For Immediate Release
Chicago, IL – July 19, 2022 – Stocks in this week’s article are BorgWarner
BWA
, Group 1 Automotive
GPI
, Turtle Beach Corp.
HEAR
, Commercial Vehicle Group
CVGI
and Signet Jewelers Ltd.
SIG
.
5 Low Price-to-Book Value Stocks to Buy for Solid Returns
The price-to-book (P/B) ratio is widely favored by value investors for identifying low-priced stocks with exceptional returns. The ratio is used to compare a stock’s market value/price to its book value.
The P/B ratio is calculated as below:
P/B ratio = market price per share/book value of equity per share
P/B ratio reflects how many times book value investors are ready to pay for a share. So, if the share price is $10 and book value of equity is $5, investors are ready to pay two times the book value. Ideally, a P/B value under 1.0 is considered good as it indicates that the stock is potentially undervalued. However, value investors often consider stocks with a P/B value under 3.0.
The P/B ratio helps to identify low-priced stocks that have high growth prospects.
BorgWarner
,
Group 1 Automotive
,
Turtle Beach Corp.
,
Commercial Vehicle Group
and
Signet Jewelers Ltd.
are some such stocks.
Now let us understand the concept of book value.
What’s Book Value?
Book value is the total value that would be left over, according to the company’s balance sheet, if it goes bankrupt immediately. In other words, this is what shareholders would theoretically receive if a company liquidates all its assets after paying off all its liabilities.
It is calculated by subtracting total liabilities from the total assets of a company. In most cases, this equates to the common stockholders’ equity on the balance sheet. However, depending on the company’s balance sheet, intangible assets should also be subtracted from the total assets to determine book value.
Understanding P/B Ratio
By comparing the book value of equity to its market price, we get an idea of whether a company is under-or overpriced. However, like P/E or P/S ratio, it is always better to compare P/B ratios within industries.
A P/B ratio of less than one means that the stock is trading at less than its book value, or the stock is undervalued and therefore a good buy. Conversely, a stock with a ratio greater than one can be interpreted as being overvalued or relatively expensive.
For example, a stock with a P/B ratio of 2 means that we pay $2 for every $1 of book value. Thus, the higher the P/B, the more expensive the stock.
But there is a caveat. A P/B ratio of less than one can also mean that the company is earning weak or even negative returns on its assets or that the assets are overstated, in which case the stock should be shunned because it may be destroying shareholder value. Conversely, the stock’s price may be significantly high — thereby pushing the P/B ratio to more than one — in the likely case that it has become a takeover target, a good enough reason to own the stock.
Moreover, the P/B ratio isn’t without limitations. It is useful for businesses — like finance, investments, insurance, and banking or manufacturing companies — with many liquid/tangible assets on the books. However, it can be misleading for firms with significant R&D expenditure, high debt, service companies, or those with negative earnings.
In any case, the ratio is not particularly relevant as a standalone number. One should analyze other ratios like P/E, P/S, and debt to equity before arriving at a reasonable investment decision.
Here are our five picks out of the 12 stocks that qualified the screening:
Turtle Beach Corp.
is an audio technology company. It designs audio products for consumer, commercial and healthcare markets. The company markets premium headsets for use with personal computers, mobile devices and video game consoles under the brand Turtle Beach.
Turtle Beach Corporation has a Zacks Rank #2 and a Value Score of A. Turtle Beach Corporation has a projected 3–5 year EPS growth rate of 16.0%.
BorgWarner
is a global leader in clean and efficient technology solutions. BorgWarner’s largest customers include Volkswagen and Ford. BWA’s production and technical facilities are spread over 64 locations in 17 countries.
BorgWarner has a projected 3–5-year EPS growth rate of 29.37%. BWA currently has a Zacks Rank #1 and a Value Score of A.
Group 1 Automotive
is a leading automotive retailer. Through its dealerships, the firm sells new and used cars and light trucks. Apart from selling new and used vehicles, Group 1 Automotive offers vehicle financing and insurance and service contracts.
Group 1 Automotive has a projected 3-5-year EPS growth rate of 14.19%. GPI currentlyhas a Zacks Rank #2 and a Value Score of A.
Commercial Vehicle Group
supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, including the heavy-duty (Class 8) truck market, the construction market and other specialized transportation markets. The company’s products include suspension seat systems, interior trim systems, such as instrument and door panels, headliners, cabinetry and floor systems, mirrors, wiper systems, controls and switches, specifically designed for applications in commercial vehicle cabs.
CVGI currently has a Zacks Rank #1 and a Value Score of B. You can see
the complete list of today’s Zacks #1 Rank stocks here
.
It has a projected 3-5 year EPS growth rate of 21.0%.
Signet Jewelers
is a retailer of diamond jewelry, watches as well as other products. SIG operates in the United States, Canada, U.K., the Republic of Ireland, and the Channel Islands.
Signet Jewelers has a projected 3-5-year EPS growth rate of 8%. Signet Jewelers currently has a Zacks Rank #1 and a Value Score of A.
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