Value investing is a time-tested strategy that focuses on finding assets trading for less than their intrinsic value, allowing investors to buy such undervalued assets at a discount. This approach hinges on the idea that market prices often don’t fully reflect a company’s fundamentals, providing opportunities to benefit from market corrections in the long run.
A key metric for value investors is earnings yield, which offers insight into a stock’s profitability relative to its market price. Earnings yield is calculated by dividing a company’s earnings per share (EPS) by its current stock price (Earnings Yield = EPS / Current Stock Price). This figure represents the profit generated for each dollar invested, effectively serving as the inverse of the price-to-earnings (P/E) ratio. A higher earnings yield typically indicates that a stock may be undervalued and could provide growth potential, while a lower earnings yield could suggest overvaluation.
Pitney Bowes PBI, Mr. Cooper Group Inc. COOP, Barrick Gold GOLD, Quad Graphics QUAD and PDD Holdings Inc. PDD are a few solid high earnings yield picks for value investors.
Beyond identifying individual stocks, earnings yield also aids in comparing the stock market to fixed-income investments, like 10-year Treasury bonds. If the earnings yield of a market index surpasses the bond yield, it can indicate favorable conditions for investing in stocks over bonds, which is valuable for portfolio diversification.
The Winning Strategy
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Picks
Here we discuss five of the 23 stocks that qualified the screening:
Pitney Bowes: It is a global technology company powering billions of transactions — physical and digital — in the connected and borderless world of commerce. The Zacks Consensus Estimate for Pitney Bowes’ 2024 and 2025 earnings implies year-over-year growth of 850% and 176%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 3 cents and 7 cents, respectively, over the past seven days. PBI currently sports a Zacks Rank #1 and has a Value Score of A.
Cooper Group: It is engaged in non-banking services for mortgage loans and provides quality servicing, origination and transaction-based services principally to single-family residences primarily in the United States. The Zacks Consensus Estimate for Cooper Group’s 2024 and 2025 earnings implies year-over-year growth of 39% and 34%, respectively. In the past 30 days, the consensus mark for 2024 and 2025 EPS has been revised upward by 19 cents and 2 cents, respectively. COOP currently sports a Zacks Rank #1 and has a Value Score of B.
Barrick Gold: It is one of the largest gold mining companies in the world, having many advanced exploration and development projects located across five continents. The Zacks Consensus Estimate for Barrick Gold’s 2024 and 2025 earnings implies year-over-year growth of 54% and 48%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 2 cents and 14 cents, respectively, over the past 30 days. GOLD currently has a Zacks Rank #2 and a Value Score of A.
Quad Graphics: It is a provider of print and related multichannel solutions for consumer magazines, special interest publications, catalogs, retail inserts and circulars, direct mail products, books and directories. The Zacks Consensus Estimate for Quad Graphics’ 2024 and 2025 earnings implies year-over-year growth of 62% and 29%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 8 cents and 2 cents, respectively, over the past 30 days. QUAD currently has a Zacks Rank #2 and a Value Score of A.
PDD Holdings: It is a multi-national commerce group that operates a portfolio of businesses. The Zacks Consensus Estimate for PDD Holdings’ 2024 and 2025 earnings implies year-over-year growth of 83% and 11%, respectively. Estimates for 2024 and 2025 earnings per share have moved up by 6 cents and 9 cents, respectively, over the past 30 days. PDD currently has a Zacks Rank #2 and a Value Score of A.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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