The stock market is facing a sharp correction after two years of gains. Major U.S. indexes have entered correction territory, with technology and semiconductor stocks leading the decline. Investor sentiment has weakened due to uncertainty over tariffs and economic policies under the new administration.
Yesterday, the S&P 500 dropped 2.7%, hitting its lowest level since September. The Nasdaq fell 4%, marking its worst session since September 2022, while the Dow declined 2.08%. The Volatility Index surged to its highest level since August. There are concerns that the tariff uncertainty could push the economy into a recession, a possibility that President Trump has not ruled out.
With uncertainty and volatility rising, value investing could offer a strategic advantage. By focusing on fundamentally strong companies trading at attractive prices, investors can navigate market turbulence with a long-term perspective. One interesting ratio that you can consider for ferreting out attractively valued stocks is earnings yield.
ANI Pharmaceuticals, Inc. ANIP, Dana Incorporated DAN, Pitney Bowes PBI, Priority Technology Holdings, Inc. PRTH and Kingstone Companies, Inc. KINS are a few value stocks with high earnings yield that can fetch you handsome gains.
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.
We have set 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.
Here we discuss five of the 69 stocks that qualified the screen:
ANI Pharma is a specialty pharmaceutical company focused on developing, manufacturing, and marketing both branded and generic prescription drugs. The Zacks Consensus Estimate for ANIP’s 2025 and 2026 earnings implies year-over-year growth of 21.3% and 9.4%, respectively. Estimates for 2025 and 2026 earnings per share have moved up by 77 cents and 15 cents, respectively, over the past seven days. The stock sports a Zacks Rank #1 and has a Value Score of B.
Dana is a provider of technology driveline, sealing and thermal-management products. The Zacks Consensus Estimate for DAN’s 2025 and 2026 earnings implies year-over-year growth of 70% and 31%, respectively. Estimates for 2025 and 2026 earnings per share have moved up by 10 cents each over the past 30 days. The stock sports a Zacks Rank #1 and has a Value Score of A.
Pitney Bowes is a global technology company powering billions of transactions — physical and digital — in the connected and borderless world of commerce. The Zacks Consensus Estimate for PBI’s 2025 and 2026 earnings implies year-over-year growth of 47.5% and 8.3%, respectively. Estimates for 2025 and 2026 earnings per share have moved up by 9 cents and 8 cents, respectively, over the past 30 days. Pitney Bowes sports a Zacks Rank #1 and has a Value Score of A.
Priority Technology operates as a payment technology company in the United States. The Zacks Consensus Estimate for PRTH’s 2025 and 2026 earnings implies year-over-year growth of 49% and 55%, respectively. Estimates for 2025 and 2026 earnings per share have moved up by 3 cents and 2 cents, respectively, over the past 60 days. The stock sports a Zacks Rank #1 and has a Value Score of A.
Kingstone owns an insurance company specializing in automobile, motorcycle, and homeowners' insurance, primarily serving individual customers rather than businesses. The Zacks Consensus Estimate for KINS’ 2025 sales and earnings implies year-over-year growth of 36.9% and 24%, respectively. Estimates for 2025 earnings per share have moved up by 25 cents over the past 30 days. Kingstone sports a Zacks Rank #1 and has a Value Score of B.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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Pitney Bowes Inc. (PBI) : Free Stock Analysis Report
Dana Incorporated (DAN) : Free Stock Analysis Report
ANI Pharmaceuticals, Inc. (ANIP) : Free Stock Analysis Report
Kingstone Companies, Inc (KINS) : Free Stock Analysis Report
Priority Technology Holdings, Inc. (PRTH) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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