For Immediate Release
Chicago, IL – June 17, 2019 - Stocks in this week’s article are Molina Healthcare, Inc. MOH, AngloGold Ashanti Limited AU, Tetra Tech, Inc. TTEK, Wesco Aircraft Holdings, Inc. WAIR and The GEO Group, Inc. GEO.
Discounted PEG Stocks that Value Investors Love
Going by the Oracle of Omaha’s success story, value investment is one of the most tempting strategies to bet on even amid uncertain market conditions. Per data provided by a Forbes article, shares of Berkshire Hathaway, owned by Warren Buffett, increased 20% in 2016, boosting the Oracle of Omaha’s personal fortune by $12.3 billion (more than any other billionaire in the U.S.) to $74.2 billion.
While searching for a suitable value investment option, investors are unlikely to consider price/earnings to growth (PEG) ratio among a number of other popular value metrics like price/earnings (P/E), price/sales (P/S) or price/book value (P/B). This is because they often find this ratio complicated, considering the limitations in calculating the future earnings growth potential of a stock.
However, at a time when volatility strikes every second day, it is pointless to ponder on methods, which do not consider a stock’s future growth rate while calculating its intrinsic merit. Yardsticks such as dividend yield, P/E or P/B are most commonly used to single out stocks trading at a discount.
However, these ratios, while not taking into account the future growth potential of a stock, may end up convincing us to invest in stocks that are at a discount just because of their poor show. This may often lead to “value traps” — a situation when 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.
In such a case, even if you buy a stock at less than its fair value, you might still end up paying more. And here comes the importance of this not-so-popular but crucial 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 to find the intrinsic value of a stock.
There are some drawbacks to using the PEG ratio though. It does not 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/429591/6-discounted-peg-stocks-that-value-investors-love
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Wesco Aircraft Holdings, Inc. (WAIR) : Free Stock Analysis Report
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
AngloGold Ashanti Limited (AU) : Free Stock Analysis Report
Tetra Tech, Inc. (TTEK) : Free Stock Analysis Report
Geo Group Inc (The) (GEO) : Free Stock Analysis Report
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