What are Value Stocks?
A value stock traditionally has a lower price when compared to stock prices of companies in the same industry. This indicates that the company may be undervalued, as investors are not expressing as much interest in such companies. The most commonly used way to check for value is with the price-to-earnings multiple, or P/E. A low P/E multiple is a good indication that the stock is undervalued.
Below is a list of notable value stocks in the consumer cyclical sector:
- Macy's (NYSE:M) - P/E: 5.38
- American Eagle Outfitters (NYSE:AEO) - P/E: 8.13
- Hovnanian Enterprises (NYSE:HOV) - P/E: 0.61
- Urban Outfitters (NASDAQ:URBN) - P/E: 8.05
- Big 5 Sporting Goods (NASDAQ:BGFV) - P/E: 3.76
Macy's has reported Q4 earnings per share at $2.45, which has increased by 99.19% compared to Q3, which was 1.23. Most recently, the company reported a dividend yield of 2.45%, which has increased by 0.17% from last quarter's yield of 2.28%.
Most recently, American Eagle Outfitters reported earnings per share at $0.35, whereas in Q3 earnings per share sat at $0.76. Most recently, the company reported a dividend yield of 3.42%, which has increased by 0.75% from last quarter's yield of 2.67%.
Hovnanian Enterprises saw a decrease in earnings per share from 7.41 in Q4 to $3.07 now. Urban Outfitters has reported Q4 earnings per share at $0.41, which has decreased by 53.93% compared to Q3, which was 0.89. Big 5 Sporting Goods saw a decrease in earnings per share from 1.07 in Q3 to $0.89 now. Most recently, the company reported a dividend yield of 6.04%, which has increased by 2.13% from last quarter's yield of 3.91%.
The Significance: A value stock may need some time to rebound from its undervalued position. The risk of investing in a value stock is that this emergence may never materialize.
