Table of Contents Show
- What Are the Basics of Value Investing?
- Criteria for Selecting Value Stocks
- Who Is the Father of Value Investing?
- Using Finviz to Find Value Stocks
- Case Studies: Examples of Value Stocks Identified Using Finviz
- Limitations and Risks of Investing in Value Stocks
- What is a Value Trap?
- Value Investing vs Growth Investing
Investing in stocks is a popular way to grow wealth and achieve financial goals. However, not all stocks are created equal, and it can be challenging to identify stocks that have the potential to outperform the market. One way to find high-quality stocks is by looking at their fundamental strength. In this article, we’ll explore what Value Stocks are and how to find them using Finviz.
What Are the Basics of Value Investing?
Value investing is a form of investing that involves looking for companies that are undervalued by the market and have the potential to increase their value over time. The goal of value investing is to find stocks that are trading at a discounted price and buy them with the expectation that their value will increase in the future.
Value investors typically look for stocks that are trading below their intrinsic value, which is the true value of the stock based on its fundamentals. To calculate the intrinsic value, investors look at a variety of factors such as the company’s financials, future prospects, and industry trends.
When investing in value stocks, it is important to look for stocks that have a good chance of increasing in value over time. To do this, investors must do their due diligence and research the company and its industry. This includes looking at the company’s financials, understanding the industry, and making sure that the company is well-positioned for growth.
It is also important to understand the risks associated with value investing. Investing in value stocks can be risky as the value could decrease if the company does not meet expectations. Additionally, the stock could become a value trap, which is a stock that appears to be undervalued but is actually overvalued and is unlikely to increase in value.
Criteria for Selecting Value Stocks
Fundamental analysis is a method of evaluating the intrinsic value of a stock by examining its financial and economic fundamentals. There are several criteria that can be used to evaluate the fundamental strength of a value stocks, including:
Price-to-Earnings (P/E) ratio: This is a valuation metric that measures a company’s current stock price relative to its earnings per share (EPS). A low P/E ratio could indicate an undervalued stock, while a high P/E ratio could suggest an overvalued stock.
EPS growth: EPS growth measures the rate at which a company’s earnings per share are increasing or decreasing over time. Positive EPS growth is generally seen as a positive sign for a company, while negative growth could indicate a struggling business.
Current ratio: This metric measures a company’s ability to pay its short-term debts with its current assets. A current ratio of 1 or higher is generally considered good, while a ratio below 1 could indicate liquidity issues.
Revenue growth: Revenue growth measures the rate at which a company’s sales are increasing or decreasing over time. Positive revenue growth is generally seen as a positive sign for a company, while negative growth could indicate a struggling business.
Profit margins: Profit margins measure the percentage of revenue that a company retains as profit after accounting for all expenses. Higher profit margins are generally seen as a positive sign for a company.
Return on Equity (ROE): ROE measures the rate of return that a company generates on the equity invested in it by shareholders. A higher ROE is generally seen as a positive sign for a company.
Who Is the Father of Value Investing?
Value investing was popularized by Benjamin Graham, who is often referred to as the “father of value investing”. Graham was an American economist and investment advisor who developed a value investing strategy in the 1920s.
Graham’s value investing strategy involved looking for stocks that were trading at a discount to their intrinsic value. He believed that by investing in stocks that were trading at a discount, investors could reduce their downside risk and increase their potential for return.
Graham’s value investing strategy has been adopted by many investors over the years and is still popular today. Many of the world’s most successful investors, such as Warren Buffett, have adopted Graham’s value investing strategy and have seen great success.
Using Finviz to Find Value Stocks
Finviz is a popular stock screener tool that can be used to filter stocks based on various fundamental and technical criteria. Here’s how to use Finviz to find Value stocks:
- Go to Finviz.com and click on the “Screener” tab.
- In the “Filters” section, select “All” to view all available filters.
- In the “Descriptive” section, select “Market Cap” to specify the size of the companies you’re interested in. Choose a minimum market cap that suits your preference.
- In the “Fundamental” section, select “P/E” to filter for stocks with a low P/E ratio. Choose a maximum P/E ratio that suits your preference.
- In the same “Fundamental” section, select “EPS growth this year” and “EPS growth next year” to filter for stocks with positive earnings growth. Choose a minimum EPS growth rate that suits your preference.
- In the same “Fundamental” section, select “Current Ratio” to filter for stocks with strong liquidity. Choose a minimum current ratio that suits your preference.
Finally, you can click “Charts” to view the stocks that match your criteria.
Case Studies: Examples of Value Stocks Identified Using Finviz
Caleres, Inc. (CAL)
Caleres, Inc. is a company that operates in the retail and wholesale of footwear in various countries like the US, Canada, China, and Guam. The company functions through two segments: Famous Footwear and Brand Portfolio. Currently, Caleres has a market capitalization of $880.43M with a P/E ratio of 5.31. The company’s EPS TTM is $4.657, and it is expected to have an EPS growth of 5.26% for the next year.
Recently, Caleres announced its preliminary and unaudited fiscal 2022 consolidated sales and earnings per share. These exceeded the company’s previous expectations, primarily due to the robust demand for its lead brands and strong holiday performance. Based on these figures, Caleres expects consolidated sales of approximately $2.97 billion for the fiscal year 2022, representing a growth of 7% compared to the previous year. This growth rate surpasses the company’s previous expectations of growth between 4% to 6%.
