Thus far, with the first 3 parts of this five-part series, we’ve examined 60% (18 of 30) of the 30 stocks in the Dow Jones Industrial Average. What we found so far were that the majority of these constituents are currently overvalued or at least fully valued. Finally, with this Part 4, we will examine 6 additional Dow constituents that appear fairly valued with blended P/E ratios of 14-16. But as the title of this article asks, why are these 6 Dow stocks trading within the historical normal valuation range of the market when the others are being valued much higher? In other words, are they cheaper for good reason?
Portfolio Review: Six Fairly Valued Stocks in the Dow Jones Industrial Average
The following portfolio review lists 6 stocks in the Dow Jones Industrial Average that appear fairly valued based on their current blended P/E ratio. However, there are many ways to value a stock in addition to the P/E ratio. Consequently, I suggest the reader also notices the price to cash flow of each of these 6 Dow constituents. For those investors most interested in dividend income, price to cash flow might be more relevant for higher-yielding dividend paying stocks. Furthermore, when ascertaining valuation, other factors such as expected growth need to be considered as well. I will elaborate more fully in the video below.
The following portfolio review is presented in order of highest blended P/E ratio to lowest. As an additional valuation check, note that the earnings yield (EPS Yld) of each of these Dow constituents is above 6%, but only 3 of 6 are above my 6 ½ to 7% threshold. Consequently, this particular group of 6 Dow stocks is more attractively valued than what we’ve seen in previous parts of this five-part series. On the other hand, these 6 Dow stocks are not necessarily bargains at current levels either.
FAST Graphs Analyze Out Loud Valuation Analysis
This video will present a quick overview of each of these Dow constituents based primarily on price relative to earnings and cash flow. However, for certain constituents, I will also evaluate other metrics. For any reader concerned with the current valuation of the stock market, this video, and the videos in Part 1, Part 2, and Part 3, as well as the next and final video that will follow in Part 5, are must watches. Furthermore, although I will be only providing a cursory, or a pre-more comprehensive due diligence analysis, I believe you will find the video enlightening and hopefully entertaining.