This Trio of Graham-Style Stocks Appears to Be Reasonably Priced
To enhance the effectiveness of their search for value opportunities, investors may want to screen the market for stocks whose "Graham blended multiplier" is 22.5 or less. The multiplier, which was developed by Benjamin Graham, the father of value investing, equals the stock's price-earnings ratio times its price-book ratio.
Thus, value investors may want to consider the following three stocks, as their Graham blended multipliers are 22.5 or less.
Exxon Mobil
The first stock to consider is Exxon Mobil Corp. (NYSE:XOM), the Irvine, Texas-based producer of crude oil and natural gas.
Shares of Exxon Mobil closed at a price of $45.47 each on May 29 for a market capitalization of $192.36 billion.
The stock has a Graham blended multiplier of 18.22 as the price-earnings ratio is 17.03 (versus the industry median of 9.24) and the price-book ratio is 1.07 (versus the industry median of 0.7).
The stock does not appear to be expensive based on the Peter Lynch chart.
The 52-week range is $30.11 to $83.49.
Wall Street sell-side analysts issued a hold recommendation rating for the stock and have set an average target price of $46.42 per share.
Viad
The second stock to consider is Viad Corp (NYSE:VVI), a Phoenix-based provider of several specialty business services.
Shares of Viad closed at $18.34 on May 29 for a market capitalization of $373.78 million.
The stock has a Graham blended multiplier of 14.67, as the price-earnings ratio is 18.34 (versus the industry median of 14.67) and the price-book ratio is 0.8 (versus the industry median of 1.5).
The stock doesn't seem to be expensive as it trades only slightly above the Peter Lynch earnings line.
The 52-week range is $11.25 to $72.27.
Wall Street sell-side analysts issued an overweight recommendation rating for the stock and have established an average target price of $38 per share.
British American Tobacco
The third company to consider is British American Tobacco PLC (NYSE:BTI), the London-based cigarette manufacturer.
Shares of British American Tobacco closed at $40.08 on May 29 for a market capitalization of $91.95 billion.
The stock has a Graham blended multiplier of 14.73 as the price-earnings ratio is 12.81 (versus the industry median of 13.69) and the price-book ratio is 1.15 (versus the industry median of 3.35).
The stock seems to be cheap because its share price is currently trading below the Peter Lynch earnings line.
The 52-week range is $27.32 to $45.64.
Wall Street sell-side analysts issued a buy recommendation rating for the stock and have established an average target price of $56.16 per share.
Disclosure: I have no positions in any securities mentioned.
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This article first appeared on GuruFocus.
