Introduction
Low multiples such as earnings multiples or book multiples generally represent good values. While this may not be always true, it is true enough that they make for a great screen to shortlist stocks for further review. In this screen we go after the traditional trifecta of low price/book, low price/earnings and low price/sales. At the same time, we are look for some history of sales and earnings growth.
This gives us a good shortlist of stocks from which we can further narrow down our focus by quick review of other fundamental data.
Screen Details
This screen looks for mid cap stocks between $2 Billion and $5 Billion in market capitalization with low multiples:
- P/E ratio between 2 and 10
- P/B ratio < 1.5
- P/S ratio < 2
- 5 year EPS growth rate > 2%
- 5 year Sales growth rate > 2%
The stocks are limited to those listed on US exchanges.
The Screen Results
Stock | Company | P/E Ratio | P/B Ratio | P/S ratio | EPS 5 yr growth | Sales 5 yr growth |
|---|---|---|---|---|---|---|
ANAR | American National Ins | 9.6 | 0.5 | 0.9 | 6.4% | 2.7% |
ELP | Cia Paranaense De Energia | 8.5 | 1.0 | 1.1 | 9.6% | 5.4% |
ESGR | Enstar Group | 7.5 | 1.1 | 2.0 | 14.1% | 23.7% |
PFSI | PennyMac Financial Services | 9.4 | 1.4 | 1.8 | 17.3% | 23.7% |
SAVE | Spirit Airlines | 7.7 | 1.2 | 0.7 | 11.8% | 14.7% |
TX | Ternium | 5.0 | 0.7 | 0.4 | 9.4% | 4.6% |
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Notes and Observations
I am not favoring the financial and energy sectors yet. Of the remaining names, none show sufficient financial strength to be considered further
Ending Note
The ugly truth about cheap stocks is that they may be on a shaky ground financially. This is apparent from this screen. We do not have any new ideas to carry forward from this screen.
