Zacks.com featured highlights include Barrick Gold, Catalyst Pharmaceuticals, Allegiant Travel and America Movil

Zacks Equity Research
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For Immediate Release

Chicago, IL – October 15, 2024 – Stocks in this week’s article are Barrick Gold Corp. GOLD, Catalyst Pharmaceuticals, Inc. CPRX, Allegiant Travel Co. ALGT and America Movil, S.A.B. de C.V. AMX.

Unlock Your Portfolio Value with These 4 High Earnings Yield Stocks

The U.S. annual inflation rate slowed for the sixth consecutive month to 2.4% in September 2024, marking its lowest level since February 2021. Additionally, stagnant wholesale prices, as indicated by the latest Producer Price Index, signal continued progress on inflation. Despite political and geopolitical uncertainty, the S&P 500 has surged 22% this year and is poised for another year of double-digit gains.

However, a tight U.S. presidential race and heightened Middle East tensions have investors cautious about potential market volatility. In this environment, value investing could offer a prudent strategy.

Barrick Gold Corp., Catalyst Pharmaceuticals, Inc., Allegiant Travel Co. and America Movil, S.A.B. de C.V. are a few solid high earnings yield picks for value investors.

Play Value Investing Using Earnings Yield Metric

The value investing approach seeks to profit from investing in stocks that appear to be trading at a discount to their intrinsic values and eventually make handsome returns when the stock price rises toward that value, reflecting the actual fundamentals.

One interesting ratio that you can consider for ferreting out attractively valued stocks is earnings yield. This metric, expressed in percentage, is calculated as annual earnings per share (EPS) divided by market price. This metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today. While comparing stocks, if other factors are similar, the ones with higher earnings yield are considered undervalued, while those with lower earnings yield are seen as overpriced.

While earnings yield is nothing but the reciprocal of the P/E ratio, it is albeit a little more illuminating than the traditional P/E ratio as it also facilitates the comparison of stocks with fixed-income securities. Investors often compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.

If the yield on a stock is lower than the 10-year Treasury yield, it would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued. In this situation, investing in the stock market would be a better option for a value investor.

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