Let’s face it, value stocks are yesterday’s news.
Not only has the Russell 2000 index lagged behind other broad market indexes but the tech-heavy Nasdaq is now up 23% for the year.
But that hasn’t always been the case. In fact, historically, value stocks (shares of companies that are cheaper than the average as measured by things like price-to-earnings ratios) have outperformed.
Could it be time for value to catch up?
The following stocks have been selected based on their trailing price-to-earnings, price-to-book, sales growth, and return on equity.
Rockwell (ROK): This industrial automation company’s shares are up 12.5% for the year. Contributing to this increase is the upgrading of supply chains and the automation of factory processes. Revenue is expected to increase in the next two years by 5% and 7% respectively, and ROE is expected to shine at 88% in fiscal year 2021.
NVR (NVR): Homebuilding and mortgage banking is where this company operates, focussing on single-family detached homes, townhomes, and condos. The stock has gained 7.5% this year, bolstered by new home deliveries and a 12% rise in backlogs of houses under construction. Sales in 2021 are expected to rise by 8.6% in 2021, promoting earnings growth 15%.
Avery Dennison(AVY): This label and packaging giant manufactures and distributes pressure-sensitive and packaging materials around the world anywhere you can imagine a label is used. Shares and earnings are down 10% and 9.4% respectively, but forecasts for 2021 are anticipating sales to bounce back by 4.4% pushing profits up by 11%.
Illinois Tool Works(ITW): This is a world-class diversified industrial-equipment and components manufacturer operating in seven segments including but not limited to automotive, food, welding, and construction products. Sales are anticipated to grow by 10% in 2021, expanding earnings by 23% to $7.06 a share, and an ROE of 97% and a yield of 2.3%.
Procter & Gamble (PG): The Blue Chip consumer goods giant synonymous with names like Gillette, Tide, and Crest own a stable full of familiar brand names. P&G has outperformed the S&P 500’s five-year price-performance besting the index by a whopping 20%, the indexes 70% to P&G’s 90%. Fourth-quarter earnings reported $1.16 per share on revenue of $17.698 beating analysts’ expectations of $17 billion. Annual earnings per share for the year showed an increase of 13%.
Bottom Line: Stocks trading at a discount that you want to ultimately outperform the market may seem like a needle in a haystack. Consider these metrics as a jumping-off point: Price-to-Earnings Ratio, Price-to-Book Ratio, and the Price-to-Sales Ratio.
Until Next Time,
The BLI Staff