5 Top-Ranked Value Stocks To Grab Today

What if you could just put your excess funds into a stock and then forget about it? What if you could wake up 10-12 years later to see that it has appreciated 100% or 1000%? That would be perfect, wouldn’t it?

You wouldn’t need to worry when market forces pulled it one way or the other in the daily tug-of-war. You’d know that when you needed the cash after so many years, it would be there.

This is what value investing is all about.

There’s also some evidence that with all the guessing and speculating that some people do, their gains and losses tend to balance each other out in the long term, so they don’t really do much better than the market, despite all the risk that they take.

These kinds of arguments are usually forwarded when speaking in favor of value investing.

However, it would never do to just take a wager on any cheap stock. Cheap, by the way, doesn’t always mean that the stock has a low dollar value, and so, is easier to buy. Instead, it means that the stock has a low value relative to others and considering its prospects as against the prospects of those others.     

Thus the stock’s relative valuation is arrived at by dividing its price by its earnings, or earnings growth or sales (these three are the most common) with the resultant ratios being called price-to-earnings (P/E), price-to-earnings-growth (PEG), or price-to-sales (P/S) ratios.

So for example, if the market, or the stocks in any index (like the S&P 500), or the stocks of the industry to which your stock belongs (depending on the group you want to compare with) has an average P/E of 15, and the stock you’re considering has a P/E below that, it is considered cheap. Another way of looking at it would be to compare your stock’s P/E at a given time with the P/E over the past year and if it’s trading in the middle of the annual range or below it, it’s generally considered cheap.

And as far as the PEG or P/S ratios are concerned, we generally need a value below 1, which means that the stock is trading below its expected earnings growth or expected sales for the current year. So you’re paying less than expected sales or expected earnings growth.

1 2 3 4
View single page >> |

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.