One of the first things you look for as a value investor are the key price multiples. For example, we know that Price/Earnings ratio, Price/Book ratio and Price/Sales ratio all indicate some level of price appropriateness. If the ratios are too high compared to the normal or the peers, the stock may be over valued. On the other hand, if the ratios are low compared to the historical or peers today, the stock may be undervalued.
These ratios do not always give us the full picture. Therefore, a few additional criteria, such as EPS growth and Sales growth can help make the screen stronger.
We ran this screen for best large cap stocks (Market Cap > $5 Billion), and found the following 13 stocks that exhibit cheap multiples and good growth.
This screen was run in Stock Rover. Learn more about why this could be the only investment research tool you would ever need.
The list has a number of homebuilders. Given the current real estate market, it is not surprising that many of these company stocks are available for cheap. However, when you consider the time to value realization, you need to consider how the real estate market is going to perform in the near or intermediate future. Many homebuilder stocks pay nice dividends so it may be worth waiting.
Automakers on the other hand offer perennially cheap stocks. At some point the market will reward automakers (not named Tesla) by valuing them properly. When will that time come? I do not know.
I do own MKL and I believe it has great value to offer at today’s prices too.
Please review the stocks you are interested in before you buy any.
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Shailesh Kumar, MBA is the founder of Astute Investor’s Calculus, where he shares high-conviction small-cap value ideas, stock reports, and investing strategies.
His work has been featured in the New York Times and profiled on Wikipedia. He previously ran Value Stock Guide, one of the earliest value investing platforms online.
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