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3 Large-Cap Stocks With Superior Earnings Yields

- By Alberto Abaterusso

If investors want to find more value opportunities, they should look for stocks that at least double 20-year high-quality market corporate bonds in terms of a higher return. These bonds represent corporate loans issued by triple-A, double-A and single-A rated companies.

The bond has a monthly average spot rate of 4.43% as of February. Thus, the following stocks have a price-earnings ratio, which is the inverse of the earnings yield, of 11.29 or less as of March 22.


Further, as of Friday, these large-cap companies have a market capitalization of more than $75 billion, have a price-book ratio of less than 1 and an overweight recommendation rating. This means Wall Street analysts expect these stocks to outperform either their industry or the overall market over the next 52 weeks with an average price target that brings at least 20% stock appreciation.

The stocks are Citigroup Inc. (NYSE:C) with a target price of $76.14, Nippon Telegraph & Telephone Corp. (NTTYY) with a target price of $51.44 and Banco Santander S.A. (SAN) with a target price of $5.88.

Over the next five years, analysts also predict annual earnings will grow at an average rate of 16.81% for Citigroup, 7.8% for Nippon Telegraph & Telephone and 6.33% for Banco Santander. This is the main catalyst to the share price of these companies.

Shares of Citigroup were trading around $60.98 at close on Friday for a market capitalization of $142.72 billion. The price-earnings ratio is 9.13 versus an industry median of 12.36, the price-book ratio is 0.81 compared to the industry median of 1.11 and the price-sales ratio is 2.09 compared to the industry median of 3.01.

The bank's stock has declined 17% so far this year, underperforming the S&P 500 Index by 13.6%. The closing price on Friday fell within a 52-week range of $48.42 to $75.24.

The Peter Lynch chart suggests the stock is fairly priced.

The closing share price of Tokyo-based telecom services company Nippon Telegraph & Telephone was $43.13 on Friday for a market capitalization of $83.49 billion. The stock has a price-earnings ratio of 10.07 versus an industry median of 19.33, a price-book ratio of 0.99 versus an industry median of 2.07 and a price-sales ratio of 0.80 compared to an industry median of 1.5.

The stock has lost 7.5% year to date, underperforming the S&P 500 index by nearly 4%. The 52-week range is $35.36 to $49.48.

According to the Peter Lynch chart, the stock appears to be cheap.

Shares of Spanish bank Banco Santander closed at $4.65 on Friday with a market capitalization of roughly $76.74 billion. The stock has a price-earnings ratio of 9.24 versus an industry median of 12.36, a price-book ratio of 0.70 versus an industry median of 1.11 and a price-sales ratio of 1.5 compared to an industry median of 3.01.

So far this year, the stock has declined 13%, underperforming the S&P 500 index by 4%. The 52-week range is $4.21 to $6.82.

The Peter Lynch chart suggests the stock is not expensive.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.