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How to Find the Best Oversold Value Stocks

Tracey Ryniec
A quality value stock isn't just one that has sold off. This powerhouse screen finds the best stocks with classic value fundamentals.
  • (0:30) - Oversold Value Stocks: Is It Time To Buy?
  • (5:25) - Tracey’s Top Stock Picks
  • (16:40) - Takeaways On The Powerhouse Stock Screener
  • (19:25) - Episode Roundup: AMWD, EME, TOL, SNX, TTMI
  •             Podcast@Zacks.com

Welcome to Episode #114 of the Value Investor Podcast

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.

Stocks have sold off and everyone is talking about how “oversold” the growth stocks are now.

But what about the value stocks? Is it possible for them to be oversold as well?

Screening for Oversold Value Stocks

It’s possible to screen for oversold stocks and then add value fundamentals.

To get stocks that are oversold, you can look for stocks trading near their 52-week lows. That probably indicates some distress in the stock.

This screen looked for those trading within 15% of the lows but some of the companies in the screen had a value of “O” in this category which means they actually are trading at their 52-week lows.

For value, you can use any of the classic fundamentals. In this screen, the P/S ratio under 1.0 was used.

The screen also includes the Zacks Ranks of #1 (Strong Buy) and #2 (Buy) which should provide stocks with rising earnings estimates.

It’s no guarantee that you’ll avoid value traps just by adding the top Zacks Ranks, but it will certainly eliminate some companies that are struggling.

This basic screen returned 57 stocks.

Here are 5 that you should put on your short list.

5 Oversold Value Stocks

1.       American Woodmark Corp. AMWD has been hit hard in 2018 as shares have fallen 49% year-to-date. This cabinet maker is very cheap with a P/S ratio of 0.9 and a forward P/E of 8.9. Earnings are expected to be up double digits this year and next, however.

2.       EMCOR EME is trading within a $1 of its 52-week low. Shares of this engineering and construction company have fallen 15% year-to-date even though earnings are expected to rise 17% this year. It has a PEG ratio of just 0.97.

3.       Toll Brothers TOL, the luxury home builder, has seen its shares sink over 33% year-to-date. Shares are now dirt cheap, with a forward P/E of just 6.8. Earnings are expected to be up double digit this fiscal year and next fiscal year yet no one on Wall Street is buying it as they continue to flee. Is it time to stock up on the home builders?

4.       SYNNEX SNX has already reported earnings and had a record third quarter. Wall Street is having none of it as this business services company is still trading near its 52-week lows. It’s price-to-sales ratio is just 0.15. How much cheaper will it get?

5.       TTM Technologies TTMI is a global printed circuit board manufacturer. Shares are down 6.5% year-to-date but still trade near the 52-week low. With a forward P/E of 7.7, it’s certainly a value stock. Why is Wall Street ignoring this small cap stock?

This easy screen produced some fantastic oversold stocks that also have big growth.

What else should know you about finding oversold stocks?

Listen to this week’s podcast to find out.

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EMCOR Group, Inc. (EME) : Free Stock Analysis Report
Toll Brothers Inc. (TOL) : Free Stock Analysis Report
Synnex Corporation (SNX) : Free Stock Analysis Report
TTM Technologies, Inc. (TTMI) : Free Stock Analysis Report
American Woodmark Corporation (AMWD) : Free Stock Analysis Report
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