5 Value Stocks to Buy Right Now With High Earnings Yield
Wall Street ended lower yesterday as a sharp climb in bond yields set a cautious tone for the week. Both the benchmark 10-year Treasury and the 30-year bond are hovering near their highest levels in several years, as traders price in the possibility of further Fed rate hikes on the back of stubborn inflation.
Investors will be hunting for fresh clues on where rates are headed, with three major data releases landing this week. Inflation comes first, as August's PCE reading, the gauge the Fed leans on most, is due tomorrow. Factory activity numbers follow on Thursday, and the week closes with September's employment report on Friday.
Against this backdrop, a value-focused approach makes sense. Buying strong businesses at prices below what they are actually worth builds in a cushion, which can help a portfolio hold up when markets swing.
Honda Motor HMC, National Energy Services Reunited NESR, Ternium S.A. TX, Avnet, Inc. AVT and Star Bulk Carriers SBLK are a few value stocks with high earnings yield.
Using the Earnings Yield Metric
Earnings yield is an interesting ratio that you can consider for picking attractively valued stocks. This metric, expressed in percentage, is calculated as annual earnings per share (EPS) divided by market price. It measures the anticipated 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 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.
Setting the Right Filters
We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:
Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.
Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.
Current Price greater than or equal to $5.
Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Picks
We have highlighted five of the 32 stocks that qualified the screen:
Honda is a leading manufacturer of automobiles and the largest producer of motorcycles in the world. The Zacks Consensus Estimate for HMC’s fiscal 2027 and 2028 EPS implies year-over-year growth of 204% and 62%, respectively. EPS estimates for the current year and the next have moved up by 54 cents and 42 cents, respectively, over the past 60 days. Honda currently sports a Zacks Rank #1 and has a Value Score of A.
National Energy Services is an oilfield services company focused mainly on the Middle East and North Africa. The Zacks Consensus Estimate for NESR’s 2026 and 2027 EPS implies year-over-year growth of 129% and 47%, respectively. EPS estimates for the current year and the next have moved up by 12 cents and 14 cents, respectively, over the past 60 days. National Energy Services currently sports a Zacks Rank #1 and has a Value Score of B.
Ternium is a leading producer of steel products in Latin America and consolidates the operations of steel companies like Hylsa in Mexico, Siderar in Argentina and Sidor in Venezuela. The Zacks Consensus Estimate for TX’s 2026 and 2027 EPS implies year-over-year growth of 201% and 24%, respectively. EPS estimates for the current year and the next have moved up by 47 cents and 24 cents, respectively, over the past 30 days. Ternium currently sports a Zacks Rank #1 and has a Value Score of A.
Avnet is one of the world’s largest distributors of electronic components and computer products. The Zacks Consensus Estimate for AVT’s fiscal 2027 and 2028 EPS implies year-over-year growth of 84% and 7%, respectively. EPS estimates for the current and the next fiscal year have moved up by $3.15 and $4.03, respectively, over the past 60 days. Avnet currently sports a Zacks Rank #1 and has a Value Score of B.
Star Bulk is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk sector. The Zacks Consensus Estimate for SBLK’s 2026 sales and EPS implies year-over-year growth of 38% and 367%, respectively. EPS estimates for the current and next year have moved up by 6 cents and 24 cents, respectively, over the past 60 days. Star Bulk currently sports a Zacks Rank #1 and has a Value Score of B.
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See Stocks Free >>Avnet, Inc. (AVT) : Free Stock Analysis Report
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
Ternium S.A. (TX) : Free Stock Analysis Report
Star Bulk Carriers Corp. (SBLK) : Free Stock Analysis Report
National Energy Services Reunited (NESR) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
