Top Value Stocks Q1 2022

By Kirsteen Mackay

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Value investing is a prevalent type of stock market investing advocated by Billionaire investor Warren Buffett. Value stocks should be trading for less than their intrinsic or book value.

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Value Stocks - Q1 Top Picks VTM

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When identifying value stocks, some of the metrics we look for include a price-to-book value (P/B) below 1 and a price-to-earnings ratio (P/E) below 20. A low PEG ratio and dividend yield add value too.

Stocks trading below their intrinsic value do so for a reason. Many of these stocks have been impacted by COVID-19, and as the virus continues to wreak havoc, risk remains.

In the uncertain backdrop of inflation and tighter monetary policy, investors have been dumping tech and growth stocks in favor of safer options. This bodes well for value stocks, but investors should do their due diligence and understand the business before rushing in to buy shares. 

Here is a selection of stocks we see value in.

Ternium SA (NYSE: TX)

Ternium is a steel manufacturer serving a wide range of industries. It sells steel products to the construction, automotive, manufacturing, home appliances, packaging, energy, and transport industries. It also sells iron ore as concentrates and pellets from its mining segment.

As COVID-19 dies down and economies get back on track, we should see growth in industrial production. This is a scenario in which Ternium could thrive. Competitors include BHP Group (NYSE: BHP) and Rio Tinto (NYSE: RIO).

Ternium SA (NYSE: TX) financial metrics

The company metrics tick many of the boxes looked for in a value stock. Furthermore, it appears to be reducing its debt levels year-over-year. Revenue growth was consistent until 2018, from where it endured a slight drop until picking up again last year.

Overall, Ternium appears undervalued with room for growth. It also pays a very attractive dividend with a current yield of 6%. This offers reassurance to investors looking for guaranteed return whether or not the share price grows.

Avnet, Inc. (NASDAQ: AVT)

Avnet is a distributor of electronic components. Avnet sells semiconductors, interconnect, passive and electromechanical devices, and integrated components. Meanwhile, its Farnell segment sells electronic components and related products to the electronic system design community. As technology is an ever-present and advancing industry, the company should retain a consistent opportunity for growth.

Avnet, Inc. (NASDAQ: AVT) financial metrics

In 2018 and 2019, Avnet showed consistent revenue of around $19bn, which it returned to in 2021 after a dip to $17bn in 2020.

Interestingly, its PEG ratio of 0.5 shows it has further room to grow. And its price-to-sales ratio (P/S) of 0.2 represents good value for money. Avnet’s net debt appears consistent and is not rising.

Tri Pointe Homes, Inc. (NYSE: TPH)

Tri Pointe Homes is an American home building company specializing in single-family homes and condominiums. Its brands include Maracay Homes in Arizona, Pardee Homes in California and Nevada, Quadrant Homes in Washington, Trendmaker Homes in Texas, plus TRI Pointe Homes and Winchester Homes. Tri Pointe also operates a Financial Services segment operating mortgage financing and Assurance title services operations.

The US housing market is a complex beast. Demand has soared over the past year, and house prices with it. This may not be sustainable, particularly if interest rates rise, meaning the market could falter. However, demand for single-family homes is likely to remain high.

Tri Pointe Homes, Inc. (NYSE: TPH) financial metrics

Tri Pointe Homes is a company that has seen consistent revenue coming in the $3bn to $3.2bn range during the past four years. Meantime, in the last twelve months, this has grown to $3.8bn, enjoying a 21.2% growth. Earnings have grown too, but the P/E remains low at 7, and P/B is 0.9.

P/S of 0.7 suggests TPH stock could be good value for money. Meanwhile, its low PEG ratio indicates earnings could grow in the future. The net debt has decreased year-over-year, showing the company to be in a healthy position. If it opts to expand operations further, it can issue more debt if need be.

One thing to be cautious about is the potential of a housing market bubble bursting, which could see demand for new homes slow, thus negatively affecting home builders. 

Culp, Inc. (NYSE: CULP)

Culp supplies a wide range of mattress and upholstery fabrics around the world. This includes the sale of covers and beddings under the Culp Home Fashions brand and fabrics for residential and commercial manufacturers.

Culp, Inc. (NYSE: CULP) financial metrics

Although Culp’s P/E meets the industry average, its P/S and P/B are far lower. This indicates it could have room to grow and may be undervalued by the market. Its share price has fallen 50% in the last six months despite posting year-over-year earnings growth of 101%. The company is also in a healthy financial position. Its cash position is 100% more than its debt.

Amkor Technology, Inc. (NASDAQ: AMKR)

Amkor is a $6bn semiconductor product packaging and test services provider.

Amkor Technology, Inc. (NASDAQ: AMKR) financial metrics

Semiconductors remain a hot market, explaining Amkor’s growth in revenue and earnings in recent years. Nevertheless, these valuation metrics suggest it may have further room for growth.

Amkor’s net debt has been decreasing, which is a positive sign. But debt at $1.2bn to $500m cash is not ideal. Nevertheless, the hot macro environment could very well make up for this.

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In this article:

Industries:
Industrials
Information Technology
Real Estate
Companies:
Ternium
Avnet
Tri Pointe Homes
Culp
Amkor Technology

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.