U.S. Markets open in 4 hrs 27 mins

Zacks.com featured highlights: Vishay Intertechnology, Magna International, AerCap Holdings and Big Lots

Zacks Equity Research
The future of India's banking sector is in the red, as another fraud hurts the markets.

For Immediate Release

Chicago, IL –August 18, 2017 - Stocks in this week’s article include Vishay Intertechnology, Inc. (NYSE:VSH – Free Report), Magna International Inc. (NYSE:MGA – Free Report), AerCap Holdings N.V. (NYSE:AER – Free Report) and Big Lots, Inc. (NYSE:BIG – Free Report).

4 Stocks Flaunting Low Price-to-Cash Flow Ratios

“It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett.The strategy is very simple – find stocks that are trading below their inherent worth.

Investment in stocks made on diligent value analysis is usually considered one of the best practices. In value investing, investors pick stocks that are cheap but fundamentally sound. So chances are high that these stocks will allow investors to book profits when the market trends upward.

There are a number of ratios to identify value stocks but none alone can conclusively determine their inherent potential. Each ratio helps an investor to understand a particular aspect of the company’s business. One such ratio, Price to Cash Flow (or P/CF), can work wonders in stock picking if used prudently. This metric evaluates the market price of a stock relative to the amount of cash flow that the company is generating on a per share basis – the lower the number, the better.

Why Price to Cash Flow?

You must be wondering why we are considering this when the most widely used valuation metric is Price/Earnings (or P/E). Well, one of the important factors that makes P/CF a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing the financial health of a company.

Analysts caution that a company’s earnings are subject to accounting estimates and management manipulation. Then again, cash flow is quite reliable. Net cash flow unveils how much money a company is actually generating and how effectively management is deploying the same.

A positive cash flow indicates an increase in the company’s liquid assets. This gives the company the means to settle debt, shell out for its expenses, reinvest in its business, endure downturns and finally undertake shareholder-friendly moves. On the other hand, a negative cash flow implies a decline in the company’s liquidity, which in turn lowers its flexibility to support these endeavors.

However, an investment decision solely based on the P/CF metric may not fetch the desired results. To identify stocks that are trading at a discount, you should expand your search criteria and take into account price-to-book ratio, price-to-earnings ratio and price-to-sales ratio. Adding a favorable Zacks Rank and a Value Score of A or B to your search criteria should lead to even better results as these eliminate the chance of falling into a value trap.

The Bargain Hunting Strategy

Here are the parameters for selecting true value stocks:

P/CF less than or equal to X-Industry Median.

Price greater than or equal to 5: The stocks must all be trading at a minimum of $5 or higher.

Average 20-Day Volume greater than 100,000:A substantial trading volume ensures that the stock is easily tradable.

P/E using (F1) less than or equal to X-Industry Median: This parameter shortlists stocks that are trading at a discount or are equal to its peers.

P/B less than or equal to X-Industry Median:A lower P/B compared with the industry average implies that there is enough room for the stock to gain.

P/S less than or equal to X-Industry Median: The P/S ratio determines how a stock price compares to the company’s sales — the lower the ratio the more attractive the stock is.

PEG less than 1: The ratio is used to determine a stock's value by taking the company's earnings growth into account. PEG ratio gives a more complete picture than P/E ratio. A value of less than 1 indicates that the stock is undervalued and that investors need to pay less for a stock that has robust earnings growth prospect.

Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment.

Value Score of less than or equal to B: Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential. 

Here are four of the seven stocks that qualified the screening:

Vishay Intertechnology, Inc. (NYSE:VSH – Free Report), which manufactures and supplies discrete semiconductors and passive components, delivered an average positive earnings surprise of 3.3% in the trailing four quarters. The company has an expected EPS growth rate of 18.1% for 3–5 years and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Magna International Inc. (NYSE:MGA – Free Report) designs, develops, and manufactures automotive systems, assemblies, modules and components. The company, which carries a Zacks Rank #2, came up with an average positive earnings surprise of 3.1% in the trailing four quarters and has 9.5% expected EPS growth rate for 3–5 years.

AerCap Holdings N.V. (NYSE:AER – Free Report) has an expected EPS growth rate of 9.3% for 3–5 years and delivered an average positive earnings surprise of 15.7% in the trailing four quarters. This independent aircraft leasing company currently carries a Zacks Rank #2.

Big Lots, Inc. (NYSE:BIG – Free Report), which operates as a non-traditional discount retailer, has an expected EPS growth rate of 13.5% for 3–5 years. The company holds a Zacks Rank #2 and delivered an average positive earnings surprise of 83% over the trailing four quarters.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.

Get the full Report on VSH - FREE

Get the full Report on MGA - FREE

Get the full Report on AER - FREE

Get the full Report on BIG - FREE

Follow us on Twitter:  https://twitter.com/zacksresearch

Join us on Facebook:  https://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Contact: Jim Giaquinto

Company: Zacks.com

Phone: 312-265-9268

Email: pr@zacks.com

Visit: https://www.zacks.com/performance

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Magna International, Inc. (MGA) : Free Stock Analysis Report
 
Aercap Holdings N.V. (AER) : Free Stock Analysis Report
 
Big Lots, Inc. (BIG) : Free Stock Analysis Report
 
Vishay Intertechnology, Inc. (VSH) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research