Understanding 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 utilities sector:
- UGI UGI - P/E: 9.86
- Pampa Energia PAM - P/E: 3.4
- Companhia De Saneamento SBS - P/E: 9.76
- China Recycling Energy CREG - P/E: 3.55
- NRG Energy NRG - P/E: 9.36
UGI's earnings per share for Q3 sits at 0.13, whereas in Q2, they were at 1.99. Its most recent dividend yield is at 2.96%, which has decreased by 0.16% from 3.12% in the previous quarter.
Pampa Energia saw an increase in earnings per share from 0.58 in Q1 to 1.94 now. Pampa Energia does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.
Companhia De Saneamento's earnings per share for Q2 sits at 0.21, whereas in Q1, they were at 0.13. Its most recent dividend yield is at 2.94%, which has decreased by 0.83% from 3.77% in the previous quarter.
China Recycling Energy's earnings per share for Q2 sits at -0.16, whereas in Q1, they were at -0.09. China Recycling Energy does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.
This quarter, NRG Energy experienced an increase in earnings per share, which was -0.23 in Q1 and is now 4.4. Most recently, the company reported a dividend yield of 3.13%, which has decreased by 0.2% from last quarter's yield of 3.33%.
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.
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