The Meaning Behind 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.

The following stocks are considered to be notable value stocks in the basic materials sector:

1. FutureFuel FF - P/E: 4.76
2. Kraton KRA - P/E: 2.31
3. Turquoise Hill Resources TRQ - P/E: 5.39
4. Ramaco Resources METC - P/E: 10.0
5. Commercial Metals CMC - P/E: 8.64

Most recently, FutureFuel reported earnings per share at 0.35, whereas in Q1 earnings per share sat at 0.44. FutureFuel does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.

Kraton’s earnings per share for Q2 sits at 0.3, whereas in Q1, they were at 0.27. Kraton does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.

Turquoise Hill Resources has reported Q2 earnings per share at 0.04, which has increased by 33.33% compared to Q1, which was 0.03. Turquoise Hill Resources does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.

Most recently, Ramaco Resources reported earnings per share at 0.06, whereas in Q1 earnings per share sat at 0.05. Ramaco Resources does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.

This quarter, Commercial Metals experienced an increase in earnings per share, which was 0.53 in Q2 and is now 0.59. The company’s most recent dividend yield sits at 2.62%, which has decreased by 0.99% from 3.61% last 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.