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First Cut Stocks

Stocks With Low Price-to-Book Ratios

Profitable companies whose price-to-book ratios rank in the bottom 10% of all stocks.

by John Bajkowski | September 2015

While the market does a good job of valuing securities in the long run, in the short run it can overreact to information and push prices away from their true worth.

The book value of a company measures the net worth of the firm’s assets (shareholder’s equity) and is equal to total assets less liabilities. It represents the value of the owners’ equity based upon the historical accounting activities.

Value investors such as Benjamin Graham sought the rare companies with a share price below their book value. Numerous academic studies also identify the price-to-book-value (P/B) ratio as being one of the best measures to identify undervalued and neglected stocks.

“Using Book Value to Judge a Stock’s Worth” by Charles Rotblut in the June 2015 issue of the AAII Journal detailed the strengths and weaknesses of this popular valuation metric.

The First Cut stocks in this issue are non-financial, exchanged-listed stocks with price-to-book-value ratios among the lowest 10% of all stocks. Financial-related companies are excluded because their balance sheets are not directly comparable to other sectors.

Additional filters exclude foreign companies, stocks with prices below $5 per share and companies with negative earnings in the most recent year.

Twenty-five stocks made the first cut, and they are ranked below by their current price-to-book-value ratio.

The table lists the historical price-to-book-value figures, along with the current industry value for comparison.

The price-earnings (P/E) ratios for these companies are all over the board and highlight how short-term earnings disruptions can make earnings-based evaluations difficult.

The historical sales and earnings growth rates measure long-term historical trends.

The market-cap column highlights how most extremely low price-to-book firms tend to be very small companies.

The 52-week relative strength rank column reveals that these stocks have not been the recent darlings of Wall Street—and that is exactly where contrarian investors begin their analysis.

—John Bajkowski, President, AAII

 

 

Stocks With Low Price-to-Book Ratios

  Company
P/B Ratio		 Indus
P/B
Ratio
(X)



P/E
Ratio
(X)


5-Year Ann’l
Growth Rate



Mkt
Cap
($ Mil)		 52-Wk
Rel
Strgth
Rank
(%)



Stock
Price
(8/14)		 Industry
 
 

Current
(X)		 Year
Ago
(X)		 5-Yr
Avg
(X)
  Sales
(%)		 EPS
(%)
Company (Ticker)
GulfMark Offshore, Inc. (GLF) 0.21 0.97 0.99 0.97 12.3 5.0 4.0 212 8 8.25 Oil Well Services & Equip
NRG Yield Inc. (NYLD.A) 0.32 0.77 na 1.64 49.3 na na 3,078 26 16.75 Electric Utilities
Talen Energy Corp. (TLN) 0.33 na na 1.64 4.4 na na 2,050 54 15.95 Electric Utilities
WPX Energy Inc. (WPX) 0.39 1.34 na 1.10 6.7 (1.0) (4.2) 1,933 13 8.22 Oil & Gas Operations
SigmaTron International (SGMA) 0.41 0.80 0.49 1.98 20.5 10.7 7.1 24 20 5.74 Semiconductors
Genco Shipping & Trading (GNK) 0.41 1.00 na 0.93 0.6 (10.3) 20.1 506 12 6.94 Water Transportation
Jones Energy Inc. (JONE) 0.41 1.40 na 1.10 2.1 na na 352 12 5.69 Oil & Gas Operations
EP Energy Corp. (EPE) 0.42 1.39 na 1.10 2.4 11.0 21.9 1,794 15 7.21 Oil & Gas Operations
Atwood Oceanics, Inc. (ATW) 0.43 1.30 1.41 0.97 3.1 14.9 6.1 1,209 14 18.70 Oil Well Services & Equip
Global Power Equipment (GLPW) 0.43 1.02 1.30 1.47 10.8 1.5 (14.6) 121 17 7.02 Construction Services
Universal Stainless & Alloy (USAP) 0.44 1.13 1.19 0.85 32.7 10.5 26.9 91 16 12.76 Iron & Steel
Helix Energy Solutions Grp (HLX) 0.46 1.77 1.36 0.97 7.7 (5.4) 16.3 771 10 7.28 Oil Well Services & Equip
Century Aluminum Co. (CENX) 0.47 2.21 1.10 1.89 4.0 16.5 19.3 528 11 6.07 Misc. Fabricated Products
Hornbeck Offshore Services (HOS) 0.47 1.18 0.94 0.93 6.8 10.5 5.1 677 17 18.88 Water Transportation
Iridium Communications (IRDM) 0.52 0.69 0.71 2.00 12.0 40.0 22.3 658 37 6.94 Communications Services
Willis Lease Finance (WLFC) 0.57 0.77 0.59 1.66 50.8 2.4 (16.1) 131 29 15.74 Rental & Leasing
L.B. Foster Co. (FSTR) 0.58 1.64 1.32 1.89 8.1 8.5 10.1 203 14 19.50 Misc. Fabricated Products
Tutor Perini Corp. (TPC) 0.59 1.11 0.72 1.47 10.4 (2.7) (4.6) 829 23 16.89 Construction Services
CAI International Inc. (CAI) 0.59 1.00 1.31 1.66 4.6 28.4 30.3 279 28 13.15 Rental & Leasing
Renewable Energy Group (REGI) 0.59 0.72 na 2.37 12.1 57.5 19.9 421 40 9.70 Chemical Manufacturing
Gulf Island Fabrication (GIFI) 0.61 1.09 1.24 2.18 20.1 10.2 (6.1) 175 25 12.03 Construction - Suppl & Fixt
Oasis Petroleum Inc. (OAS) 0.63 3.14 3.15 1.10 4.3 105.6 101.9 1,458 9 10.48 Oil & Gas Operations
Intrepid Potash, Inc. (IPI) 0.64 1.23 1.98 1.64 101.0 6.3 (29.4) 616 21 8.08 Non-Metallic Mining
Kelly Services, Inc. (KELYA) 0.66 0.74 0.88 2.82 19.7 5.2 17.1 559 47 14.81 Business Services
Friedman Industries (FRD) 0.67 0.90 1.01 0.85 103.2 10.7 (9.7) 42 33 6.19 Iron & Steel
Source: AAII’s Stock Investor Pro/Thomson Reuters. Data as of 8/14/2015.

Criteria for Stock Investor Pro Users


 Field: Operator: Factor: Compare to:
  Exchange Not Equal   Over the counter
And ADR/ADS Stock Is False    
And Country Contains   United States
And Sector Not Equal   Financial
And Industry Not Equal   Real Estate Operations
And Industry Not Equal   Misc. Financial Services
And Price >   5
And % Rank-Price/Book <=   10
And EPS-Diluted Continuing Y1 >   0
And EPS-Diluted Continuing 12m >   0

Discussion

Buzz Vanderschoot from CA posted over 10 years ago:

Usually a link is provided to the SIP screen statements that were used to generate the list. Perhaps the link could be added retroactively.


Manjunath Sharma CFA from CA posted over 10 years ago:

Lot of these companies are in commodity business (Oil, Aluminum both are traded in commodity exchange). Hence the low P/B as commodity prices and demand for its product /service is down. Individual investor should check debt levels of these companies before even thinking of going long. Can they even survive by not defaulting on debt payment? is the question. HLX was a short according another SI Pro screen couple month ago (Estimates down 5% which works great in a sideways market, such as this year). I do valuation using abnormal earnings growth model. Both these suggested short for HLX couple months ago. Currently (Sep 22, 2015), HLX valuation is around $7.85, out of which $5 is from next 5 years of growth (if at all there is any growth). So technically I will not touch this stock (go long) until it hits $2.6.


Jay Lagree from DE posted over 10 years ago:

Usually stocks have low P/B for a reason. Of course investors are shunning them. Low RSI is just another indicator that agrees. However, it is our job as Individual Investors to find the gems that may be hidden in the First Cut list. I would suggest that everyone contemplating a jump into this 'pool' should read the original article by Piotroski. Great info. Also, Wes Gray's book on Quantitative Value will save you big bucks by preventing stupid mistakes when going after low P/B equities.


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