How to Find True Value Stocks- and Avoid Value Traps
Welcome to Episode #197 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
The talking heads in finance are back to talking about the “rotation” into value stocks. But by “value” they’re talking about the hotels, airlines, cruise ship companies, the banks and retailers.
But just because a stock has sold off, doesn’t mean it’s a “value.”
Remember, value is determined by fundamentals like the price-to-earnings ratio which depends on the earnings, as much as the price.
Are these “value” stocks really true values?
Value Stocks or Traps?
• Expedia EXPE doesn’t have a P/E. The current Zacks Consensus Estimate for 2020 if a loss of $5.29. This is a stunning reversal from a year ago when it made $6.15. If you’re looking at the earnings, is it worth paying for that loss of $5.29 right now?
• JPMorgan Chase JPM used to trade around 11x earnings before the pandemic. But this year, the 2020 Zacks Consensus Estimate has fallen to $5.70. It made $10.72 last year. As a result, it’s P/E has risen to 17.2. With those earnings on a sharp decline, is this bank really a value?
• PVH Corp. PVH is in the difficult apparel retail industry. The fiscal 2020 Zacks Consensus Estimate has fallen to a loss of $3.01 in just the last 30 days. It made $9.54 last year so it’s a complete reversal. It also doesn’t have a P/E. Is it a value?
• Canadian Solar CSIQ is one of the rare companies that has not seen its earnings estimates slashed for 2020. Earnings are expected to grow 22% this year and 11% in 2021. Even as shares have risen in the past month, they’re still cheap with a PEG of 0.3. A value or a trap?
• Lithia Motors LAD is an auto retailer. 2 analysts have revised 2020’s earnings estimates higher in the last week as auto sales data remains hot. Shares are up 97% in the last 3 months but it’s still trading with a forward P/E of just 18. A value or a trap?
What else do you need to know about finding true value stocks, and avoiding traps?
Listen to this week’s podcast to find out.
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JPMorgan Chase Co. (JPM): Free Stock Analysis Report
Canadian Solar Inc. (CSIQ): Free Stock Analysis Report
Expedia Group, Inc. (EXPE): Free Stock Analysis Report
PVH Corp. (PVH): Free Stock Analysis Report
Lithia Motors, Inc. (LAD): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.