When these 3 stocks are described as “cheap” it means they’re priced at valuation levels of much less than the stock market taken as a whole. Valuation in this case considers price-earnings ratios — that is, how much in earnings is the company generating for the price you pay for its stock. There are other measures of relative value but “p/e” is the classic starting point for identifying possible investable situations.
Franklin Resources (BEN:NYSE) Buy here at 30-32 price range. Stop loss at 27. A closing price above 38 would be bullish from a price chart analysis viewpoint.
Franklin is an asset management firm also known as Franklin Templeton. Founded in 1947, the New York-based company with global reach trades with a price-earnings ratio of 8.66. This is far less than that of the S&P 500 which now sits with a p/e of 37.
This value characteristic (low price-earnings ratio) is confirmed by Franklin Resource’s price to book value which comes in at a low 1.35. Price to book for the S&P 500 is 4.54 — you can see how the business trades as a value compared to the market in general.
Low p/e and low book were key elements of Benjamin Graham’s methods as described in his classic work on the subject The Intelligent Investor. Franklin’s price to sales ratio is also relatively low at 1.85.
Earnings per share this year increased by 124.60%. The past 5-year EPS growth rate is 4.00%. Investors are paid a dividend of $1.16/share for an annualized yield of 3.75%. Franklin’s average daily volume on the NYSE is 2.69 million shares
Big 5 Sporting Goods (BGFV:NASD) Buy between 18 and 19. Stop loss at 15.50. Target is above 22.
Big 5 is a specialty retail apparel company focused on the outdoors. Headquartered in El Segundo, California, the company’s price-earnings ratio is just 4 and it trades at 1.47 times its book value, both low metrics compared to most other stocks.
Big 5’s earnings per share are up this year by a spectacular 546.70%. The EPS growth for the past 5 years comes in at 29.90%. Their price to sales ratio is a very low .36. Price to free cash flow is also relatively low at 7.03.
Shareholder equity greatly exceeds any long-term debt. Big 5 pays investors a $1.00/share dividend — that comes to a 5.32% dividend. The stock is highly liquid with average daily volume on the NASDAQ of 2.18 million shares.
Star Bulk Carriers (SBLK:NASD) Buy between 22 and 24. Stop loss at 18. Target is to above 25.
Star Bulk is a global shipping company based in Greece. According to the company’s website, their vessels “transport major bulks, which include iron ore, minerals and grain.”
The stock trades with a price-earnings ratio of 5.77 and at a price to book value of just 1.24. The price to sale metric is also relatively low at 2.03. The same with price to free cash flow at 5.77.
Earnings per share are up by 158% this year and the 5-year rate of growth for EPS is 15%. Star Bulk Carriers has more long-term debt than shareholder equity. The dividend yield, right now at 21.61%, may be difficult to sustain at that high level.
These are long-term ideas.
One of the major reasons to look at cheap, value stocks is that they show up on the screens of those large institutional investors looking for candidates to buy out or merge with similar companies in the same sector. No guarantees can be offered that such may be the case with the above equities but it’s definitely something to keep in mind.
Not investment advice. For education purposes only.