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The Federal Reserve is expected to make its third consecutive rate cut in 2024, reducing its benchmark policy rate by 0.25% to a range of 4.25%-4.50%. This marks a full percentage point drop since September, as the Fed continues to unwind its tight monetary policy designed to counter the inflation surge that began in 2021. However, the outlook for further rate cuts remains uncertain. Inflation still exceeds the Fed’s 2% target, and stronger-than-expected economic growth has added complexity to the central bank’s path forward.
Adding to the uncertainty, President-elect Donald Trump’s proposed policies on tariffs, taxes, and immigration could reshape the economic environment, potentially driving inflation higher. Looking ahead to 2025, experts caution that rate cuts could slow, given persistent inflationary pressure and potential policy-driven price increases.
In such uncertain conditions, value investing offers a strategic advantage. By identifying stocks trading below their intrinsic value, investors can position themselves for long-term gains as prices adjust to reflect fundamentals.
Using the Earnings Yield Metric
One interesting ratio that you can consider for ferreting out attractively valued stocks is earnings yield. This metric, 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 albeit 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.
Pitney Bowes (PBI - Free Report) , Gulfport Energy Corporation (GPOR - Free Report) , Kingstone Companies, Inc. (KINS - Free Report) , NCR Atleos Corporation (NATL - Free Report) and Gilead Sciences (GILD - Free Report) are a few value stocks with high earnings yield that can fetch you handsome gains.
The Winning Strategy
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 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 35 stocks that qualified the screen:
Pitney Bowes is a global technology company powering billions of transactions — physical and digital — in the connected and borderless world of commerce. The Zacks Consensus Estimate for PBI’s 2025 earnings implies year-over-year growth of 176%. Estimates for 2025 earnings per share have moved up by 7 cents over the past 60 days. Pitney Bowes sports a Zacks Rank #1 and has a Value Score of A.
Gulfport is focused on the exploration and development of natural gas and oil properties in North America. The Zacks Consensus Estimate for GPOR’s 2025 earnings implies year-over-year growth of 46%. Estimates for 2025 earnings per share have moved up by 75 cents over the past 30 days. Gulfport sports a Zacks Rank #1 and has a Value Score of B.
Kingstone owns an insurance company specializing in automobile, motorcycle, and homeowners' insurance, primarily serving individual customers rather than businesses. The Zacks Consensus Estimate for KINS’ 2025 earnings implies year-over-year growth of 11%. Estimates for 2025 earnings per share have moved up by 31 cents over the past 30 days. Kingstone sports a Zacks Rank #1 and has a Value Score of B.
NCR Atleos enables banks and retailers to offer seamless self-service banking experiences, enhancing customer access to financial services while reducing operational complexity with industry-leading technologies. The Zacks Consensus Estimate for NATL’s 2025 earnings implies year-over-year growth of 15%. Estimates for 2025 earnings per share have moved up by 23 cents over the past 60 days. The stock sports a Zacks Rank #1 and has a Value Score of A.
Gilead is a pioneer in developing drugs for the treatment of human immunodeficiency virus, liver diseases, hematology/oncology diseases and inflammation/respiratory diseases. The Zacks Consensus Estimate for GILD’s 2025 earnings implies year-over-year growth of 73%. Estimates for 2025 earnings per share have moved up by 16 cents over the past seven days. Gilead currently carries a Zacks Rank #2 and has a Value Score of B.
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 Picks to Buy for 2025
The Federal Reserve is expected to make its third consecutive rate cut in 2024, reducing its benchmark policy rate by 0.25% to a range of 4.25%-4.50%. This marks a full percentage point drop since September, as the Fed continues to unwind its tight monetary policy designed to counter the inflation surge that began in 2021. However, the outlook for further rate cuts remains uncertain. Inflation still exceeds the Fed’s 2% target, and stronger-than-expected economic growth has added complexity to the central bank’s path forward.
Adding to the uncertainty, President-elect Donald Trump’s proposed policies on tariffs, taxes, and immigration could reshape the economic environment, potentially driving inflation higher. Looking ahead to 2025, experts caution that rate cuts could slow, given persistent inflationary pressure and potential policy-driven price increases.
In such uncertain conditions, value investing offers a strategic advantage. By identifying stocks trading below their intrinsic value, investors can position themselves for long-term gains as prices adjust to reflect fundamentals.
Using the Earnings Yield Metric
One interesting ratio that you can consider for ferreting out attractively valued stocks is earnings yield. This metric, 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 albeit 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.
Pitney Bowes (PBI - Free Report) , Gulfport Energy Corporation (GPOR - Free Report) , Kingstone Companies, Inc. (KINS - Free Report) , NCR Atleos Corporation (NATL - Free Report) and Gilead Sciences (GILD - Free Report) are a few value stocks with high earnings yield that can fetch you handsome gains.
The Winning Strategy
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 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 35 stocks that qualified the screen:
Pitney Bowes is a global technology company powering billions of transactions — physical and digital — in the connected and borderless world of commerce. The Zacks Consensus Estimate for PBI’s 2025 earnings implies year-over-year growth of 176%. Estimates for 2025 earnings per share have moved up by 7 cents over the past 60 days. Pitney Bowes sports a Zacks Rank #1 and has a Value Score of A.
Gulfport is focused on the exploration and development of natural gas and oil properties in North America. The Zacks Consensus Estimate for GPOR’s 2025 earnings implies year-over-year growth of 46%. Estimates for 2025 earnings per share have moved up by 75 cents over the past 30 days. Gulfport sports a Zacks Rank #1 and has a Value Score of B.
Kingstone owns an insurance company specializing in automobile, motorcycle, and homeowners' insurance, primarily serving individual customers rather than businesses. The Zacks Consensus Estimate for KINS’ 2025 earnings implies year-over-year growth of 11%. Estimates for 2025 earnings per share have moved up by 31 cents over the past 30 days. Kingstone sports a Zacks Rank #1 and has a Value Score of B.
NCR Atleos enables banks and retailers to offer seamless self-service banking experiences, enhancing customer access to financial services while reducing operational complexity with industry-leading technologies. The Zacks Consensus Estimate for NATL’s 2025 earnings implies year-over-year growth of 15%. Estimates for 2025 earnings per share have moved up by 23 cents over the past 60 days. The stock sports a Zacks Rank #1 and has a Value Score of A.
Gilead is a pioneer in developing drugs for the treatment of human immunodeficiency virus, liver diseases, hematology/oncology diseases and inflammation/respiratory diseases. The Zacks Consensus Estimate for GILD’s 2025 earnings implies year-over-year growth of 73%. Estimates for 2025 earnings per share have moved up by 16 cents over the past seven days. Gilead currently carries a Zacks Rank #2 and has a Value Score of B.
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.