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5 High Earnings Yield Value Stocks That You Shouldn't Ignore
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After all major indexes ended the first half of the year in the green, more gains are anticipated in the second half. The resilient economy, robust job market, upward-trending sales and earnings estimates, and near-record household incomes provide strong support for continued market growth. Fed Chair Jerome Powell mentioned that the country is returning to a disinflationary path, though more data is needed before rate cuts can be confidently implemented. The Fed currently plans for just one rate cut by the end of the year, but the timing remains uncertain, and analysts believe the Fed will proceed cautiously.
In this elevated interest rate environment, value investing could be an effective approach. Value investing seeks to profit from investing in stocks that appear to be trading at a discount to their intrinsic values and eventually make handsome returns when the stock price rises toward that value, reflecting the actual fundamentals.
One interesting ratio that you can consider for ferreting out attractively valued stocks is earnings yield. Stocks like Harmony Biosciences (HRMY - Free Report) , GeoPark Ltd. (GPRK - Free Report) , GigaCloud Technology Inc. (GCT - Free Report) , Costamare Inc. (CMRE - Free Report) and Arko Corp. (ARKO - Free Report) boast impressive earnings yield to help you fetch handsome long-term rewards.
Earnings Yield Strength
Earnings yield, expressed in percentage, is calculated as annual earnings per share (EPS) divided by market price. This metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today. While comparing stocks, if other factors are similar, the ones with higher earnings yield are considered undervalued, while those with lower earnings yield are seen as overpriced.
While earnings yield is nothing but the reciprocal of the P/E ratio, it is a little more illuminating than the traditional P/E ratio as it also facilitates the comparison of stocks with fixed-income securities. Investors often compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.
If the yield on a stock is lower than the 10-year Treasury yield, it would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued. In this situation, investing in the stock market would be a better option for a value investor.
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.
Here we highlight five of the 30 stocks that qualified the screening:
Harmony Biosciences engages in developing and commercializing therapies for rare neurological disorders. The Zacks Consensus Estimate for HRMY’s 2024 and 2025 earnings implies year-over-year growth of 15% and 66%, respectively. Estimates for 2024 EPS have moved up by 4 cents over the past seven days. Harmony Biosciences currently sports a Zacks Rank #1 and has a Value Score of B.
GeoPark is engaged in the exploration, development, and production of oil and gas reserves in Chile, Colombia, Brazil, Argentina and Ecuador. The Zacks Consensus Estimate for GPRK’s 2024 and 2025 earnings implies year-over-year growth of 51% and 23%, respectively. Estimates for 2024 EPS have moved up by 7 cents over the past 60 days. GeoPark currently sports a Zacks Rank #1 and has a Value Score of A.
GigaCloud offers comprehensive B2B e-commerce solutions for large parcel merchandise both in the United States and globally. The Zacks Consensus Estimate for GCT’s 2024 and 2025 earnings implies year-over-year growth of 41% and 24%, respectively. Estimates for 2024 EPS have moved up by 27 cents over the past 60 days. GigaCloud currently sports a Zacks Rank #1 and has a Value Score of A.
Costamare operates as a containership owner, chartering its vessels to liner companies. The Zacks Consensus Estimate for CMRE’s 2024 earnings implies year-over-year growth of 49%. EPS Estimates for 2024 and 2025 have moved up by 35 cents and 24 cents over the past 60 days. Costamare currently sports a Zacks Rank #1 and has a Value Score of A.
Arko operates convenience stores in the United States. The Zacks Consensus Estimate for ARKO’s 2024 earnings implies year-over-year growth of 125%. Estimates for 2024 and 2025 earnings per share have moved up by 45 cents and 42 cents, respectively, over the past 60 days. ARKO currently sports a Zacks Rank #1 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 High Earnings Yield Value Stocks That You Shouldn't Ignore
After all major indexes ended the first half of the year in the green, more gains are anticipated in the second half. The resilient economy, robust job market, upward-trending sales and earnings estimates, and near-record household incomes provide strong support for continued market growth. Fed Chair Jerome Powell mentioned that the country is returning to a disinflationary path, though more data is needed before rate cuts can be confidently implemented. The Fed currently plans for just one rate cut by the end of the year, but the timing remains uncertain, and analysts believe the Fed will proceed cautiously.
In this elevated interest rate environment, value investing could be an effective approach. Value investing seeks to profit from investing in stocks that appear to be trading at a discount to their intrinsic values and eventually make handsome returns when the stock price rises toward that value, reflecting the actual fundamentals.
One interesting ratio that you can consider for ferreting out attractively valued stocks is earnings yield. Stocks like Harmony Biosciences (HRMY - Free Report) , GeoPark Ltd. (GPRK - Free Report) , GigaCloud Technology Inc. (GCT - Free Report) , Costamare Inc. (CMRE - Free Report) and Arko Corp. (ARKO - Free Report) boast impressive earnings yield to help you fetch handsome long-term rewards.
Earnings Yield Strength
Earnings yield, expressed in percentage, is calculated as annual earnings per share (EPS) divided by market price. This metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today. While comparing stocks, if other factors are similar, the ones with higher earnings yield are considered undervalued, while those with lower earnings yield are seen as overpriced.
While earnings yield is nothing but the reciprocal of the P/E ratio, it is a little more illuminating than the traditional P/E ratio as it also facilitates the comparison of stocks with fixed-income securities. Investors often compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.
If the yield on a stock is lower than the 10-year Treasury yield, it would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued. In this situation, investing in the stock market would be a better option for a value investor.
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 highlight five of the 30 stocks that qualified the screening:
Harmony Biosciences engages in developing and commercializing therapies for rare neurological disorders. The Zacks Consensus Estimate for HRMY’s 2024 and 2025 earnings implies year-over-year growth of 15% and 66%, respectively. Estimates for 2024 EPS have moved up by 4 cents over the past seven days. Harmony Biosciences currently sports a Zacks Rank #1 and has a Value Score of B.
GeoPark is engaged in the exploration, development, and production of oil and gas reserves in Chile, Colombia, Brazil, Argentina and Ecuador. The Zacks Consensus Estimate for GPRK’s 2024 and 2025 earnings implies year-over-year growth of 51% and 23%, respectively. Estimates for 2024 EPS have moved up by 7 cents over the past 60 days. GeoPark currently sports a Zacks Rank #1 and has a Value Score of A.
GigaCloud offers comprehensive B2B e-commerce solutions for large parcel merchandise both in the United States and globally. The Zacks Consensus Estimate for GCT’s 2024 and 2025 earnings implies year-over-year growth of 41% and 24%, respectively. Estimates for 2024 EPS have moved up by 27 cents over the past 60 days. GigaCloud currently sports a Zacks Rank #1 and has a Value Score of A.
Costamare operates as a containership owner, chartering its vessels to liner companies. The Zacks Consensus Estimate for CMRE’s 2024 earnings implies year-over-year growth of 49%. EPS Estimates for 2024 and 2025 have moved up by 35 cents and 24 cents over the past 60 days. Costamare currently sports a Zacks Rank #1 and has a Value Score of A.
Arko operates convenience stores in the United States. The Zacks Consensus Estimate for ARKO’s 2024 earnings implies year-over-year growth of 125%. Estimates for 2024 and 2025 earnings per share have moved up by 45 cents and 42 cents, respectively, over the past 60 days. ARKO currently sports a Zacks Rank #1 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.