3 Stock Considerations

Summary

• Three stocks worth buying NOW!
• My analysis on each stock.
• What should you do next?

I like to keep my viewers updated with the latest news on stocks that I considered undervalued or worthy to be watched! You can check out all of my recent buys/sells and stock considerations at my site which can be found in my profile.

I like to use the CCC spreadsheet which is run and maintained by Dave Fish. When looking at the spreadsheet I like to add my own data filters. This helps me find companies that meet my set of criteria. After the filters were added, I now had a list of companies that I can start researching. This is how I came up with the three stocks listed today.

CVS Health Corp (CVS):

My Opinion: BUY

I give CVS a buy because the dividend yield is almost 100 points higher than the 5-year average. Comparing the 5-year average dividend yield to current dividend yield is a great metric to see if a company is undervalued compared to its 5-year average. I love the dividend growth rate which sits at 27.90% for the 5-year average.

The dividend payout ratio is at a great level. I normally like to look at a ratio that is below 60%. As you see above, CVS is sitting at 37.06% payout ratio. This gives CVS a lot more years of high dividend raises. The current PE and forward PE looks great as well as the current price compared to the three analysis.

The current PE of 16.76 and forward PE of 12.46 is another great metric that I like to look at when I analyze a company. This tells me that future earnings are predicted to be higher than current earning. Looking at the Normal PE of 10 years shows 15.4. Since the forward PE of 12.46 is less than the 10-year average, this is another indicator that CVS is undervalued.

This is a picture from fastgraphs.com Whenever the black line is under the orange/blue line, it is considered to be undervalued. Here we see that CVS is indeed undervalued since it is under both the blue and orange line.

W W Grainger Inc (GWW):

My Opinion: BUY

I give GWW a buy because the dividend yield is almost 100 points higher now than the 5-year average. Actually, the last time that GWW was this high was during the Great Recession. At that time it was sitting around 2.40% dividend yield. Not only is the dividend yield is at an all-time high, but you can get it at a better yield than it was almost 10 years ago.

The dividend payout ratio is at a respectable rate. As I stated above, I like when a company has a payout ratio below 60%. GWW is lower at 50% payout currently. GWW recently increased their dividend by 4.9%. I believe that they will continue to increase it around this level for a few years to come.

Also, the 10-year normal PE is 19.9. GWW is currently sitting at 18.93 with a forward PE of 16.47. So, not only is GWW currently lower than the 10-year average, but the forward PE is much lower compared to the 10-year average. Therefore, this is a great metric to look at to determine if it is undervalued.

This is a picture from fastgraphs.com Whenever the black line is under the orange/blue line, it is considered to be undervalued. Here we see that GWW is undervalued compared to the normal PE blue line. Since this is a high-quality company, and people tend to pay a premium for GWW it almost never gets under the orange line in the last 8 years. Comparing it to the Blue normal PE line would be the best option to compare it to.

Williams-Sonoma, Inc. (WSM):

My Opinion: BUY

Lastly, WSM is the third company that I would buy. It is the same reason why I gave CVS and GWW a BUY rating. First of all, the dividend yield is at a 5-year high. Matter fact, it is over 100 points higher compared to the 5-years divided average.

The dividend payout ratio is at a great level at 43.9%. In March, WSM increased its dividend by 5.4%. I foresee this same type of increase or slightly higher for the next few years.

The normal PE sits at 17.3 as you see in the below picture from Fastgraphs. WSM is now at 14.25 with a forward PE of 12.86. Like I mentioned above, this is a great indicator that WSM is indeed undervalued.

This is a picture from fastgraphs.com Whenever the black line is under the orange/blue line, it is considered to be undervalued. Here we see that WSM is undervalued since it is under both the blue and orange line.

What should you do next?

I find all three stock to be undervalued and worthy of buying NOW! I put my money where my mouth is. In the past two months, I purchased all three of these stocks which can be seen on my Website. Also, I like to use seekingalpha.com whenever I add or make changes to my portfolio. This is a great way to get the latest updates on all of your companies.

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Analyst’s Disclosure: I am/we are long WSM, GWW, CVS. 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.