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Welcome to Episode #364 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
It’s time to look at a basic value investing screen. But this week, Tracey skipped classic value to go straight for the value investor’s secret weapon: growth and value.
Finding good value stocks might seem easy, but combining the value with growth, is very difficult. It’s a rare combination.
What is the PEG Ratio?
Benjamin Graham, the “father” of value investing and former boss of Warren Buffett, invented the PEG ratio as a way to not only get a cheap stock, but to also get growth.
What is the PEG ratio? It is the P/E ratio (price over earnings) divided by the growth rate.
For value investors, you want to look for a PEG ratio under 1.0. That means a company is both cheap and has growth.
Screening with the PEG Ratio
Zacks has a PEG ratio screen which includes the Zacks Rank of #1 (Strong Buy) and #2 (Buy) along with the current average broker recommendation.
It also looks for stocks over $5.
The screen is even more demanding of the PEG ratio, however. It looks for stocks with a PEG of 0.55 or less. That’s going to have a lot of value.
This is one of Tracey’s favorite stock screens for value investors.
JD.com is a Chinese Internet retailer. Shares of JD.com are down 12% year-to-date and have sold off over the last 5 years, falling 16.9% during that time.
It’s cheap, with a forward P/E of just 8.5 along with a PEG ratio under 1.0. But Chinese stocks have struggled over the last 2 years.
Owens Corning manufactures building and construction materials. This is a hot area of the economy right now. Shares of Owens Corning are up 10.5% year-to-date and it recently hit new 5-year highs. Owens Corning is up 216% over that period.
Yet Owens Corning remains cheap. It trades with a PEG ratio of just 0.3. Owens Corning also pays a dividend yielding 1.5%.
Toyota Motor is a Japanese auto manufacturer. Shares of Toyota have soared in 2024, adding 32%. It has also hit 5-year highs, up 94% during that period.
Despite the big rally, Toyota remains cheap. It has a forward P/E of just 10.7. It’s expected to grow earnings by 73% in fiscal 2024 but what will come next? Can it keep this growth rate?
Should an auto manufacturer like Toyota be on your watch list in 2024?
Pilgrim’s Pride produces chicken and pork products. Shares of Pilgrim’s Pride have soared this year, adding 28%. But over the last 5 years, they’ve lagged the S&P 500. Pilgrim’s Pride is up 52.5% during that period while the S&P 500 is up 76.2%.
Pilgrim’s Pride is cheap. It trades with a PEG ratio of just 0.4. Earnings are expected to soar 75.4% this year.
After such a big rally, it too late to buy Pilgrim’s Pride?
What Else Do You Need to Know About Using the PEG Ratio to Find Top Value Stocks?
Tune into this week’s podcast to find out.
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Value Investors: Screen with the PEG Ratio
Welcome to Episode #364 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
It’s time to look at a basic value investing screen. But this week, Tracey skipped classic value to go straight for the value investor’s secret weapon: growth and value.
Finding good value stocks might seem easy, but combining the value with growth, is very difficult. It’s a rare combination.
What is the PEG Ratio?
Benjamin Graham, the “father” of value investing and former boss of Warren Buffett, invented the PEG ratio as a way to not only get a cheap stock, but to also get growth.
What is the PEG ratio? It is the P/E ratio (price over earnings) divided by the growth rate.
For value investors, you want to look for a PEG ratio under 1.0. That means a company is both cheap and has growth.
Screening with the PEG Ratio
Zacks has a PEG ratio screen which includes the Zacks Rank of #1 (Strong Buy) and #2 (Buy) along with the current average broker recommendation.
It also looks for stocks over $5.
The screen is even more demanding of the PEG ratio, however. It looks for stocks with a PEG of 0.55 or less. That’s going to have a lot of value.
This is one of Tracey’s favorite stock screens for value investors.
This screen returned 19 stocks.
5 Value Stocks with Growth for Your Short List
1. JD.com, Inc. (JD - Free Report)
JD.com is a Chinese Internet retailer. Shares of JD.com are down 12% year-to-date and have sold off over the last 5 years, falling 16.9% during that time.
It’s cheap, with a forward P/E of just 8.5 along with a PEG ratio under 1.0. But Chinese stocks have struggled over the last 2 years.
Is JD.com too cheap to pass up?
2. Owens Corning (OC - Free Report)
Owens Corning manufactures building and construction materials. This is a hot area of the economy right now. Shares of Owens Corning are up 10.5% year-to-date and it recently hit new 5-year highs. Owens Corning is up 216% over that period.
Yet Owens Corning remains cheap. It trades with a PEG ratio of just 0.3. Owens Corning also pays a dividend yielding 1.5%.
Should Owens Corning be on your short list?
3. Royal Caribbean Cruises Ltd. (RCL - Free Report)
Royal Caribbean Cruises operates cruise ships. Cruising struggled during the pandemic but has made a comeback four years later.
However, shares of Royal Caribbean are down 1.8% year-to-date. And even over the last 5 years, they are up just 4.3%.
Royal Caribbean is cheap and has growth. It’s forward P/E is just 13.3 and Royal Caribbean is expected to grow earnings by 48% in 2024.
Should you add a travel and hospitality company like Royal Caribbean to your watch list?
4. Toyota Motor Corp. (TM - Free Report)
Toyota Motor is a Japanese auto manufacturer. Shares of Toyota have soared in 2024, adding 32%. It has also hit 5-year highs, up 94% during that period.
Despite the big rally, Toyota remains cheap. It has a forward P/E of just 10.7. It’s expected to grow earnings by 73% in fiscal 2024 but what will come next? Can it keep this growth rate?
Should an auto manufacturer like Toyota be on your watch list in 2024?
5. Pilgrim’s Pride Corp. (PPC - Free Report)
Pilgrim’s Pride produces chicken and pork products. Shares of Pilgrim’s Pride have soared this year, adding 28%. But over the last 5 years, they’ve lagged the S&P 500. Pilgrim’s Pride is up 52.5% during that period while the S&P 500 is up 76.2%.
Pilgrim’s Pride is cheap. It trades with a PEG ratio of just 0.4. Earnings are expected to soar 75.4% this year.
After such a big rally, it too late to buy Pilgrim’s Pride?
What Else Do You Need to Know About Using the PEG Ratio to Find Top Value Stocks?
Tune into this week’s podcast to find out.