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.
The following stocks are considered to be notable value stocks in the consumer defensive sector:
- Albertsons Companies (NYSE:ACI) - P/E: 7.26
- Pilgrims Pride (NASDAQ:PPC) - P/E: 6.41
- 51 Talk Online Education (NYSE:COE) - P/E: 2.66
- Sunlands Technology (NYSE:STG) - P/E: 1.44
- Bridgford Foods (NASDAQ:BRID) - P/E: 2.65
Most recently, Albertsons Companies reported earnings per share at $0.72, whereas in Q1 earnings per share sat at $1.0. Pilgrims Pride's earnings per share for Q3 sits at $1.09, whereas in Q2, they were at 1.54. This quarter, 51 Talk Online Education experienced an increase in earnings per share, which was $-3.76 in Q1 and is now $-2.68. This quarter, Sunlands Technology experienced an increase in earnings per share, which was $1.26 in Q2 and is now $1.69. Bridgford Foods has reported Q3 earnings per share at $0.04, which has increased by 144.44% compared to Q2, which was -0.09.
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.