For Immediate Release
Chicago, IL – August 15, 2017 - Stocks in this week’s article include Coca-Cola FEMSA, S.A.B. de C.V. (NYSE: (NYSE:KOF) – Free Report), Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: (NYSE:BBVA) – Free Report), Lantheus Holdings, Inc. (NASDAQ: (NASDAQ:LNTH) – Free Report), Gilead Sciences, Inc. (NASDAQ: (NASDAQ:GILD) – Free Report) and Lam Research Corporation (NASDAQ: (NASDAQ:LRCX) – Free Report).
Screen of the Week of Zacks Investment Research:
5 Discounted PEG Stocks for GARP Investors
Following the investment track of Oracle (NYSE:ORCL) of Omaha, we can see how, in quest of excellence, this pure play value investor gradually shifted to become a GARP (growth at a reasonable price) investor. According to him, while picking undervalued stocks, investors also need to focus on its earnings growth potential.
GARP combines both growth and value investing principles and offers a mixed investing strategy that has a proven track record of success.
What GARPers look for is whether the stocks are somewhat undervalued and have solid sustainable growth potential (Investopedia).
And here lies the importance of a not-so-popular fundamental metric, the price/earnings growth (PEG) ratio. Although it is categorized under value investing, this strategy follows the principles of both growth and value investing.
The PEG ratio is defined as: (Price/ Earnings)/Earnings Growth Rate
It relates the stocks P/E ratio with future earnings growth rate.
While P/E alone only gives the idea of stocks, which are trading at a discount, PEG while adding the GROWTH element to it, helps to find those stocks that have solid future potential.
A lower PEG ratio, preferably less than 1, is always better for GARP investors.
Say for example, if a stock’s P/E ratio is 10 and expected long-term growth rate is 15%, the company’s PEG will come down to 0.66, a ratio which indicates both undervaluation and future growth potential.
Unfortunately, this ratio is often neglected due to investors’ limitation to calculate the future earnings growth rate of a stock.
There are some drawbacks to using the PEG ratio though. It doesn’t consider the very common situation of changing growth rates such as the forecast of the first three years at very high growth rates followed by a sustainable but lower growth rate in the long term.
Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.
Here are the screening criteria for a winning strategy:
PEG Ratio less than X Industry Median
P/E Ratio (using F1) less than X Industry Median (For more accurate valuation purpose.)
Zacks Rank of 1 (Strong Buy) or 2 (Buy) (Whether good market conditions or bad, stocks with a Zacks Rank #1 or #2 have a proven history of success.)
Market Capitalization greater than $1 Billion (This helps us to focus on companies that have strong liquidity.)
Average 20 Day Volume greater than 50,000: A substantial trading volume ensures that the stock is easily tradable.
Percentage Change F1 Earnings Estimate Revisions (4 Weeks) greater than 5%: Upward estimate revisions add to the optimism, suggesting further bullishness.
Value Score of less than or equal to B: Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1, 2 or 3 (Hold) offer the best upside potential.
Here are five of the 28 stocks that qualified the screening:
Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF – Free Report): This franchise bottler produces, markets, distributes, and sells Coca-Cola trademark beverages. The company offers a portfolio of products, including sparkling beverages, still beverages, juices, sports, and energy drinks, as well as teas, waters, isotonics, and dairy products. Apart from a Zacks Rank #1 and a Value Style Score of B, the stock also has an impressive long-term expected growth rate of 17.5%.
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA (MC:BBVA) – Free Report): BBVA Compass ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (5th). The stock also can be an impressive value investment pick with its Zacks Rank #2 and Value Style Score of A. Apart from a discounted PEG and P/E, the stock also has an impressive long-term expected growth rate of 10.3%.
Lantheus Holdings, Inc.(NASDAQ:LNTH – Free Report): The company develops, manufactures, and commercializes diagnostic medical imaging agents and products for the diagnosis and treatment of cardiovascular and other diseases worldwide. Apart from a Zacks Rank #2 and Value Style Score of A, the company also has an impressive expected growth rate of 52% for the current fiscal.
Gilead Sciences, Inc. (NASDAQ:GILD – Free Report): This biopharmaceutical company is focused on developing drugs for the treatment of human immunodeficiency virus (HIV), liver diseases such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection, cardiovascular, hematology/oncology and inflammation/respiratory diseases. The company holds a Zacks Rank #2 and has a Value Style Score A. It also has an impressive five-year historical growth rate of 44%.
Lam Research Corporation (NASDAQ:LRCX – Free Report): This is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. Apart from a Zacks Rank #1 and Value Style Score of B, the company also has an impressive long-term expected growth rate of 17.2%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.
Get the full Report on KOF - FREE
Get the full Report on BBVA - FREE
Get the full Report on LNTH - FREE
Get the full Report on GILD - FREE
Get the full Report on LRCX - FREE
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook (NASDAQ:FB): https://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/performance
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Banco Bilbao Viscaya Argentaria S.A. (BBVA): Free Stock Analysis Report
Coca Cola Femsa S.A.B. de C.V. (KOF): Free Stock Analysis Report
Lantheus Holdings, Inc. (LNTH): Free Stock Analysis Report
Gilead Sciences, Inc. (GILD): Free Stock Analysis Report
Lam Research Corporation (LRCX): Free Stock Analysis Report
Original post
Zacks Investment Research