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In this edition of Watchlist Wednesday, we highlight five mid-cap stocks with the lowest price ratios as displayed on the Value Composite #1 stock screen.
In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
This screen is influenced by a strategy Jim O’Shaugnessy discussed in the book, What Works On Wall Street.
Value Composite Description
Value Composite #1 is a compilation of multiple value factors. Jim O’Shaughnessy, in his research, found that there was an “ongoing horse race” between which single factors performed the best.
While stocks with the lowest price ratios always ended up as the best investment options, the best performing price-ratio continuously changed over various time periods.
This led O’Shaughnessy to build a “master value composite factor” which consistently outperforms any individual metric.
5 Mid-Cap Stocks With the Lowest Price Ratios
Here’s a breakdown of five mid-cap stocks with the lowest price ratios and a market capitalization between $1 billion and $10 billion.
Office Depot, Inc. (ODP)
Office Depot, Inc. sells office products and services. As of December 26, 2015, it operated 1,564 stores in the United States and 147 stores in France, South Korea, Sweden, New Zealand, and Australia.
Office Depot, Inc. was founded in 1986 and is headquartered in Boca Raton, Florida.
- Market Capitalization: $2 Billion
- Price to Earnings: 7.33
- Price to Book: 1.07
- Price to Sales: 0.13
- Price to Free Cash Flow: 7.17
- Enterprise Value to EBITDA: 3.60
Greenbrier Companies, Inc. (GBX)
The Greenbrier Companies, Inc. designs, manufactures, and markets railroad freight car equipment in North America and Europe. The company operates in the following segments: Manufacturing, Wheel & Parts, Leasing & Services, and a GBW Joint Venture segment.
The Greenbrier Companies, Inc. was founded in 1974 and is headquartered in Lake Oswego, Oregon.
- Market Capitalization: $1.04 Billion
- Price to Earnings: 4.8
- Price to Book: 1.24
- Price to Sales: 0.33
- Price to Free Cash Flow: 3.67
- Enterprise Value to EBITDA: 2.53
Noble Corp. plc (NE)
Noble Corporation plc operates as an offshore drilling contractor for the oil and gas industry worldwide. It owns and operates a fleet of mobile offshore drilling units. As of February 25, 2016, the company operated a fleet of 30 drilling rigs.
Noble Corporation plc was founded in 1921 and is headquartered in London, the United Kingdom.
- Market Capitalization: $1.8 Billion
- Price to Earnings: 3.0
- Price to Book: 0.26
- Price to Sales: 0.64
- Price to Free Cash Flow: 1.69
- Enterprise Value to EBITDA: 3.55
Tech Data, Corp. (TECD)
Tech Data Corporation engages in the wholesale distribution of technology products. It distributes and markets broadline, data center, and storage products. Additionally, the company offers software products and customer services.
Tech Data Corporation was founded in 1974 and is headquartered in Clearwater, Florida.
- Market Capitalization: $2.83 Billion
- Price to Earnings: 11.54
- Price to Book: 1.32
- Price to Sales: 0.09
- Price to Free Cash Flow: 4.58
- Enterprise Value to EBITDA: 5.51
Dillard’s, Inc. (DDS)
Dillard’s, Inc. operates as a fashion apparel, cosmetics, and home furnishing retailer in the United States. As of January 30, 2016, the company operated 297 Dillard’s stores, including 24 clearance centers; and an Internet store.
Dillard’s, Inc. was founded in 1938 and is based in Little Rock, Arkansas.
- Market Capitalization: $2.16 Billion
- Price to Earnings: 9.41
- Price to Book: 1.19
- Price to Sales: 0.38
- Price to Free Cash Flow: 11.43
- Enterprise Value to EBITDA: 4.28
Due to the nature of deep value strategies such as the Value Composite #1, average investors will find numerous reasons not to buy the above stocks.
Disciplined investors, on the other hand, will find success following such a simple investment strategy.
You can build your own portfolio using the stock screens on TheStockMarketBlueprint.com.
Check out our Shadow Stock Portfolios to see real-world examples of implementing systematic investment strategies.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.