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A Trio of Non-Cyclical Stocks to Consider

GuruFocus.com
·5 min read

- By Alberto Abaterusso

Investors focused on assets with high returns might be interested in the following non-cyclical stocks, as their earnings yields (as calculated through Joel Greenblatt's method) are outperforming the S&P 500 Index.

Greenblatt defines the earnings yield a little differently, calculating the ratio as the company's earnings before interest and taxes divided by its enterprise value. The ratio offers a more reliable reference when applied to non-cyclical stocks whose earnings have little or no correlation with the business cycle (as the metric only looks at 12 months of operating activities).


The S&P 500's historical high earnings yield stands at around 9.5%.

Biogen

The first stock to consider is Biogen Inc. (NASDAQ:BIIB), a Cambridge, Massachusetts-based drug manufacturer.

The stock offers an earnings yield of 15.63% as of the most recent quarter, resulting from a 12-month EBIT of about $6.64 billion and an enterprise value of $42.49 billion.This stands slightly below the upper limit of the past 10-year historical earnings yield range of 3. 3% to 16.5%. Biogen's earnings yield ranks higher than 94% of 1,057 companies that are operating in the drug manufacturers industry.

The stock traded at around $248.59 per share at close on Friday for a market capitalization of $38.25 billion and a 52-week range of $223.25 to $374.99. The stock lost nearly 12% over the past year.

A Trio of Non-Cyclical Stocks to Consider
A Trio of Non-Cyclical Stocks to Consider

Its price-earnings ratio is 8.23 (versus the industry median of 24.37), the price-book ratio is 3.56 (versus the industry median of 2.23) and the price-sales ratio is 2.91 (versus the industry median of 2.66).

Biogen does not pay dividends.

GuruFocus assigned a score of 6 out of 10 for the company's financial strength rating and a 10 out of 10 rating for its profitability.

Wall Street sell-side analysts issued eight strong buy recommendation ratings, 13 buy recommendation ratings and 11 hold recommendation ratings for an average target price of $290.20 per share.

PRIMECAP Management, BlackRock Inc. and Vanguard Group Inc. are the three largest fund holders of the company, owning 10.2%, 9.22% and 8.13% of shares outstanding.

Albertsons Companies

The second stock to consider is Albertsons Companies Inc. (NYSE:ACI), a Boise, Idaho-based operator of grocery stores in the United States.

The stock had an earnings yield of approximately 10.6% as of the most recent quarter as a result of a 12-month EBIT of about $2.07 billion and an enterprise value of $19.53 billion. Albertsons Companies' current earnings yield stands above the upper limit of the 10-year historical range of 9% to 9.91% and ranks higher than 83% of 288 companies that are operating in the retail - defensive industry.

The share price was trading at around $15.15 at close on Friday for a market capitalization of $7.16 billion and a 52-week range of $12.91 to $16.5. The stock lost 2% over the past year.

A Trio of Non-Cyclical Stocks to Consider
A Trio of Non-Cyclical Stocks to Consider

Its price-earnings ratio is 7.83 (versus the industry median of 19.29), the price-book ratio is 4.83 (versus the industry median of 1.79) and the price-sales ratio is 0.12 (versus the industry median of 0.43).

On Nov. 10, the company paid a quarterly cash dividend of 10 cents per common share for an estimate of forward dividend yield of 2.62% as of Nov. 13.

GuruFocus assigned a 5 out of 10 rating for both the company's financial strength and profitability.

Wall Street sell-side analysts issued five strong buy recommendation ratings, 10 buy recommendation ratings and four hold recommendation ratings for the stock and have set an average target price of $20.47 per share.

Steven Cohen and Paul Tudor Jones are the two top fund holders of the company, owning 0.16% and 0.06% of shares outstanding.

Cia Paranaense De Energia Copel

The third stock to consider is Cia Paranaense De Energia Copel (NYSE:ELP), a Brazilian distributor of electricity.

The stock had an earnings yield of 20.2% as of the most recent quarter, resulting from a 12-month EBIT of about $1.03 billion and an enterprise value of $4.84 billion. Currently, Cia Paranaense De Energia Copel's earnings yield stands very close to the upper limit of the 10-year historical range of 5.2% to 21.5% and ranks higher than 92% of 507 companies that are operating in the utilities - regulated industry.

The shares closed at $12.49 on Friday for a market capitalization of $3.42 billion and a 52-week range of $8.28 to $18.15. The stock declined 12.8% over the past year.

A Trio of Non-Cyclical Stocks to Consider
A Trio of Non-Cyclical Stocks to Consider

Its price-earnings ratio is 5.41 (versus the industry median of 16.96), the price-book ratio is 0.91 (versus the industry median of 1.46) and the price-sales ratio is 1.01 (versus the industry median of 1.4).

The company has been a dividend payer for many years. In 2019, it declared dividends for a total amount of approximately 44.5 cents per common share, producing a trailing 12-month dividend yield of 3.57% as of Nov. 13.

GuruFocus assigned a score of 5 out of 10 to the company's financial strength and a 7 out of 10 rating to its profitability.

Wall Street sell-side analysts issued one buy recommendation rating and one hold recommendation rating for the stock and have established an average target price of $13.60 per share.

Amid the top fund holders of the company, BlackRock Inc. dominates with 1.56% of shares outstanding, followed by Letko, Brosseau & Associates Inc. with 1.02% and Vanguard with 0.65%.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.