Seeking Alpha
Profile| Send Message|
( followers)  

These five stocks boast predictable and proven earnings over time and appear by some measures to be undervalued. They are all contenders for longer term, buy-and-hold portfolios common in retirement. In this article I analyze each stock on a relative value basis to see why they should be bought right now.

Microsoft Corp. (NASDAQ:MSFT) – This software giant is currently trading near $26 a share. With a 52-week range of $23.65 to $29.46, its price is relatively stable. Its dividend yield is 3.2 percent or $0.80, so it may appeal to income as well as long-term investors. Trailing 12-month earnings per share are $2.75. The company’s price to earnings ratio is about 9.4, and its market capitalization is over $217 billion. Its ten-year revenue growth rate is 14 percent, and its ten-year earnings growth rate is 15.20 percent. It is rated four and a half stars (out of five) on Guru Focus’s predictability scale, so its revenue and earnings have grown consistently and predictably over time. MSFT’s long-term debt to equity ratio is 20 percent.

Its competitor Oracle Corporation (NYSE:ORCL) is currently trading near $32 a share. Its 52-week range is $24.72 to $36.50. Its dividend yield of 0.80 percent or $0.24 is much less than MSFT’s. Earnings per share are $1.76, and price to earnings ratio is 18.16. ORCL’s market capitalization is over $161 billion. Its ten-year revenue growth rate is 17.5 percent, and its ten-year earnings growth rate is 17 percent. ORCL earned three and a half stars in business predictability. Its debt to equity ratio is 36 percent.

Ten years ago, MSFT was trading at an adjusted price of almost $27, and ORCL was trading at just over $15 a share. The adjustments account for dividends and splits. Looking backward at share price only on specific dates, it appears that ORCL may have been the better choice ten years ago. MSFT’s price and earnings per share indicate it is a more stable and efficient company than ORCL. Its price to earnings ratio indicates it is less expensive than ORCL. ORCL also carries more debt. Though ORCL offers more risk-tolerant investors opportunities for growth and gains, MSFT remains the better choice for conservative, long-term investors.

WalMart Stores (NYSE:WMT) – This discount retailer is currently trading near $59 a share. Its 52-week range of $48.31 to $59.40 is also relatively stable. Its dividend yield is 2.50 percent or $1.46. Earnings per share are $4.72, and price to earnings ratio is 12.4. WMT’s market capitalization is almost $202 billion. Its ten-year revenue growth rate is 10.4 percent, and its ten-year earnings growth rate is 11.8 percent. It is rated five stars in business predictability. Its debt to equity ratio is 71 percent.

Its competitor Target Corp. (NYSE:TGT) is currently trading near $54 a share. Its 52-week range of $45.28 to $60.97 indicates slightly more price volatility than WMT. Its dividend yield of 2.3 percent or $1.20 is slightly less. Earnings per share are $4.30, and price to earnings ratio is 12.5. TGT’s market capitalization is almost $36 billion. TGT’s ten-year revenue growth rate is 9.3 percent, and its ten-year earnings growth rate is 9.6 percent. It is also ranked five stars in business predictability. Its debt to equity ratio is 106 percent.

Had an investor purchased 100 shares of WMT ten years ago at $56.57, the investment would be up 3.55 percent today to $5858. The same investment in TGT would have cost $39.62. Today, it would be worth $5357, an increase of 35.21 percent. These calculations do not take into account fees or dividends. Both of these investments are stable and predictable. WMT shows a slightly better dividend, better earnings per share, and is larger in terms of market capitalization. TGT carries a lot of debt, which could be a yellow flag. Both of these discount retailers should continue to perform well in the future, particularly in light of current macroeconomic conditions. This is a decision that boils down to personal preference. I like both.

