4 stocks are trading below gains

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When screening the market for stocks that are trading at or below their fair price, one tool investors can use is the earnings power value.

The value of earnings power was popularized by Bruce Greenwald, a former Columbia University professor and well-known value investor. He was looking for ways to circumvent the series of random choices that must be made when trying to assess a stock’s intrinsic value using the discounted cash flow valuation model. The measure is calculated as adjusted earnings divided by the weighted average cost of capital.

The following stocks appear reasonably priced, as their stock prices are trading below their respective earnings power values.

Macy’s Inc.

The first stock that meets the above criteria is Macy’s Inc. (M, Financial), a New York-based department store operating 725 stores in the United States, the District of Columbia, Puerto Rico and Guam. The Company’s merchandise is also sold in stores in Dubai, the United Arab Emirates and Kuwait under license agreements.

Macy’s earnings power value is $37.74 per share (as of the last fiscal quarter ended July 29), which is higher than the stock price of $17.10 at the end of Friday’s trading, for a margin of safety of approximately 54.69%.

After a 22.02% decline in the stock price over the past year, the market capitalization is $4.63 billion. The 52-week range is $15.85-$37.95.

GuruFocus rated the company’s financial strength 5 out of 10 and its profitability 7 out of 10.

Vanguard Group Inc., BlackRock Inc. and

Jim Simons (Trades, Portfolio) are among the company’s major institutional shareholders with 10.87%, 9.5% and 4.57% of the total shares outstanding, respectively.

HP Inc.

The second stock making the cut is HP Inc. (HPQ, Financial), a hardware company based in Palo Alto, California.

HP Inc.’s earnings power value is $88.28 per share (as of the last fiscal quarter ending July 30), which is higher than the stock price of $27.64 at the end of normal trading hours on Friday, for a margin of safety of 68.69%.

After a 3.53% decline in the share price over the past year, the market capitalization is now $28.58 billion. The 52-week range is $26.11-$41.47.

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GuruFocus rated the company’s financial strength 6 out of 10 and its profitability 8 out of 10.

warren buffet (Trades, Portfolio), Vanguard Group Inc. and BlackRock Inc. are among the company’s largest institutional shareholders with 10.10%, 9.60% and 9.51% of total shares outstanding, respectively.

Devon Energy Corporation

The third eligible stock is Devon Energy Corp. (NDV, Financial), an oil and gas producer based in Oklahoma City, Oklahoma, which operates approximately 5,134 gross wells in the United States.

The value of the earnings power of Devon Energy Corp. is $223.85 per share (as of the June 2022 quarter), which is higher than the share price of $70.34 at the end of normal hours on Friday, determining a margin of safety of approximately 68, 58%.

After the shares have risen 142% in the past year, the market capitalization is around $46.06 billion. The 52-week range is $27.40-$79.40.

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GuruFocus rated the company’s financial strength 7 out of 10 and its profitability 5 out of 10.

Vanguard Group, BlackRock Inc. and State Street Corp. are among the top fund holders of the company with 11.54%, 8.31% and 6.10% of the outstanding shares respectively.

The Western Union Company

The fourth stock to qualify is The Western Union Co (Wu, Financial), a Denver, Colorado-based provider of global money transfer and payment services that facilitates the transfer of money between consumers and businesses and the completion of consumer-to-business transactions.

Western Union Co’s earnings power value is $28.05 per share (as of the June 2022 quarter), which is higher than Friday’s stock price of $14.56, determining a margin of safety of approximately 48.1%.

After shares have fallen 32.31% over the past year, the market capitalization is around $5.62 billion. The 52-week range is $14.51-$21.87.

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GuruFocus rated the company’s financial strength 5 out of 10 and its profitability 9 out of 10.

BlackRock Inc., Vanguard Group Inc. and Capital Research Global Investors are among the company’s largest institutional shareholders with 16.34%, 10.95% and 5.76% of total shares outstanding, respectively.

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