What Defines a Value Stock?
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.
The following stocks are considered to be notable value stocks in the basic materials sector:
- Steel Dynamics STLD - P/E: 5.37
- Cemex CX - P/E: 1.4
- Nexa Res NEXA - P/E: 7.45
- Reliance Steel & Aluminum RS - P/E: 7.45
- Huntsman HUN - P/E: 5.9
Steel Dynamics saw a decrease in earnings per share from 5.46 in Q3 to $4.37 now. Most recently, the company reported a dividend yield of 1.48%, which has decreased by 0.18% from last quarter's yield of 1.66%.
Cemex looks to be undervalued. It possesses an EPS of $0.18, which has not changed since last quarter (Q2). Nexa Res's earnings per share for Q3 sits at $-0.37, whereas in Q2, they were at 0.61. Reliance Steel & Aluminum's earnings per share for Q3 sits at $6.48, whereas in Q2, they were at 9.15. The company's most recent dividend yield sits at 1.86%, which has decreased by 0.03% from 1.89% last quarter.
Huntsman has reported Q3 earnings per share at $0.71, which has decreased by 44.53% compared to Q2, which was 1.28. Its most recent dividend yield is at 3.18%, which has increased by 0.23% from 2.95% in the previous quarter.
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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