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Zacks.com featured highlights include: Lithia Motors, Marathon Petroleum, Meritage Homes, Jazz Pharmaceuticals and Barclays PLC

Zacks Equity Research

For Immediate Release

Chicago, IL – December 31, 2019 - Stocks in this week’s article are Lithia Motors, Inc. LAD, Marathon Petroleum Corp. MPC, Meritage Homes Corp. MTH, Jazz Pharmaceuticals PLC JAZZ and Barclays PLC BCS.

5 High Earnings Yield Stocks for a Standout Portfolio

Investors often use P/E ratio and other valuation metrics to pick undervalued stocks with solid upside potential. However, one can also use another interesting ratio. Earnings yield, expressed in percentage, is calculated as (Annual Earnings per Share/Market Price) x 100. While comparing stocks, if other factors are similar, investors can look out for the one with higher earnings yield. This is because stocks with earnings yield have the potential to provide comparatively greater returns.

You must have heard of dividend yield (Dividend per share/ Market Price), which is one of the classic metrics for valuating stocks. If we substitute dividend per share with earnings per share, we get the earnings yield. Just like the case with dividend yield, firms with higher earnings yield are considered underpriced, while those with lower earnings yield are seen as overpriced. Notably, earnings yield captures both the tangible and intangible yield of the firm, as opposed to dividend yield, which only takes into account the tangible yield. The ratio of dividend yield to earnings yield indicates the proportion of earnings directly distributed in the form of dividend payout.

Importantly, earnings yield can also be used to compare the performance of a market index with the 10-year Treasury yield. For instance, when the yield of the market index is more than the 10-year Treasury yield, stocks can be considered as undervalued than bonds. In this situation, investing in the stock market would be a better option for a value investor.

Earnings Yield: Simply the Inverse of P/E

Earnings yield is nothing but the reciprocal of one of the most popular valuation metrics i.e. the P/E ratio (stock price/earnings per share). Thus, a firm having a P/E ratio of 10.2 will logically have an earnings yield of 9.8% (100/10.2). In fact, as the concept of earnings yield is already indirectly captured in the P/E ratio, earnings yield as an investment valuation metric is not as widely used as the P/E ratio.

Having said that, it should be noted that earnings yield is an important tool for investors with exposure to both stocks and bonds. In fact, with regard to this, earnings yield can be more illuminating than the traditional P/E ratio as the former facilitates comparisons of stocks with fixed- income securities.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/694397/5-high-earnings-yield-stocks-for-a-standout-portfolio

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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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/performance for information about the performance numbers displayed in this press release.

 

 

 

                                                                                     


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Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
 
Barclays PLC (BCS) : Free Stock Analysis Report
 
Meritage Homes Corporation (MTH) : Free Stock Analysis Report
 
Jazz Pharmaceuticals PLC (JAZZ) : Free Stock Analysis Report
 
Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report
 
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