What Defines a Value Stock?

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.

Below is a list of notable value stocks in the basic materials sector:

1. Turquoise Hill Resources TRQ - P/E: 5.12
2. Verso VRS - P/E: 3.85
3. Valhi VHI - P/E: 5.65
4. Warrior Met Coal HCC - P/E: 3.6
5. Commercial Metals CMC - P/E: 8.78

This quarter, Turquoise Hill Resources experienced an increase in earnings per share, which was 0.03 in Q1 and is now 0.04. Turquoise Hill Resources does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.

Verso has reported Q2 earnings per share at -0.99, which has decreased by 682.35% compared to Q1, which was 0.17. Verso does not have a dividend yield, which investors should be aware of when considering holding onto such a stock.

Valhi’s earnings per share for Q1 sits at 0.07, whereas in Q4, they were at 0.03. Most recently, the company reported a dividend yield of 3.04%, which has decreased by 30.19% from last quarter’s yield of 33.23%.

Warrior Met Coal saw a decrease in earnings per share from 0.39 in Q1 to -0.18 now. Most recently, the company reported a dividend yield of 1.23%, which has decreased by 0.61% from last quarter’s yield of 1.84%.

Commercial Metals has reported Q3 earnings per share at 0.59, which has increased by 11.32% compared to Q2, which was 0.53. Its most recent dividend yield is at 2.62%, which has decreased by 0.99% from 3.61% in the previous 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.