Back to top

Image: Bigstock

5 High Earnings Yield Stocks Poised for Long-Term Gains

Read MoreHide Full Article

Value investing is a time-tested strategy in the investment world that helps in finding undervalued assets with the potential for long-term growth. This method emphasizes the importance of intrinsic asset value and fundamental analysis rather than short-term market fluctuations. By purchasing stocks at prices below their intrinsic values, value investing seeks substantial returns as stock prices eventually reflect their true fundamentals. A key metric for spotting undervalued stocks is the earnings yield.

Earnings yield helps investors gauge the rate of return on an investment. This percentage is calculated by dividing annual earnings per share (EPS) by the market price per share, effectively the inverse of the price-to-earnings (P/E) ratio.

When comparing stocks, if other factors are similar, a higher earnings yield indicates a stock is undervalued. This metric measures the expected return from earnings for each dollar invested in a stock today.

While not as commonly used as the P/E ratio, the earnings yield is often compared to prevailing interest rates, like the current 10-year Treasury yield, to assess the return on investment compared to virtually risk-free returns.

If a stock's yield is lower than the 10-year Treasury yield, it is considered overvalued relative to bonds. Conversely, if the stock's yield is higher, it is considered undervalued.

You can enhance your portfolio by investing in high earnings yield stocks such as Hanesbrands Inc. (HBI - Free Report) , American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) , Futu Holdings limited (FUTU - Free Report) , Navigator Holdings Limited (NVGS - Free Report) and SM Energy Company (SM - Free Report) .

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 44 stocks that qualified the screening:

Hanesbrands is a global apparel company specializing in the design, manufacture, sourcing, and sale of essential clothing items for men, women and children. The Zacks Consensus Estimate for HBI’s 2024 and 2025 earnings implies year-over-year growth of 666.7% and 54%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 2 cents and 1 cent, respectively, over the past 90 days. Hanesbrands currently sports a Zacks Rank #1 and has a Value Score of A. 

American Axle is one of the leading suppliers of driveline and drivetrain systems, modules and components for the light vehicle market. The Zacks Consensus Estimate for AXL’s 2024 and 2025 earnings implies year-over-year growth of 544% and 115%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 2 cents and 22 cents, respectively, over the past 60 days. American Axle currently sports a Zacks Rank #1 and has a Value Score of A. 

Futu Holdings is a technology company offering a digitized brokerage platform. It is primarily engaged in online brokerage services and margin financing services. The Zacks Consensus Estimate for FUTU’s 2024 and 2025 earnings implies year-over-year growth of 19.4% and 19%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 15 cents and 39 cents, respectively, over the past 60 days. Futu Holdings currently sports a Zacks Rank #1 and has a Value Score of B. 

Navigator Holdings provides international seaborne transportation and regional distribution services of liquefied petroleum gas, petrochemical gases and ammonia for energy companies, industrial users and commodity traders. The Zacks Consensus Estimate for NVGS’ 2024 and 2025 earnings implies year-over-year growth of 27.4% and 37%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 2 cents and 1 cent, respectively, over the past 60 days. Navigator Holdings currently sports a Zacks Rank #1 and has a Value Score of B. 

SM Energy is an independent oil and gas exploration and production company. The Zacks Consensus Estimate for SM’s 2024 and 2025 earnings implies year-over-year growth of 24% and 22%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 77 cents and $1.79, respectively, over the past 30 days. SM Energy 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.

DisclosureOfficers, 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 athttps://www.zacks.com/performance.

Published in