Finding Value with Bubble Charts

One of the most versatile tools on the Finscreener.org site is the Bubble Chart. Bubble Chart is an X and Y axis graphing tool that allows users to plot specific criterion and measure the performance of US stocks on markets such as the DOW 30, Nasdaq 100, S&P 500 or Russell 1000. The tool is particularly helpful to screen for undervalued stocks. Users can also analyze ETF, Forex, OTC, and EU Stocks. The tool allows users to filter by market, market cap, sector, industry and country to conduct investment planning and build diversified portfolios.

Bubble Chart is a True Screening Tool

Investors can use Bubble Chart to look for undervalued stocks or more closely identify stocks that require additional analysis because they may operate in the same sector but have different value ratios. For example, the chart below shows stocks that make up the Dow 30. The colors represent different sectors where the companies operate. The chart plots the companies’ historical PE Ratio on the Y-Axis and the 2020 Earnings Per Share (EPS) expectation on the X-Axis.

Such powerful screening tools make this analysis interesting for two reasons. The first is that it adds potential insight into specific stocks such as Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL). These companies operate in the same sector and have similar market capitalizations, yet the 2020 EPS expectation for Apple is much better than it is for Microsoft. The same can be said for The Walt Disney Company (NYSE: DIS) and Verizon Communications (NYSE: VZ), where both companies operate in the Communication Services sector. Looking at the chart, we can see that both companies have a similar 2020 EPS, but Verizon trades at a discount relative to Disney on a PE ratio basis.

Another exciting feature the chart above shows is which stocks in the Dow 30 appear undervalued. If we draw a 45-degree line and split the chart in two, we can see the 14 stocks in the Dow that have respectable 2020 EPS figures along the X-Axis and still reasonably low PE ratios along the Y-Axis. Value investors may want to start with these companies to explore possible investment opportunities.

Try the Bubble Chart for yourself. The tool is flexible enough for all kinds of investors. For example, value investors may also find it interesting to change the X and Y axis settings to look for things like Dividend Yield vs. Forward PE Ratio. When you have finished, you should have a list of names that offer a respectable dividend payment at a fair value.

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Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.