For Immediate Release
Chicago, IL – March 10, 2023 – Stocks in this week’s article are Deutsche Bank DB, Signet Jewelers SIG, EPR Properties EPR and Sterling Infrastructure STRL.
4 Stocks with Low P/B Ratios to Buy in March
When evaluating a company’s value, investors mostly look at a stock’s Price-to-Earnings (P/E) or Price-to-Sales (P/S) ratio. While P/E is the ratio of annual earnings to stock price, P/S reflects the amount investors pay for each dollar of revenues generated by the company.
Though P/E and P/S valuation tools are more commonly used for stock selection, the price-to-book ratio (P/B ratio) is also an easy-to-use metric for identifying low-priced stocks with high-growth prospects.
P/B is the ratio of stock price to book value.
It is calculated as below:
P/B ratio = market capitalization/book value of equity
The P/B ratio helps to identify low-priced stocks that have high growth prospects. Deutsche Bank, Signet Jewelers, EPR Properties and Sterling Infrastructure are some such stocks.
Now let us understand the concept of book value.
What’s Book Value?
Book value is the total value that would be left over, according to the company’s balance sheet, if it goes bankrupt immediately. In other words, this is what shareholders would theoretically receive if a company liquidates all its assets after paying off all its liabilities.
It is calculated by subtracting total liabilities from the total assets of a company. In most cases, this equates to the common stockholders’ equity on the balance sheet. However, depending on the company’s balance sheet, intangible assets should also be subtracted from the total assets to determine book value.
Understanding P/B Ratio
By comparing the book value of equity to its market price, we get an idea of whether a company is under-or overpriced. However, like P/E or P/S ratio, it is always better to compare P/B ratios within industries.
A P/B ratio of less than one means that the stock is trading at less than its book value, or the stock is undervalued and, therefore a good buy. Conversely, a stock with a ratio greater than one can be interpreted as being overvalued or relatively expensive.
For example, a stock with a P/B ratio of 2 means that we pay $2 for every $1 of book value. Thus, the higher the P/B, the more expensive the stock.
But there is a caveat. A P/B ratio of less than one can also mean that the company is earning weak or even negative returns on its assets or that the assets are overstated, in which case the stock should be shunned because it may be destroying shareholder value. Conversely, the stock’s price may be significantly high — thereby pushing the P/B ratio to more than one — in the likely case that it has become a takeover target, a good enough reason to own the stock.
Moreover, the P/B ratio isn't without limitations. It is useful for businesses — like finance, investments, insurance, and banking or manufacturing companies — with many liquid/tangible assets on the books. However, it can be misleading for firms with significant R&D expenditure, high debt, service companies, or those with negative earnings.
In any case, the ratio is not particularly relevant as a standalone number. One should analyze other ratios like P/E, P/S and debt to equity before arriving at a reasonable investment decision.
Here are our four picks out of the seven stocks that qualified the screening:
Headquartered in Frankfurt am Main, Deutsche Bank Aktiengesellschaft, also called Deutsche Bank AG, is the largest bank in Germany and one of the largest financial institutions in Europe and the world, as measured by total assets.
Deutsche Bank has a Zacks Rank #1 and a Value Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
DB has a projected 3–5 year EPS growth rate of 6.53%.
Signet Jewelers is a retailer of diamond jewelry, watches and other products. The company operates in the United States, Canada, the U.K., the Republic of Ireland and the Channel Islands.
Signet Jewelers has a projected 3–5-year EPS growth rate of 8%. SIG currently has a Zacks Rank #2 and a Value Score of A.
EPR Properties is specialty real estate investment trust that invests in three primary segments: Entertainment, Recreation and Education. Its properties include megaplex theatres, entertainment retail centers, and destination recreational and specialty properties.
EPR Properties has a Zacks Rank #2 and a Value Score of B. EPR has a projected 3–5 year EPS growth rate of 8.96%.
Sterling Infrastructure operates through subsidiaries within segments specializing in E-Infrastructure, Building and Transportation Solutions. E-Infrastructure Solutions projects develop advanced, large-scale site development systems and services for data centers, e-commerce distribution centers, warehousing, transportation, energy and more.
Building Solutions projects include residential and commercial concrete foundations for single-family and multi-family homes,parking structures, elevated slabs and other concrete work. Transportation Solutions includes infrastructure and rehabilitation projects for highways, roads, bridges, airports, ports, light rail, water, wastewater and storm drainage systems.
Sterling Infrastructure has a projected 3-5-year EPS growth rate of 18%. Sterling Infrastructure currently has a Zacks Rank #2 and a Value Score of A.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2063378/4-stocks-with-low-pb-ratio-to-buy-in-march
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