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.
Below is a list of notable value stocks in the consumer defensive sector:
- United Natural Foods (NYSE:UNFI) – P/E: 9.63
- DAVIDsTEA (NASDAQ:DTEA) – P/E: 0.85
- Mannatech (NASDAQ:MTEX) – P/E: 4.42
- Hailiang Education Gr (NASDAQ:HLG) – P/E: 4.7
- Lifevantage (NASDAQ:LFVN) – P/E: 6.3
United Natural Foods’s earnings per share for Q3 sits at $1.1, whereas in Q2, they were at 1.13. DAVIDsTEA has reported Q1 earnings per share at $-0.04, which has decreased by 166.67% compared to Q4, which was 0.06. This quarter, Mannatech experienced a decrease in earnings per share, which was $1.25 in Q4 and is now $0.06. The company’s most recent dividend yield sits at 3.21%, which has increased by 0.89% from 2.32% last quarter.
Hailiang Education Gr’s earnings per share for Q4 sits at $0.8, whereas in Q3, they were at 0.64. Lifevantage saw an increase in earnings per share from 0.05 in Q2 to $0.12 now.
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.