Wall Street is entering a period of renewed uncertainty as sticky inflation complicates the Federal Reserve’s stance on interest rates. U.S. inflation remains well above the central bank’s 2% target, while the prolonged conflict in the Middle East continues to create risks for energy prices and the broader economy.
With the next Fed decision approaching and September historically proving a challenging month for stocks, investors may face greater volatility ahead. This backdrop makes chasing expensive growth stocks less appealing.
Instead, investors may benefit from focusing on companies whose share prices do not fully reflect their underlying fundamentals. Value investing could offer a sensible approach in this environment, as financially solid businesses trading at reasonable valuations may provide a stronger margin of safety while giving investors room to benefit if market sentiment improves.
Value investors can consider stocks such as Herbalife Ltd. HLF, Honda Motor HMC, Marathon Petroleum Corporation MPC, Halozyme Therapeutics HALO and Genworth Financial GNW, which have high earnings yield.
Understanding Earnings Yield Metric
One metric widely used by value investors to identify potentially undervalued stocks is earnings yield. Calculated by dividing a company’s annual earnings per share by its current stock price, earnings yield indicates the amount of earnings generated for every dollar invested in a stock. Generally, a higher earnings yield suggests a stock may be undervalued relative to its earnings potential, while a lower earnings yield can indicate a richer valuation.
Earnings yield also provides a useful way to compare stocks with fixed-income investments such as bonds. When a stock’s earnings yield exceeds prevailing bond yields, it may offer a more attractive return potential, making it a valuable tool for investors searching for opportunities in an uncertain market.
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
Here we have discussed five of the 35 stocks that qualified the screening:
Herbalife is a global nutrition company focused on helping consumers improve their health and wellness through science-based products.The Zacks Consensus Estimate for HLF’s 2026 and 2027 EPS implies year-over-year growth of 26% and 12%, respectively. While EPS estimates for the current year have remained stable over the past 30 days, they have moved up by 18 cents for 2027 over the same timeframe. Herbalife currently carries a Zacks Rank #2 and has a Value Score of A.
Honda is a leading manufacturer of automobiles and the largest producer of motorcycles in the world.The Zacks Consensus Estimate for HMC’s fiscal 2027 and 2028 EPS implies year-over-year growth of 204% and 62%, respectively. EPS estimates for the current year and the next have moved up by $1.27 and 67 cents, respectively, over the past 30 days. Honda currently sports a Zacks Rank #1 and has a Value Score of A.
Marathon Petroleum is a leading independent refiner, transporter and marketer of petroleum products. The Zacks Consensus Estimate for MPC’s 2026 EPS implies year-over-year growth of 336%. EPS estimates for the current year and the next have moved up by $3.47 and $2.29, respectively, over the past 30 days. Marathon Petroleum currently carries a Zacks Rank #2 and has a Value Score of A.
Halozyme is a biopharmaceutical company focused on the development and commercialization of novel treatments for oncology indications by targeting the tumor microenvironment. The Zacks Consensus Estimate for HALO’s 2026 and 2027 EPS implies year-over-year growth of 97% and 18%, respectively. EPS estimates for the current and next year have moved up by 23 cents and 9 cents, respectively, over the past 30 days. Halozyme currently carries a Zacks Rank #2 and has a Value Score of B.
Genworth, through its principal insurance subsidiaries, offers mortgage and long-term care insurance products. The Zacks Consensus Estimate for GNW’s 2026 and 2027 EPS implies year-over-year growth of 214% and 5%, respectively. EPS estimates for the current and next year have moved up by 66 cents and 69 cents, respectively, over the past 60 days. Genworth currently carries a Zacks Rank #2 and has a Value Score of A.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
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Honda Motor Co., Ltd. (HMC): Free Stock Analysis Report
Genworth Financial, Inc. (GNW): Free Stock Analysis Report
Halozyme Therapeutics, Inc. (HALO): Free Stock Analysis Report
Marathon Petroleum Corporation (MPC): Free Stock Analysis Report
Herbalife Ltd (HLF): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).