The markets continue to show amazing strength, with the major indexes all trading near record highs. Hopes of tax reform are currently fueling the market’s upward trend, and so far, there is no sign of trader exhaustion or profit taking hitting the market.
As the markets hit new record highs, a lot of big name stocks have also traded up to new highs, leaving a lot of investors looking for value in the market. Value is tough to pinpoint, as there is no uniform formula that can be applied to individual stocks.
The best way to determine value is to look at where a stock is trading in relation to its earnings. Price-to-earnings ratios are the quickest way to determine whether a stock is in overbought of oversold territory, but even P/E ratios can be misleading.
If a stock is expected to experience a drop in earnings over the next year, it makes sense that the market would sell off the stock to a low P/E ratio in anticipation of the lower future earnings. Conversely, if a company is expected to show significant earnings growth in the future, the market is correct to price that growth into the stock, and allow the multiple to rise.
To find the perfect stock, you need to find a stock that not only has a reasonable valuation, but also one that is expected to enjoy earnings growth moving forward. If you can find such a stock, you can reasonable assume that the stock is undervalued, and shares will move higher as earnings increase and the market pushes the stock higher to maintain the valuation.
Despite the market’s strength, there are still plenty of high-quality stocks that appear to be a great value at this time. Let’s take a look at five such stock that are trading at sale prices right now.