5 Low Price-to-Book Stocks to Include in Your Portfolio for Gains

Core Insights - Investors primarily use price-to-earnings (P/E) and price-to-sales (P/S) ratios for stock valuation, while the price-to-book (P/B) ratio is also a useful metric for identifying undervalued stocks with growth potential [1][2] Group 1: Understanding P/B Ratio - The P/B ratio is calculated as market capitalization divided by book value of equity, helping to identify low-priced stocks with high growth prospects [2] - A P/B ratio of less than one indicates that a stock is trading below its book value, suggesting it may be undervalued and a good buy [5] - Conversely, a P/B ratio greater than one suggests that a stock may be overvalued [5][6] Group 2: Limitations of P/B Ratio - A P/B ratio of less than one can also indicate weak or negative returns on assets, or that assets are overstated, which may warrant caution [7] - The P/B ratio is particularly relevant for industries with tangible assets, such as finance and manufacturing, but may be misleading for companies with high R&D expenditures or significant debt [8] Group 3: Screening Parameters for Investment - Stocks with a P/B ratio lower than the industry median may have room for price appreciation [11] - A lower P/S ratio compared to the industry median makes a stock more attractive, as it indicates better value for each dollar of sales [11] - A P/E ratio lower than the industry median is also considered favorable for investment decisions [12] Group 4: Selected Low P/B Stocks - JD.com has a Zacks Rank of 1 and a projected 3-5 year EPS growth rate of 32.3% [15][16] - City Office REIT holds a Zacks Rank of 2 with a projected EPS growth rate of 6.0% [16] - Fresenius Medical Care has a Zacks Rank of 1 and a projected EPS growth rate of 11.9% [17] - Itron, with a Zacks Rank of 2, has a projected EPS growth rate of 29.0% [18] - EnerSys has a Zacks Rank of 2 and a projected EPS growth rate of 18.0% [19][20]