2 Value Stocks to Buy Ahead of Key Earnings Releases

Market Overview - The stock market experienced a temporary decline with key indices retreating after recent gains, influenced by rising Treasury yields and concerns over high valuations and potential rate cuts [1] - The S&P 500 closed down 0.18% at 5,853.98, while the Dow Jones Industrial Average fell 344.31 points or 0.80% to 42,931.60, contrasting with a modest gain of 0.27% in the Nasdaq Composite, which finished at 18,540.01 [1] Investment Strategy - Investors are advised to focus on corporate earnings and the political landscape, with value stocks emerging as a strong investment option due to their trading below intrinsic value [2] - The Price to Cash Flow (P/CF) ratio is highlighted as an effective metric for evaluating value stocks, with companies like JD.com and KB Home showing low P/CF ratios [2][3] Financial Health Metrics - The P/CF ratio is emphasized for its reliability in assessing a company's financial health, as it accounts for non-cash charges and provides a clearer picture of cash generation [4] - Positive cash flow indicates a company's ability to manage debt, reinvest, and return value to shareholders, while negative cash flow suggests liquidity issues [4] Value Investing Parameters - A comprehensive approach to value investing should include multiple metrics such as price-to-book, price-to-earnings, and price-to-sales ratios, alongside a favorable Zacks Rank and Value Score [5][6] - Specific parameters for selecting true-value stocks include a P/CF ratio less than or equal to the industry median, a minimum stock price of $5, and a significant average trading volume [6][7] Stock Highlights - JD.com, with a Zacks Rank of 1, has shown a trailing four-quarter earnings surprise of 24% and is projected to grow sales and EPS by 4.7% and 27.2% respectively, with shares up 60% over the past year [7] - KB Home, ranked 2, has a trailing earnings surprise of 10.8% and is expected to see sales and EPS growth of 7.6% and 19.8% respectively, with shares increasing by 87.7% in the past year [8]