5 Large-Cap Stocks With The Lowest Price Ratios

|
Includes: CTL, EMN, M, VLO, WDC
by: Mitchell Mauer

Summary

Here’s a list of five stocks with the lowest combined price ratios and market caps over $10 billion.

Each stock qualifies for the Value Composite #1 screen.

The stocks are equally weighted by the following ratios: price to book; price to earnings; price to sales; price to free cash flow; and enterprise value to EBITDA.

Are you looking for some large-cap value stocks to add to your portfolio? Here's a list of five stocks with the lowest combined price ratios and market caps over $10 billion.

Click to enlarge

Each stock qualifies for the Value Composite #1 screen. This screen is discussed in the book "What Works On Wall Street" by Jim O'Shaughnessy.

Value Composite #1 Description

Value Composite #1 is a compilation of multiple value factors. In O'Shaughnessy's research, he found that there was an "ongoing horse race" between which single factors performed the best. Although stocks with the lowest price ratio always ended up as the best investment options, the best-performing price ratios continuously changed over various time periods.

This led O'Shaughnessy to build a "master value composite factor" that consistently outperformed any individual metric. Value Factor #1 is what he calls a "pure play" factor because it only accounts for balance sheet and cash flow metrics.

The stocks are equally weighted by the following ratios: price to book; price to earnings; price to sales; price to free cash flow; and enterprise value to earnings before interest, taxes, depreciation and amortization.

Implementation

Here is a breakdown of five stocks with the best value composite rankings as found on The Stock Market Blueprint. Investors can implement this strategy by regularly investing equal amounts in the qualifying stocks with the lowest combined rank.

1. Valero Energy (VLO)

Valero Energy operates as an independent petroleum refining and marketing company in the Canada, the Caribbean, Ireland, the United Kingdom and the United States.

It operates through two segments, ethanol and refining. The company also operates convenience stores; a credit card business; a 50-megawatt wind farm; filling stations; and truck stop, card lock and home heating oil facilities.

Valero Energy was founded in 1955 and is based in San Antonio, Texas.

  • Price to book: 1.18
  • Price to earnings: 7.21
  • Price to free cash flow: 12.74
  • Price to sales: 0.37
  • Enterprise multiple: 3.79
  • Closing price on Tuesday 6/21/16: $5247 a share
  • Combined rank: 31, after ranking price ratios for all stocks with a market cap above $10 million

2. Western Digital (WDC)

Western Digital and its subsidiaries engage in the development, manufacture, provision and sale of data storage solutions that allow businesses, consumers, governments and other organizations to create, experience, manage and preserve digital content worldwide.

The company's product portfolio includes direct attached storage solutions, hard disk drives, personal cloud network attached storage solutions, public and private cloud data center storage solutions, and solid-state drives.

In addition, it provides consumer electronics solutions, including camcorders, DVRs, entertainment and automobile navigation systems, gaming consoles, multi-function printers, security surveillance, set top boxes, and systems.

Western Digital was founded in 1970 and is based in Irvine, Calif.

  • Price to book: 1.16
  • Price to earnings: 13.41
  • Price to free cash flow: 10.25
  • Price to sales: 0.86
  • Enterprise multiple: 3.85
  • Closing price on Tuesday 6/21/16: $48.87 a share
  • Combined rank: 58, after ranking price ratios for all stocks with a market cap above $10 million

3. CenturyLink (CTL)

CenturyLink provides various communications services to business, governmental, residential and wholesale customers in the United States operating through its business and consumer segments. The company offers Ethernet and high-speed Internet services.

As of December 31, CenturyLink served about 6 million high-speed Internet subscribers and 285,000 television subscribers and operated 59 data centers in Asia, Europe and North America.

CenturyLink was founded in 1968 and is based in Monroe, La.

  • Price to book: 1.06
  • Price to earnings: 16.41
  • Price to free cash flow: 14.53
  • Price to sales: 0.97
  • Enterprise multiple: 5.09
  • Closing price on Tuesday 6/21/16: $28.08 a share
  • Combined rank: 101, after ranking price ratios for all stocks with a market cap above $10 million

4. Macy's (M)

Macy's and its subsidiaries operate mobile applications, stores and websites in the United States. Its stores and websites sell a range of merchandise, including apparel and accessories, cosmetics and home furnishings.

As of May 11, Macy's operated about 870 stores under the Bloomingdale's, Bloomingdale's Outlet, Bluemercury, Macy's and Macy's Backstage names, as well as websites. In addition, the company operates as a beauty products and spa retailer.

Macy's was founded in 1830 and is based in Cincinnati.

  • Price to book: 2.51
  • Price to earnings: 10.96
  • Price to free cash flow: 17.88
  • Price to sales: 0.47
  • Enterprise multiple: 5.86
  • Closing price on Tuesday 6/21/16: $33.04 a share
  • Combined rank: 102, after ranking price ratios for all stocks with a market cap above $10 million

5. Eastman Chemical Co. (EMN)

Eastman Chemical Company, a specialty chemical company, manufactures and sells materials, chemicals, and fibers in the United States and internationally.

The company operates through five segments: Additives & Functional Products, Adhesives & Plasticizers, Advanced Materials, Fibers, and Specialty Fluids & Intermediates segments.

Eastman Chemical Company was founded in 1920 and is headquartered in Kingsport, Tennessee.

  • Price to Book: 2.53
  • Price to Earnings: 11.61
  • Price to Free Cash Flow: 12.09
  • Price to Sales: 1.13
  • Enterprise Multiple (EBITDA): 7.79
  • Closing price on Tuesday 6/21/16: $72.07 a share
  • Combined rank: 138, after ranking price ratios for all stocks with a market cap above $10 million

Visit TheStockMarketBlueprint.com to find more top ranked value stocks.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.