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For Immediate Release

Chicago, IL – July 19, 2018 - Stocks in this week’s article GMS Inc. GMS, Nucor Corp. NUE, Lennar Corporation LEN and Everest Re Group, Ltd. RE.

4 Dirt-Cheap PEG Stocks Suitable for Value Investors

Value investing is gaining popularity by the day. The success of value investors like Warren Buffett further underscores this.

However, this apparently simple value investment technique has some drawbacks and not understanding the strategy properly may lead to “value traps”. These value picks start to underperform over the long run as the temporary problems, which once drove the share price down, turn out to be persistent. There are many value investment yardsticks such as dividend yield, P/E or P/B, which are simple and can show whether a stock is trading at a discount.

However, for investors looking to escape such value traps, it is also vital to determine where the stock is headed in the next 12 to 24 months. Warren Buffett advises these investors to focus on the earnings growth potential of a stock. This is where lies the importance of a not-so-popular value investing metric, the PEG ratio.

The PEG ratio is defined as: (Price/Earnings)/Earnings Growth Rate

A low PEG ratio is always better for value investors.

While P/E alone fails to identify a true value stock, PEG helps determine the intrinsic value of a stock.

There are some drawbacks of using the PEG ratio though. It doesn’t consider the very common situation of changing growth rates such as the forecast of the first three years at a very high growth rate followed by a sustainable but lower growth rate in the long term.

Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/311962/4-dirtcheap-peg-stocks-suitable-for-value-investors

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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