In the third quarter of 2022, Caleres’s total revenue was $798.26M, indicating an increase of 1.80% from the same quarter in the previous year. Overall, Caleres appears to be a promising investment opportunity, based on its financial figures and strong holiday performance. The projected growth in sales and earnings is a positive sign for potential investors
Ring Energy, Inc. (REI)
Another company that could be a big winner in 2023 is Ring Energy, Inc. Ring Energy is an independent oil and gas exploration and production company based in Texas, with a focus on developing and acquiring mature oil and gas properties in the Permian Basin in West Texas and New Mexico. The company has experienced steady growth in production and reserves due to successful drilling and strategic acquisitions. In the third quarter, Ring Energy reported record-breaking results, and their Q4 guidance shows an expected increase in sales volumes for oil, natural gas, and natural gas liquids.
Currently, Ring Energy has a market capitalization of $399.40M. The company’s EPS TTM is $1.068, with a P/E ratio of 2.14. This means that the company is trading at a relatively low price compared to its earnings. Furthermore, Ring Energy’s expected EPS growth for the next year is 22.45%, indicating the potential for future growth.
Based on these financial figures, Ring Energy appears to be a potentially good investment opportunity. The company has a solid track record of successful operations, and their anticipated growth in sales volumes and earnings is a promising sign for investors.
Talos Energy Inc. (TALO)
Talos Energy Inc. is an independent exploration and production company that focuses on exploring and producing oil and natural gas properties in the US Gulf of Mexico and offshore Mexico.
As of now, the company’s market capitalization is $1.55B, with an EPS TTM of $5.492 and a P/E ratio of 3.42. Additionally, Talos Energy is projected to have a significant EPS growth of 40.23% in the next year.
Recently, Talos Energy successfully completed the acquisition of EnVen Energy Corp. for $1.1 billion, as previously announced. With the completion of the acquisition, the combined company now has a market capitalization of around $2.5 billion and approximately 126.37 million shares of common stock outstanding. Overall, based on Talos Energy’s strong financial figures and recent acquisition, the company appears to be a promising investment opportunity. The significant projected EPS growth is a positive sign for investors, and the company’s focus on oil and natural gas exploration and production in the Gulf of Mexico and offshore Mexico suggests a stable industry.
Canaan Inc. (CAN)
Canaan Inc. is a Chinese company that focuses on the design and sale of integrated circuit products for bitcoin mining. They also assemble and distribute mining equipment and spare parts.
Currently, the company’s market capitalization is at $424.44M. It has a low P/E ratio of 1.38, and the company’s EPS TTM is $2.069. This means that the company is undervalued compared to its earnings, and investors may view it as an opportunity to invest. Furthermore, it is expected that Canaan’s EPS Growth will increase by 36.50% for the coming year.
In the second quarter of 2022, Canaan’s total revenue was ¥1.65B, a significant increase of 52.78% from the same period in the previous year. This suggests that the company is on a growth trajectory, which is a good sign for potential investors.
Overall, based on Canaan’s financial figures, it could be a potentially good investment opportunity.
However, investing in the stock market comes with certain risks, such as fluctuations in commodity prices and regulatory changes, which should be taken into account before making any investment decisions.
Limitations and Risks of Investing in Value Stocks
While fundamental analysis can be a powerful tool for identifying strong stocks, there are limitations and risks associated with using this approach. One limitation is that fundamental analysis can be time-consuming and requires a good understanding of financial statements and accounting principles. It also does not take into account macroeconomic events, industry trends, and other external factors that can affect a stock’s fundamental strength.
There are also risks associated with investing in fundamentally strong stocks. For example, unexpected earnings reports, changes in company leadership or strategy, and market volatility can all negatively impact a stock’s performance, regardless of its fundamental strength. It’s important for investors to diversify their portfolios and not rely solely on one criterion, such as fundamental strength, when making investment decisions.
What is a Value Trap?
A value trap is a stock that appears to be undervalued by the market, but is actually a poor investment. Value traps can occur when a company’s financials are deteriorating, but the stock price has not yet reflected the decline. Value traps can also occur when a company is in a declining industry or facing intense competition.
Value investors must be careful to avoid value traps, as they can lead to significant losses. To avoid value traps, investors should conduct thorough research into a company’s financials, management, and industry trends.
Value Investing vs Growth Investing
Value investing and growth investing are two different types of investing strategies that have distinct characteristics. Value investing involves looking for stocks that are trading at a discounted price and have the potential to gain value over time, while growth investing involves looking for stocks that have the potential to grow quickly.
Value investing is considered to be a more conservative strategy as it involves looking for stocks that are undervalued and have the potential to increase in value over time. Growth investing, on the other hand, is considered to be a more aggressive strategy as it involves looking for stocks that have the potential to grow quickly.
When investing, it is important to understand the differences between value investing and growth investing and choose the strategy that best suits your investment goals. Both strategies can be profitable if done correctly, but it is important to understand the associated risks and rewards before investing.
In conclusion, Value stocks are an important consideration for investors who are looking for long-term growth and stability in their portfolios. Finviz is a useful tool for identifying stocks that meet the criteria for fundamental strength, such as a low P/E ratio, strong earnings growth, and good liquidity. However, it’s important to remember that fundamental analysis is just one tool in a larger toolkit for successful investing. Investors should also consider other factors, such as macroeconomic events, industry trends, and company-specific risks, when making investment decisions. By taking a comprehensive approach to investing, investors can increase their chances of achieving their financial goals.