A company’s book value is equal to its total assets, less its liabilities. Book value does not consider the future at all. It is strictly a measure of the company’s balance sheet values at any given time. For investors, deals can be had when an otherwise solid company has stock trading below its book value per share (BVPS).
When a stock is trading below its BVPS (book value divided by the number of shares outstanding), that’s usually a big sign that there’s something worrisome about the business, which results in investors demanding a steep discount for it. Depending on the company, this can be an indication of value or an indication of a value trap.
Three stocks that are struggling badly this year are Viatris (NASDAQ: VTRS), JetBlue Airways (NASDAQ: JBLU), and Plug Power (NASDAQ: PLUG). You can buy any of them for well below their BVPS. The big question is whether these stocks are worth the risk.
Viatris came into existence in 2020 when healthcare giant Pfizer spun off parts of its Upjohn business, which combined with Mylan. The stock has proven to be a bad buy, losing half of its value (52%) since the spinoff. More than 43 percentage points of those losses for this healthcare stock have come since mid-November 2024.
The company is struggling to grow its top line and the stock has primarily been attractive for income-seeking investors because of its high yield of 6.3%. Viatris incurred a net loss of $634 million last year but its free cash flow totaled $1.9 billion, which was sufficient to cover its dividend payments of around $575 million.
Viatris’ stock trades at around half of its book value but without much in the way of growth prospects. The worry is that this just becomes a value trap for investors. While it does offer a high dividend payment, the problem is that the stock’s losses have more than offset the dividend income investors have earned thus far from this investment. That trend may not change in the future. Even if you want a high-yielding dividend, you may be better off passing on Viatris.
Low-cost airline JetBlue Airways might also appeal to investors due to its discounted valuation. It’s trading at around half of its book value and the stock is down close to 51% this year. It began to nosedive in late January after releasing its latest earnings numbers and providing disappointing guidance. The company is coming off a disappointing year in 2024, when its operating revenue fell by more than 3% and it incurred an operating loss of $684 million.
Now, with the economy looking to be in even worse shape due to tariffs and trade wars, it’s hard to imagine JetBlue’s situation improving anytime soon. The company has incurred a loss in each of the past four years and with a recovery in demand likely not forthcoming, things can go from bad to worse for JetBlue in the months ahead.
