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4 High Earnings Yield Value Bets to Shrug Off Market Volatility
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After a turbulent start to August, thanks to recession fears stemming from a weak U.S. employment report, the panic on Wall Street has somewhat eased. The latest FOMC Minutes bolstered expectations for a rate cut in September. However, market volatility is likely to persist in the near term due to uncertainties in the job market and the broader economy, and geopolitical tensions. Historically, September tends to be a challenging month for the stock market, especially in presidential election years. The upcoming election could add to market volatility, consistent with trends seen in previous U.S. elections.
In this uncertain environment, value investing could be the most effective investment strategy. This approach involves purchasing stocks that appear undervalued compared to their intrinsic worth, with the expectation of earning significant returns when the stock prices eventually align with their true fundamentals.
A commonly used metric to identify undervalued stocks with strong upside potential is the price-to-earnings (P/E) ratio. However, another valuable metric for spotting attractively priced stocks is earnings yield. High earnings yield stocks, such as —Sylvamo Corporation (SLVM - Free Report) , IAMGOLD Corporation (IAG - Free Report) , Wolverine World Wide (WWW - Free Report) and Seanergy Maritime Holdings (SHIP - Free Report) — offer the potential for substantial long-term gains.
Understanding Earnings Yield Strength
Earnings yield is a critical measure for investors focusing on return rates. Expressed as a percentage, it is calculated by dividing annual earnings per share (EPS) by the market price of the stock. This metric reveals the expected return from earnings for each dollar invested in a stock. When comparing stocks with similar characteristics, those with higher earnings yields are typically viewed as undervalued, while those with lower yields are seen as overpriced.
Although earnings yield is the inverse of the P/E ratio, it offers additional insight, particularly when comparing stocks with fixed-income securities. Investors often compare a stock’s earnings yield to current interest rates, like the 10-year Treasury yield, to assess its return relative to risk-free alternatives. If a stock’s yield is lower than the 10-year Treasury yield, it may be considered overvalued relative to bonds. Conversely, a higher yield suggests undervaluation, making the stock market a more appealing option for value investors.
Screening Parameters
We have set Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential of generating 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.
Below, we have highlighted four of the 32 stocks that made it through the screen:
Sylvamo produces and markets uncoated freesheet for cut size, offset paper and pulp. The Zacks Consensus Estimate for SLVM’s 2024 and 2025 earnings implies year-over-year growth of 13.7% and 12.2%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 50 cents and $1, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
IAMGOLD is an intermediate gold producer and developer in Canada and Burkina Faso. The Zacks Consensus Estimate for IAG’s 2024 and 2025 earnings implies year-over-year growth of 333% and 51%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 6 cents and 5 cents, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Wolverine is engaged in the designing, manufacturing and distribution of a wide variety of casual as well as active apparel and footwear. The Zacks Consensus Estimate for WWW’s 2024 and 2025 earnings implies year-over-year growth of 1,600% and 53.5%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 3 cents each over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Seanergy is a prominent pure-play Capesize ship owner that provides marine dry bulk transportation services through a modern fleet of Capesize vessels. The Zacks Consensus Estimate for SHIP’s 2024 earnings implies year-over-year growth of 272%. Estimates for 2024 and 2025 earnings per share have moved up by 54 cents and 51 cents, respectively, over the past 30 days. The stock 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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4 High Earnings Yield Value Bets to Shrug Off Market Volatility
After a turbulent start to August, thanks to recession fears stemming from a weak U.S. employment report, the panic on Wall Street has somewhat eased. The latest FOMC Minutes bolstered expectations for a rate cut in September. However, market volatility is likely to persist in the near term due to uncertainties in the job market and the broader economy, and geopolitical tensions. Historically, September tends to be a challenging month for the stock market, especially in presidential election years. The upcoming election could add to market volatility, consistent with trends seen in previous U.S. elections.
In this uncertain environment, value investing could be the most effective investment strategy. This approach involves purchasing stocks that appear undervalued compared to their intrinsic worth, with the expectation of earning significant returns when the stock prices eventually align with their true fundamentals.
A commonly used metric to identify undervalued stocks with strong upside potential is the price-to-earnings (P/E) ratio. However, another valuable metric for spotting attractively priced stocks is earnings yield. High earnings yield stocks, such as —Sylvamo Corporation (SLVM - Free Report) , IAMGOLD Corporation (IAG - Free Report) , Wolverine World Wide (WWW - Free Report) and Seanergy Maritime Holdings (SHIP - Free Report) — offer the potential for substantial long-term gains.
Understanding Earnings Yield Strength
Earnings yield is a critical measure for investors focusing on return rates. Expressed as a percentage, it is calculated by dividing annual earnings per share (EPS) by the market price of the stock. This metric reveals the expected return from earnings for each dollar invested in a stock. When comparing stocks with similar characteristics, those with higher earnings yields are typically viewed as undervalued, while those with lower yields are seen as overpriced.
Although earnings yield is the inverse of the P/E ratio, it offers additional insight, particularly when comparing stocks with fixed-income securities. Investors often compare a stock’s earnings yield to current interest rates, like the 10-year Treasury yield, to assess its return relative to risk-free alternatives. If a stock’s yield is lower than the 10-year Treasury yield, it may be considered overvalued relative to bonds. Conversely, a higher yield suggests undervaluation, making the stock market a more appealing option for value investors.
Screening Parameters
We have set Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential of generating 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 Choices
Below, we have highlighted four of the 32 stocks that made it through the screen:
Sylvamo produces and markets uncoated freesheet for cut size, offset paper and pulp. The Zacks Consensus Estimate for SLVM’s 2024 and 2025 earnings implies year-over-year growth of 13.7% and 12.2%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 50 cents and $1, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
IAMGOLD is an intermediate gold producer and developer in Canada and Burkina Faso. The Zacks Consensus Estimate for IAG’s 2024 and 2025 earnings implies year-over-year growth of 333% and 51%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 6 cents and 5 cents, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Wolverine is engaged in the designing, manufacturing and distribution of a wide variety of casual as well as active apparel and footwear. The Zacks Consensus Estimate for WWW’s 2024 and 2025 earnings implies year-over-year growth of 1,600% and 53.5%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 3 cents each over the past 30 days. The stock currently sports a Zacks Rank #1 and has a Value Score of B.
Seanergy is a prominent pure-play Capesize ship owner that provides marine dry bulk transportation services through a modern fleet of Capesize vessels. The Zacks Consensus Estimate for SHIP’s 2024 earnings implies year-over-year growth of 272%. Estimates for 2024 and 2025 earnings per share have moved up by 54 cents and 51 cents, respectively, over the past 30 days. The stock 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