Daily Spotlight: Look for Values in Financial and Healthcare

Summary

Each month, we take a close look at an aspect of sector investing. This month, we are examining growth and valuation. Investors hunting for stocks that reasonably balance long-term growth prospects and current value characteristics might want to look at companies in the Financial, Communication Services, and Healthcare sectors. These are among the industry groups that are currently selling for PEGY ratios — (price/earnings)/(growth+yield) — at or below the S&P 500’s ratio of 2.4. To generate the PEGY ratios, we use the P/E ratio for each sector based on forward earnings for the numerator. For the denominator, we average the growth rates for the past five years along with two years of forward estimates, this in order to achieve a less-volatile trend of earnings growth. Then we add the current yield to approximate total return. As an example, the current S&P 500 P/E ratio is 21, the current yield is 1.6%, and the forecast five-year growth rate is 7.1%. The formula is 20/(1.6+7.1) = 2.4. Sectors with favorable growth and valuation characteristics, in addition to the three listed above, include Energy, Real Estate, and Utilities. Premium-valued sectors with low growth rates inc

EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel