3 High Earnings Return Stocks Allure The Value Investor
Picking stocks that more than double the earnings return that 20-year high-quality corporate bonds grant to their possessors enhances the number of possibilities to find value opportunities.
The 20-year high-quality corporate bonds offer an average monthly spot rate of 3.49% as of Nov. 26. These securities represent corporate loans issued by triple-A, double-A and single-A companies with a very low risk of bankruptcy.
Therefore, the following stocks grant earnings return of more than 6.98% and are trading their earnings for less than 14.33 times their price. The earnings return is the inverse of the price-earnings ratio.
PulteGroup
Shares of PulteGroup Inc (NYSE:PHM) closed at $40.09 on Tuesday for a market capitalization of $10.86 billion. The Atlanta, Georgia-based homebuilders in the US has an earnings yield of 8.2% versus the industry median of 9.7% and a price-earnings ratio of 12.22 versus the industry median of 10.35.
The stock has grown 85.34% over the past five years through Nov. 26. Regardless of the significant growth, the share price is still cheap based on the Peter Lynch chart.
GuruFocus assigned a very positive rating of 7 out of 10 for both the company's financial strength and its profitability.
The stock has a forward dividend yield of 1.12% as of Tuesday.
Wall Street issued a hold recommendation rating for shares of PulteGroup Inc with an average target price of $40.12.
Barrett Business Services
Shares of Barrett Business Services Inc (NASDAQ:BBSI) closed at $88.56 on Tuesday for a market capitalization of $663.7 million.
The Vancouver-based provider of business management solutions to small and mid-sized US companies has an earnings yield of 7.8% versus the industry median of 5.8% and a price-earnings ratio of 12.74 versus the industry median of 17.18.
The share price skyrocketed 306% over the past five years, but it seems to be still cheap based on the Peter Lynch chart.
GuruFocus assigned a positive rating of 6 out of 10 for the company's financial strength and a very positive rating of 7 out of 10 for its profitability.
The stock has a forward dividend yield of 1.36% as of Tuesday.
Wall Street issued a buy recommendation rating for shares of Barrett Business Services Inc and an average target price of $116.33 per unit.
SB One
Shares of SB One Bancorp (NASDAQ:SBBX) closed at $23.1 on Tuesday with a market capitalization of $217.2 million. The Rockaway, New Jersey-based regional bank has an earnings yield of 9.2% versus the industry median of 8.5% and a price-earnings ratio of 10.9 versus the industry median of 11.77.
The stock still seems cheap based on the Peter Lynch chart, despite a strong 130% rise in its share price over the past five years.
GuruFocus assigned the US regional bank a low financial strength rating of 2 out of 10, but a moderate profitability rating of 4 out of 10.
The stock offers a forward dividend yield of 1.45% as of Nov. 26. SB One has paid dividends for more than 2 decades and increased them since 2016.
Wall Street analysts issued an overweight recommendation rating for shares of SB One Bancorp and have set an average target price of $26.63 per share reflecting 15.3% growth from Tuesday's closing price.
Disclosure: I have no positions in any securities mentioned.
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This article first appeared on GuruFocus.
