4 Value Plays With High Earnings Yield and Upside Potential

Value investing is a time-tested strategy that focuses on finding assets trading for less than their intrinsic value, allowing investors to buy such undervalued assets at a discount. This approach hinges on the idea that market prices often don’t fully reflect a company’s fundamentals, providing opportunities to benefit from market corrections in the long run.

A key metric for value investors is earnings yield, which offers insight into a stock’s profitability relative to its market price. Earnings yield is calculated by dividing a company’s earnings per share (EPS) by its current stock price (Earnings Yield = EPS / Current Stock Price). This figure represents the profit generated for each dollar invested, effectively serving as the inverse of the price-to-earnings (P/E) ratio. A higher earnings yield typically indicates that a stock may be undervalued and could provide growth potential, while a lower earnings yield could suggest overvaluation.

Commercial Metals Company CMC, Allied Gold Corporation AAUC, LATAM Airlines LTM and CommScope Holding Company, Inc. COMM are a few solid high earnings yield picks for value investors.

Beyond identifying individual stocks, earnings yield also aids in comparing the stock market to fixed-income investments, like 10-year Treasury bonds. If the earnings yield of a market index surpasses the bond yield, it can indicate favorable conditions for investing in stocks over bonds, which is valuable for portfolio diversification.

The Winning Strategy

We have set an Earnings Yield greater than 10% as our primary screening criterion but it alone cannot be used for picking stocks that have the potential to generate solid returns. So, we have added the following parameters to the screen:

Estimated EPS growth for the next 12 months greater than or equal to the S&P 500: This metric compares the 12-month forward EPS estimate with the 12-month actual EPS.

Average Daily Volume (20 Day) greater than or equal to 100,000: High trading volume implies that a stock has adequate liquidity.

Current Price greater than or equal to $5.

Buy-Rated Stocks: Stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy) have been known to outperform peers in any type of market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our Picks

Here we discuss four of the 36 stocks that qualified the screening:

Commercial Metals manufactures, recycles and markets steel and metal products, related materials and services. The company is focused on strengthening its core operations while expanding into new markets, customer segments and applications. Ongoing network optimization initiatives are expected to enhance margins and lower costs. Strong demand across its major product lines in North America should continue to support top-line growth. Additionally, CMC’s solid liquidity, healthy balance sheet and disciplined capital allocation — including debt reduction — position the company well for sustained growth and improved profitability.

The Zacks Consensus Estimate for CMC’s fiscal 2026 sales and earnings implies year-over-year growth of 7% and 70%, respectively. EPS estimates for the current and next fiscal year have moved up by 59 cents and 35 cents, respectively, over the past 30 days. Commercial Metals currently sports a Zacks Rank #1 and has a Value Score of B.

Allied Gold, a Canada-based gold producer, is steadily building momentum with operations spread across Côte d’Ivoire, Mali and Ethiopia. The company has been drilling high-grade zones, refining its mine models and improving grade control to enhance accuracy and productivity. At its Sadiola mine, new equipment has been deployed to improve fleet availability, while in Mali, Allied Gold has strengthened mine management with experienced local hires. It’s also advancing stripping at Bonikro and Agbaou to access higher-grade ore. These efforts to lift production, along with operational improvement, are expected to benefit the company.  

The Zacks Consensus Estimate for AAUC’s 2025 sales and earnings implies year-over-year growth of 80% and 857%, respectively. EPS estimates for the next year have moved up by 50 cents over the past seven days. Allied Gold currently sports a Zacks Rank #1 and has a Value Score of B.

LATAM Airlines, headquartered in Santiago, Chile, is Latin America’s leading airline. The company is benefiting from its lean cost structure, expanding operations and strategic partnerships. Improvement in air travel demand following the end of the pandemic and normalization of economic activities bodes well for LATAM's top line. Its focus on premium traffic presents significant opportunities for revenue growth and margin expansion. Shareholder-friendly moves further boost investor confidence.

The Zacks Consensus Estimate for LTM’s 2025 sales and earnings implies year-over-year growth of 9% and 46%, respectively. EPS estimates for the next year have moved up by 5 cents over the past seven days. LATAM Airlines currently carries a Zacks Rank #2 and has a Value Score of A.

CommScope is a noted player in the communications and networking hardware space. It provides comprehensive networking solutions designed to support wireline and wireless network convergence, which are essential for the success of 5G technology. The company continues to benefit from stringent cost-cutting measures and a focus on core operations. CommScope is actively pruning its non-core businesses while focusing on inorganic growth to boost its portfolio strength. The acquisition of Casa Systems’ Cable Business assets has boosted CommScope’s prospects. The deal brings operational synergies and supports the company’s strategy to broaden its technology capabilities and customer reach in cloud-native network solutions.

The Zacks Consensus Estimate for COMM’s 2025 sales and earnings implies year-over-year growth of 17% and 5,566%, respectively. EPS estimates for current and next year have moved up by 35 cents and 55 cents, respectively, over the past 30 days. CommScope currently sports a Zacks Rank #1 and has a Value Score of B.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.

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This article originally published on Zacks Investment Research (zacks.com).

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