Advance Auto Parts (NYSE:AAP) – This retailer of aftermarket car parts, accessories and maintenance items is currently trading near $70 a share. Its price has ranged from $49.50 to $72.32 over the past 52 weeks. Its dividend yield is 0.30 percent or $0.24. Earnings per share are $4.70, and price to earnings ratio is 14.97. Its market capitalization is over $5 billion. Its ten-year revenue growth rate is 11 percent, and its ten-year earnings growth rate is 33.4 percent. It is rated four stars in business predictability. Its debt to equity ratio is 77 percent.

Its competitor O’Reilly Automotive Inc. (NASDAQ:ORLY) is currently trading near $80 a share. It has shown some price volatility over the past 52 weeks, ranging from $53.33 to $80.67. It does not pay a dividend. Earnings per share are $3.47, and its price to earnings ratio is 22.92. ORLY’s market capitalization is over $10 billion. Its ten-year revenue growth rate is 15.3 percent, and its ten-year earnings growth rate is 16 percent. ORLY is a five-star ranked predictable company. Its debt to equity ratio is only 28 percent.

Ten years ago, AAP closed near $14 a share, and ORLY closed near $18. AAP has advantages over ORLY. AAP pays a dividend. Earnings per share indicate higher efficiency. Its price to earnings ratio indicates that it is better priced. ORLY has shown greater growth in revenue and earnings over time, and the debt it carries is much lower than its competitor. AAP remains the better value, though.

Open Text Corporation (NASDAQ:OTEX) – This Canadian developer of content management software is currently trading near $55 a share. It has fluctuated from $44.65 to $72.32 over the past 52 weeks. It does not pay a dividend. Earnings per share are $2.34, and its price to earnings ratio is 23.40. Its market capitalization is $3.16 billion. OTEX’s ten-year revenue growth rate is 19.6 percent, and its ten-year earnings growth rate is 19.1 percent. It is ranked five stars in business predictability. Its debt to equity ratio is 26 percent.

Its larger cap American competitor EMC Corporation (NYSE:EMC), which develops enterprise storage systems and software, is currently trading near $24 a share. It has ranged in price from $19.84 to $28.73 over the past 52 weeks. It does not pay a dividend, either. Earnings per share are $1.00, and its price to earnings ratio is 23.50. Its market capitalization is over $48 billion. EMC’s ten-year revenue growth rate is 14.9 percent. Its five-year growth rate is 9 percent. It is rated one star in predictability, so it is not in a predictable business. EMC’s debt to equity ratio is 1 percent.

Ten years ago, OTEX closed at $15.60 a share, while EMC closed near $18 a share. The prices are adjusted for dividends and splits. OTEX shows the greater gain over the past decade. Though its price has shown some volatility, it is an efficient company with debt that is under control.

Ralph Lauren Corporation (NYSE:RL) – This clothing and home accessories designer is currently trading near $151 a share. It has ranged from $102.33 to $164.55 over the past 52 weeks. Its dividend yield is 0.60 percent or $0.80. Earnings per share are $6.77, and price to earnings ratio is 22.27. RL’s market capitalization is $13.68 billion. RL’s ten-year revenue growth rate is 11.2 percent, and its ten-year earnings growth rate is 16.3 percent. RL is ranked five starts in business predictability. Its debt to equity ratio is 8 percent.

Its competitor The Jones Group Inc. (NYSE:JNY) is currently trading near $10 a share. It has ranged in price from $8 to $16.02 over the past 52 weeks. Its dividend yield is 2 percent or $0.20. Earnings per share are $0.38, and its price to earnings ratio is 27.80. The company’s market capitalization is almost $847 million. JNY’s ten year revenue growth rate is 3 percent. Its earnings growth rate is not available for this time frame, but earnings have declined by a rate of 190.2 percent over the past 12 months. It is ranked one star in business predictability. JNY’s debt to equity ratio is high at 77 percent.

Ten years ago, RL closed near $24 a share. JNY closed near $29 a share. RL is the clear leader in this case.

Source: 5 Buy-And-Hold Stocks For Your Retirement Portfolio