the past seven days. RenaissanceRe currently carries a Zacks Rank #2 and has a Value Score of A.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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5 Value Stocks With High Earnings Yield to Boost Your Portfolio
Value investing — a time-tested strategy in the world of finance — focuses on identifying undervalued assets and purchasing them at a price lower than their intrinsic value.Investors using this approach believe that the market frequently undervalues or overvalues stocks in the short term, leading to opportunities for profit for those who can identify and capitalize on these discrepancies.
One essential tool in the value investor's toolbox is earnings yield. This metric is a valuable indicator that helps investors determine whether a stock is a hidden gem or a potential financial sinkhole.
Earnings yield is calculated by dividing a company's earnings per share (EPS) by its current stock price. The formula can be expressed as:
Earnings Yield = Earnings Per Share (EPS)/Current Stock Price
This metric tells you how much profit you're getting for each dollar invested in the stock. It's essentially the inverse of the price-to-earnings (P/E) ratio. A high earnings yield indicates that the stock is undervalued, while a low earnings yield may suggest that the stock is overvalued.
Earnings yield can be used to compare market index performance with the 10-year Treasury yield, guiding value investors toward stocks when the market index yield surpasses the bond yield. This ratio offers valuable insights, especially when comparing stocks to fixed-income securities, making it a powerful tool for investors with exposure to both stocks and bonds. By integrating earnings yield into their investment approach, value investors can discover hidden opportunities and position themselves for success in the dynamic market.
Urban Outfitters Inc. (URBN - Free Report) , Adient PLC (ADNT - Free Report) , Ovintiv Inc. (OVV - Free Report) , Jazz Pharmaceuticals (JAZZ - Free Report) and RenaissanceRe Holdings Ltd. (RNR - Free Report) are a few solid high earnings yield picks for value investors.
The Winning Strategy
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Picks
Here we discuss five of the 37 stocks that qualified the screening:
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. Management has been strengthening its direct-to-consumer business, enhancing productivity across existing channels and optimizing inventory levels. URBN’s technological advancements, strategic growth initiative, FP Movement and store-growth endeavors are also impressive.
The Zacks Consensus Estimate for URBN’s fiscal 2024 sales and earnings implies year-over-year growth of 6.5% and 83.4%, respectively. Estimates for fiscal 2024 and 2025 earnings per share have moved up by 39 cents and 34 cents, respectively, over the past 60 days. Urban Outfitters currently sports a Zacks Rank #1 and has a Value Score of A.
Adient is one of the world’s largest automotive seating suppliers. A diverse customer base and international presence have helped the company to create a strong market position. Frequent EV program wins, including platforms introduced by legacy OEMs and new entrants, are set to boost top-line growth. Its strong liquidity profile and share buyback initiative instill confidence. Adient's China operations play a crucial role in driving the company's growth.
The Zacks Consensus Estimate for ADNT’s fiscal 2023 sales and earnings implies year-over-year growth of 9% and 1,791%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 59 cents and 25 cents, respectively, over the past 90 days. Adient currently sports a Zacks Rank #1 and has a Value Score of A.
Ovintiv is an energy producer with an attractive oil and gas production portfolio in three major North American unconventional basins — Montney, Anadarko and the Permian. The Newfield acquisition has bolstered Ovintiv's scale and delivered synergy benefits. OVV has a premium inventory of high-quality, liquids-rich locations with an attractive mix of drilled but uncompleted wells, which can be quickly brought into production. The company’s cost-cut efforts should boost cash flow generation.
The Zacks Consensus Estimate for OVV’s 2024 sales and earnings implies year-over-year growth of 5% and 27%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 4 cents and 10 cents, respectively, over the past seven days. Ovintiv currently carries a Zacks Rank #2 and has a Value Score of A.
Jazz Pharmaceuticals is a specialty biopharmaceutical company focusing on neuroscience and oncology. The company’s sleep disorder portfolio looks strong with the availability of two commercialized drugs — Xyrem and Xywav — and several ongoing and planned development activities in the sleep therapeutic area. Jazz also markets four oncology drugs (Defitelio, Vyxeos, Rylaze and Zepzelca) and expects to generate approximately $1 billion in product sales from its oncology franchise in 2023.
The Zacks Consensus Estimate for Jazz’s 2023 sales and earnings implies year-over-year growth of 5% and 41%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by 2 cents and 20 cents, respectively, over the past seven days. Jazz currently carries a Zacks Rank #2 and has a Value Score of A.
RenaissanceRe is a leading provider of reinsurance and insurance across the globe. RNR’s premiums should continue to grow on the back of solid contributions from its Property as well as Casualty and Specialty segments. Strong fee and investment income, along with strategic buyouts and a strong financial position, spark optimism. The company remains active on the capital deployment front and rewards shareholders through share buybacks or dividend payments.
The Zacks Consensus Estimate for RNR’s 2023 sales and earnings implies year-over-year growth of 14% and 308.7%, respectively. Estimates for 2023 and 2024 earnings per share have moved up by $2.16 and 32 cents, respectively, over the past seven days. RenaissanceRe currently carries a Zacks Rank #2 and has a Value Score of A.
You can get the rest of the stocks on this list by signing up now for a 2-week free trial to the Research Wizard stock picking and backtesting software. You can also create your own strategies and test them first before making investments.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.