It is important when investing your money in stocks that you not only purchase great performing companies, but more importantly that you buy them at a great price. Regardless of what valuation metrics you prefer, I think it is important that you try and consider all aspects of a company’s performance. To just analyze the price-to-earnings (P/E) or price-to-book values (P/B) would be naïve. Just because a company trades at low multiples does not mean it is a great value play. We need to be looking for great companies that trade at discounted prices. For one reason or another, the market has either yet to recognize or has passed over these value companies, and we as informed investors get to reap the benefits.
Value in Semiconductors
Brooks Automation, Inc. (USA) (NASDAQ:BRKS) provides automation, vacuum, and instrumentation solutions for semiconductor manufacturing, life sciences and technology device manufacturing markets worldwide. The company has no debt and currently trades at 5.9 times trailing twelve months’ earnings. Brooks Automation, Inc. (USA) (NASDAQ:BRKS) also trades at 0.96 times price/book and 1.23 times price/sales. Earnings are expected to grow at close to 18% per year for the next five years. Brooks Automation has a forward dividend yield of 3.18% with a very manageable 17% payout ratio. Brooks Automation, Inc. (USA) (NASDAQ:BRKS) combines a hefty dividend and strong earnings growth, all the while trading below book value.
Value in Regional Banks
Umpqua Holdings Corp (NASDAQ:UMPQ) operates as the holding company for Umpqua Bank and Umpqua Investments, Inc. that provide commercial, and retail banking and brokerage services to corporate, institutional, and individual customers in the United States.
Umpqua Holdings Corp (NASDAQ:UMPQ) has a debt to equity of only 0.3 and currently trades at just 15.34 times forward earnings. The company also trades at just 0.87 times book value and 8.32 times free cash flow. Umpqua is expected to grow earnings 11.5% annually over the next five years. Umpqua also sports a nice dividend, which currently yields 3.17%, and their payout ratio of 42% is respectable. Umpqua Holdings Corp (NASDAQ:UMPQ)’s PEG ratio also sits at an optimal 1.33–typically a PEG between 0.8 and 1.8 mean a company is trading at a discount to its future earnings growth potential.
Value in Cloud Computing
8×8, Inc. (NASDAQ:EGHT) develops and markets telecommunications services for internet protocol (IP), telephony, and video applications. It also offers contact center, Web-based conferencing and unified communication services, as well as cloud-based computing services.