Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Zacks.com featured highlights: Baxter International, Coca-Cola FEMSA, S.A.B. de C.V., Banco Bilbao Vizcaya Argentaria, Fibria Celulose S.A. and Teekay Offshore Partners

For Immediate Release

Chicago, IL –July 31, 2017 - Stocks in this week’s article include Baxter International Inc. (NYSE:BAX Free Report), Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF Free Report), Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA Free Report), Fibria Celulose S.A. (NYSE:FBR Free Report) and Teekay Offshore Partners L.P. (NYSE:TOO Free Report).

Bet on These 5 GARP Stocks with Discounted PEG Ratio

Pure play growth and value investors have one thing in common – both strategize for long-term investments. Yet, their approach and growth goals make them totally distinct from each other when it comes to stock picking.

During the course of their financial planning and execution, while value investors miss the chance of betting on stocks that have bright long-term prospects, growth investors often end up investing in expensive stocks.

Consequently, investors often wonder whether they should resort to any of these distinctive strategies or follow an approach that combines the best of both. The investing track of the Oracle of Omaha over the past few decades and his gradual shift from being a pure-play value investor to a GARP (growth at a reasonable price) investor might give us all the answers.

In this regard, we should take note that strategic mingling of both growth and value investing principles gives us a mixed investing strategy that is getting popular with each passing day. What GARPers look for is whether the stocks are somewhat undervalued and have solid sustainable growth potential (Investopedia).

And here lies the importance of a not-so-popular fundamental metric, the price/earnings growth (PEG) ratio. Although it is categorized under value investing, this strategy follows the principles of both growth and value investing.

The PEG ratio is defined as: (Price/ Earnings)/Earnings Growth Rate

It relates the stocks P/E ratio with future earnings growth rate.

While P/E alone only gives the idea of stocks, which are trading at a discount, PEG while adding the GROWTH element to it, helps finding those stocks that have solid future potential.

A lower PEG ratio, preferably less than 1, is always better for GARP investors.

Say for example, if a stock’s P/E ratio is 10 and expected long-term growth rate is 15%, the company’s PEG will come down to 0.66, a ratio which indicates both undervaluation and future growth potential.

Unfortunately, this ratio is often neglected due to investors’ limitation to calculate the future earnings growth rate of a stock.

There are some drawbacks to using the PEG ratio though. It doesn’t consider the very common situation of changing growth rates such as the forecast of the first three years at very high growth rates followed by a sustainable but lower growth rate in the long term.

Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.

Here are the screening criteria for a winning strategy:

PEG Ratio less than X Industry Median

P/E Ratio (using F1) less than X Industry Median (For more accurate valuation purpose.)

Zacks Rank of 1 (Strong Buy) or 2 (Buy) (Whether good market conditions or bad, stocks with a Zacks Rank #1  or #2 have a proven history of success.)

Market Capitalization greater than $1 Billion (This helps us to focus on companies that have strong liquidity.)

Average 20 Day Volume greater than 50,000: A substantial trading volume ensures that the stock is easily tradable.

Percentage Change F1 Earnings Estimate Revisions (4 Weeks) greater than 5%: Upward estimate revisions add to the optimism, suggesting further bullishness.

Value Score of less than or equal to B: Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1, 2 or 3 (Hold) offer the best upside potential.

Here are five of the 12 stocks that qualified the screening:

Baxter International Inc. (NYSE:BAXFree Report): It is a renowned medical product company. We believe that Baxter’s expanding product pipeline is a key growth catalyst. Newly-launched products like SIGMA SPECTRUM infusion pump and AMIA APD cycler with SHARESOURCE two-way connectivity are expected to drive top-line growth in the near term. Baxter can be an impressive value investment pick with its Zacks Rank #2 and Value Style Score of ‘B.’ The company’s long-term expected earnings growth rate is projected to be 12%.

Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOFFree Report): This franchise bottler produces, markets, distributes, and sells Coca-Cola trademark beverages. The company offers a portfolio of products, including sparkling beverages, still beverages, juices, sports, and energy drinks, as well as teas, waters, isotonics, and dairy products. Apart from a Zacks Rank #1 and a Value Style Score of 'B,' the stock also has an impressive long-term expected growth rate of 17.5%.

Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVAFree Report): BBVA Compass ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (5th). The stock also can be an impressive value investment pick with its Zacks Rank #2 and Value Style Score of 'B.' Apart from a discounted PEG and P/E, the stock also has an impressive long-term expected growth rate of 10.3%.

Fibria Celulose S.A.(NYSE:FBRFree Report): This eucalyptus pulp producer works on meeting the growing global demand for forestry products in a sustainable manner. It has an impressive expected five-year growth rate of 18.4%. It has a Value Style Score of ‘A’ and carries a Zacks Rank #2. You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link_invidea...">the complete list of today’s Zacks #1 Rank stocks here.

Teekay Offshore Partners L.P. (NYSE:TOOFree Report): The company operates in the marine midstream space through its ownership of the general partners and a portion of the outstanding limited partner interests in Teekay LNG Partners L.P. and Teekay Offshore Partners L.P. The company holds a Zacks Rank #1 and has a Value Style Score ‘A.’ It also has an impressive expected growth rate of 11.6% for the next fiscal.

Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

About Screen of the Week

Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine.  But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.

Get the full Report on BAX - FREE

Get the full Report on KOF - FREE

Get the full Report on BBVA - FREE

Get the full Report on FBR - FREE

Get the full Report on TOO - FREE

Follow us on Twitter: 

Join us on Facebook:  http://www.facebook.com/ZacksInvestmentResearch">https://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Contact: Jim Giaquinto

Company: Zacks.com

Phone: 312-265-9268

Email: pr@zacks.com

Visit: https://www.zacks.com/performance

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

 

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Teekay Offshore Partners L.P. (TOO): Free Stock Analysis Report
 
Banco Bilbao Viscaya Argentaria S.A. (BBVA): Free Stock Analysis Report
 
Coca Cola Femsa S.A.B. de C.V. (KOF): Free Stock Analysis Report
 
Baxter International Inc. (BAX): Free Stock Analysis Report
 
Fibria Celulose S.A. (FBR): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research