Inflation seems to be cooling. In June, the Consumer Price Index rose less than expected, and the Producer Price Index fell 0.3%. That said, it is too early to say rate hikes are completely off the table. Even as short-term hike odds may have eased, markets still appear to be pricing in the possibility of additional tightening later this year, so the path for rates remains uncertain.
Renewed tensions between the United States and Iran have once again brought the Strait of Hormuz into focus. Although President Trump withdrew a proposed 20% levy on ships using the strategic waterway, military attacks between the two countries continue. Concerns over global energy supplies and trade disruptions have resurfaced, keeping investors on edge.
With geopolitical risks likely to persist, market volatility could remain elevated in the near term. In such an environment, value investing stands out as a prudent approach, as fundamentally strong companies trading below their intrinsic value tend to offer greater resilience during periods of uncertainty and market turbulence.
Arcos Dorados Holdings ARCO, Halozyme Therapeutics HALO, Ternium S.A. TX and Array Technologies ARRY are a few value stocks with high earnings yield.
Using the Earnings Yield Metric
Earnings yield is an interesting ratio that you can consider for ferreting out attractively valued stocks. This metric, expressed in percentage, is calculated as annual earnings per share (EPS) divided by market price. This metric measures the anticipated yield (or return) from earnings for each dollar invested in a stock today. While comparing stocks, if other factors are similar, the ones with higher earnings yield are considered undervalued, while those with lower earnings yield are seen as overpriced.
While earnings yield is the reciprocal of the P/E ratio, it is a little more illuminating than the traditional P/E ratio as it facilitates the comparison of stocks with fixed-income securities. Investors often compare the earnings yield of a stock to the prevailing interest rates, such as the current 10-year Treasury yield, to get a sense of the return on investment it offers compared to virtually risk-free returns.
If the yield on a stock is lower than the 10-year Treasury yield, it would be considered overvalued relative to bonds. Conversely, if the yield on the stock is higher, it would be considered undervalued. In this situation, investing in the stock market would be a better option for a value investor.
Setting the Right Filters
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
We have highlighted four of the 29 stocks that qualified the screen:
Arcos Dorados operates as a franchisee of McDonald’s restaurants. The company is benefiting from healthy comparable sales growth, supported by rising digital engagement, a growing loyalty platform and resilient guest traffic. Continued restaurant expansion, operational efficiency initiatives and a focus on value offerings position Arcos Dorados for sustainable long-term growth.
The Zacks Consensus Estimate for ARCO’s 2026 and 2027 EPS implies year-over-year growth of 181% and 19%, respectively. Estimates for 2026 and 2027 earnings per share have moved up by 5 cents and 2 cents, respectively, over the past 60 days. Arcos Dorados currently sports a Zacks Rank #1 and has a Value Score of A.
Halozyme is a biopharmaceutical company benefiting from its ENHANZE drug delivery technology. Strong demand for products such as Roche's Phesgo, argenx's Vyvgart Hytrulo, and J&J's subcutaneous Darzalex is driving royalty revenues. With new partnership opportunities and continued product momentum, the company is well-positioned for sustained growth through 2026.
The Zacks Consensus Estimate for HALO’s 2026 and 2027 EPS implies year-over-year growth of 92% and 21%, respectively. Estimates for 2026 and 2027 earnings per share have moved up by 4 cents and 27 cents, respectively, over the past 60 days. Halozyme currently has a Zacks Rank #2 and a Value Score of B.
Ternium, a leading flat and long steel producer, is well-positioned to benefit from recovering demand and firmer steel prices across key markets. Mexico's commercial sector is rebounding post-destocking, infrastructure spending is supporting shipments, and Brazil's automotive demand remains solid, aided by favorable trade measures. Cost-competitive facilities and proactive steps to bolster liquidity further strengthen Ternium’s outlook.
The Zacks Consensus Estimate for TX’s 2026 and 2027 EPS implies year-over-year growth of 182% and 7%, respectively. EPS estimates for the current year and the next have moved up by $1.68 and 21 cents, respectively, over the past 60 days. Ternium currently sports a Zacks Rank #1 and has a Value Score of A.
Array Technologies develops a solar tracking system. It is strengthening its competitive position with 100% domestically sourced solar trackers, an advantage amid evolving trade and policy dynamics. The acquisition of APA Solar has expanded its product portfolio to include foundation and fixed-tilt solutions, making it a more integrated supplier. Backed by a healthy order book, improving demand and APA Solar's contribution, the company is well-positioned for continued growth.
The Zacks Consensus Estimate for ARRY’s 2026 and 2027 EPS implies year-over-year growth of 9% and 26%, respectively. EPS estimates for the current year and the next have moved up by 1 cent each over the past 60 days. Array Technologies currently sports a Zacks Rank #1 and has a Value Score of A.
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Halozyme Therapeutics, Inc. (HALO): Free Stock Analysis Report
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Arcos Dorados Holdings Inc. (ARCO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).