What is 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.
The following stocks are considered to be notable value stocks in the basic materials sector:
- Loma Negra Cia Industria (NYSE:LOMA) - P/E: 8.55
- Cementos Pacasmayo (NYSE:CPAC) - P/E: 9.31
- Vale (NYSE:VALE) - P/E: 7.06
- Steel Dynamics (NASDAQ:STLD) - P/E: 7.29
- Gerdau (NYSE:GGB) - P/E: 5.05
Loma Negra Cia Industria's earnings per share for Q3 sits at $0.26, whereas in Q2, they were at 0.09. Cementos Pacasmayo has reported Q3 earnings per share at $0.14, which has decreased by 9.33% compared to Q2, which was 0.15. The company's most recent dividend yield sits at 10.45%, which has decreased by 2.68% from 13.13% last quarter.
Vale saw an increase in earnings per share from 0.2 in Q2 to $0.66 now. Steel Dynamics saw a decrease in earnings per share from 4.81 in Q2 to $3.47 now. The company's most recent dividend yield sits at 1.52%, which has decreased by 0.09% from 1.61% last quarter.
Gerdau has reported Q2 earnings per share at $0.38, which has increased by 8.57% compared to Q1, which was 0.35. Its most recent dividend yield is at 8.19%, which has increased by 1.75% from 6.44% 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.