Understanding Value Stocks

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.

Benzinga Insights has compiled a list of value stocks in the financial services sector that may be worth watching:

1. Meridian Bancorp EBSB - P/E: 9.08
2. First Community FCBC - P/E: 8.94
3. Old Second Bancorp OSBC - P/E: 8.25
4. Grupo Financiero Galicia GGAL - P/E: 5.93
5. Macatawa Bank MCBC - P/E: 8.4

Meridian Bancorp’s earnings per share for Q2 sits at 0.34, whereas in Q1, they were at 0.25. The company’s most recent dividend yield sits at 2.65%, which has increased by 0.79% from 1.86% last quarter.

This quarter, First Community experienced a decrease in earnings per share, which was 0.5 in Q1 and is now 0.46. Its most recent dividend yield is at 4.77%, which has increased by 0.46% from 4.31% in the previous quarter.

This quarter, Old Second Bancorp experienced an increase in earnings per share, which was 0.2 in Q1 and is now 0.31. Most recently, the company reported a dividend yield of 0.54%, which has decreased by 0.04% from last quarter’s yield of 0.58%.

Most recently, Grupo Financiero Galicia reported earnings per share at 0.09, whereas in Q4 earnings per share sat at 0.11. Its most recent dividend yield is at 1.36%, which has increased by 0.62% from 0.74% in the previous quarter.

Most recently, Macatawa Bank reported earnings per share at 0.22, whereas in Q1 earnings per share sat at 0.19. The company’s most recent dividend yield sits at 4.41%, which has decreased by 0.2% from 4.61% last 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.