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3 Companies With a Compelling Price-Book Ratio

If investors pick stocks with a market capitalization of more than $2 billion but less than 1.5 times book value, they will have a higher chance of unearthing high-quality companies.

Thus, value investors could be interested in the following securities, which have received positive financial strength and profitability and growth ratings from GuruFocus, increasing the likelihood of a successful investment.


Further, sell-side analysts on Wall Street have issued positive recommendation ratings ranging between hold and buy, corroborating expectations of performing securities.

The first company is Westlake Chemical Corp. (NYSE:WLK). Shares of the Houston-based specialty chemicals company closed at $65.44 on Friday for a market capitalization of $8.39 billion.

The price-book ratio of 1.47 is almost in line with the industry median of 1.43, but below slightly more than half of its competitors.

The share price is down only 1.1% so far this year, underperforming the S&P 500 Index by 19.3%. The Peter Lynch chart indicates the stock is not expensive.

Westlake Chemical has a GuruFocus financial strength rating of 5.5 out of 10 and a profitability and growth rating of 7 out of 10.

Wall Street recommends holding the stock with an average target price of $69.15.

Currently, the company pays a quarterly dividend of 26.3 cents per common share, producing a 1.55% dividend yield as of Friday.

The second company is Devon Energy Corp. (NYSE:DVN). Shares of the Oklahoma City-based oil and gas producer closed at $24.25 on Friday for a market capitalization of $9.8 billion.

The price-book ratio of 1.43 is above than the industry median of 0.96, but underperforms more than half of its industry peers.

The stock has gained 7.6% so far this year, but underperformed the S&P 500 Index by 10.6%. The Peter Lynch chart indicates the stock is still cheap.

The stock has a GuruFocus financial strength rating of 5.6 out of 10 and a profitability and growth rating of 6 out of 10.

Wall Street recommends an overweight rating for shares of Devon Energy with an average target price of $32.94. The rating means analysts predict the stock will outperform either the industry or the entire market in the coming weeks.

On Dec. 27, the company will pay a quarterly dividend of 9 cents per common share to shareholders of record as of Dec. 13, producing a 1.4% dividend yield as of Friday.

The third company is Diamondback Energy Inc. (NASDAQ:FANG). Shares of the Midland, Texas-based oil and gas producer closed at $89.99 on Friday for a market capitalization of $14.67 billion.

The price-book ratio of 1.06 is almost in line with the industry median of 0.96 and underperforms over half of its competitors.

The stock is down 3% so far this year, underperforming the S&P 500 Index by 21%. The Peter Lynch chart indicates the stock is not expensive.

The stock has a GuruFocus financial strength rating of 5.1 out of 10 and a profitability rating of 9 out of 10.

Wall Street recommends buying shares of Diamondback Energy with an average target price of $143.59.

Currently, the company pays a quarterly dividend of 18.8 cents per common share, producing a 0.69% dividend yield as of Friday.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.