So far in 2019, various events like the U.S.-China trade war, Brexit-related uncertainty and the Fed’s decision to cut interest rates thrice in the year have impacted stocks from all sectors in some way or other.
Still, the S&P 500 index has been hitting new all-time highs. So far this year, the S&P 500 rose 26.1%. Because of this rise, most of the stocks are likely to have become expensive for investors at present.
Nevertheless, this should not be considered as bad news by value investors, who benefit from buying stocks that are trading at a discount or are less expensive because all stocks have not been able to match the stock market’s rally.
Due to the global concerns — including the trade war — there are some stocks, which did not appreciate much in price, and are still trading at a reasonable discount and hence seem to be good investment options for value investors.
In fact, value investors search for those stocks that they think the stock market is underestimating. Value investing is one of the most popular ways to find such undervalued stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys or offer tantalizing discounts when compared to fair value?
Notably, these investors try to look at several key metrics and financial ratios, which are crucial in the value stock selection process.
Two of the most commonly used ratios are price/earnings (P/E) and price/sales (P/S), which are used to determine whether a stock is trading cheap.
The P/E ratio shows us how much an investor is willing to pay for each dollar of earnings in a given stock and is one of the most popular financial ratios in the world. By comparing the P/E ratio of a given stock with that of the broader market or with the stock’s sector, an investor finds out whether the stock is currently trading cheap.
Similarly, the P/S ratio compares a given stock’s price to its total sales, where, like the P/E ratio, a lower reading is considered better. Some people prefer this metric more than P/E because this ratio considers sales, something that is far harder to manipulate with accounting tricks than earnings. Also, earnings can be negative while sales cannot.
So, it can be concluded that there are still a number of stocks, which are good investment options for value investors. Hence, such investors should buy these stocks for 2020.
We have taken the help of the Zacks Stock Screener to shortlist five stocks that are incredible for value investors to buy for 2020 as these currently carry a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Also, the stocks have a Value Score of A or B. Our research shows that stocks, with a Value Score of A or B when combined with a Zacks Rank #1 or #2 offer the best upside potential.
Further, the P/E and P/S ratios of all five stocks show that these are currently undervalued when compared with the broader market or their respective sectors. The earnings growth projection for these companies for the next year is also positive, which makes it even better for value investors to buy them for 2020.
The stocks are mentioned below.
Nexstar Media Group, Inc. NXST: It is a television broadcasting and digital media company, which is headquartered in Irving, TX. Currently, the company has a Zacks Rank of 2 and a Value Score of B. Its trailing 12-month P/E ratio (P/E TTM) stands at 16.25, below the S&P 500’s 19.90. Also, the figure compares favorably with its sector’s P/E ratio of 23.67. Moreover, its P/S ratio of 1.85 is below the broader market’s 3.44.
The company’s projected earnings growth rate for 2020 is more than 100% and the Zacks Consensus Estimate for next-year earnings has been revised 60.1% upward over the past 60 days.
First BanCorp. FBP: Headquartered in Santurce, PR, the finance company has a Value Score of B and a Zacks Rank #2 at present. Its earnings are expected to grow 17.3% in 2020 and the consensus estimate for its 2020 earnings has been revised 7.3% upward over the past 60 days.
It has a P/E TTM ratio of 14.59, which is below the S&P 500 as well as its sector’s 15.06. Also, its P/S ratio of 3.14 is below that of the S&P 500.
Arconic Inc. ARNC: Headquartered in New York, NY, the company engineers, manufactures, and sells lightweight metals worldwide. Its 2020 earnings are projected to grow 13.6%. Also, the company currently has a Zacks Rank of 2 and a Value Score of B. The Zacks Consensus Estimate for its 2020 earnings has been raised marginally over the past 60 days.
The company has a P/E TTM ratio of 16.40, which is lower than its sector’s 17.08. Also, it compares favorably with the S&P 500’s P/E ratio of 19.90. Moreover, its P/S ratio of 1.01 is below the S&P 500’s 3.44.
United Airlines Holdings, Inc. UAL: The airline company is based in Chicago, IL. It has a Zacks Rank of 2 and a Value Score of A at present. Its P/E TTM ratio stands at 7.55, below the S&P 500’s. Also, the figure compares favorably with its sector’s P/E ratio of 16.04. Moreover, its P/S ratio of 0.53 is below that of the broader market.
The company’s projected earnings growth rate for 2020 is 5.8% and its Zacks Consensus Estimate for next-year earnings has been revised nearly 1% upward over the past 60 days.
Allegiant Travel Company ALGT: Headquartered in Las Vegas, NV, the leisure travel company presently has a Value Score of B and a Zacks Rank #1. Its earnings are expected to grow 17.2% in 2020 and the consensus estimate for 2020 earnings has been revised 9.9% upward over the past 60 days.
The company has a P/E TTM ratio of 13.14, which is below the S&P 500 as well as its sector’s 16.04. Also, its P/S ratio of 1.60 is below that of the S&P 500.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?
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Allegiant Travel Company (ALGT) : Free Stock Analysis Report
United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
First BanCorp. (FBP) : Free Stock Analysis Report
Nexstar Media Group, Inc (NXST) : Free Stock Analysis Report
Arconic Inc. (ARNC) : Free Stock Analysis Report
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