Interesting article with WATG included
19 Companies Whose Growth Exceeds Their Stock Prices
by: Kurtis Hemmerling February 27, 2011
| about: AHCI / ANAT / ANW / AOB / CSKI / DCO / ESA / EVK / FBMI / FSBK / GTU / JGBO / LEO / PBNY / USBI / WATG
The hunt is on for the next undervalued stock pick that will pop once enough investors realize the market price is irrational. While this theory is grand to contemplate - that a stock will jump as soon as people come to their senses - the reality is that these picks often have valuation problems for a reason.
Still, if we can find companies increasing their net worth at a higher rate than share prices, there just might be a profitable pop if enough attention is driven their way or if earnings forecasts begin to rise.
How will we look for such undervalued picks?
1. PE ratios below their 5 year averages
2. Price to book ratio of 1 or less
3. Book value growth vastly exceeding share price growth (or share price drop vastly exceeding book value decline)
Keep in mind that these could be highly contrarian stock picks where share price is falling faster than book value, or it could be that book value has grown despite earnings tapering off with a waffling share price. In a few rare circumstances there might be stocks with greatly increasing earnings and book values that have yet to be reflected fully in the increasing share price.
19 Potentially Undervalued Stocks With a Few Metrics
Ticker Market Cap(mil) P/E PEG P/S P/B P/Cash
ANAT 2164.91 15.14
0.7 0.6 13.13
GTU 885.61 4.74
5.57 1.01 1.01
LEO 458.33 10
10.38 0.6
ESA 421.74 10.24 0.68 0.77 0.87 26.31
ANW 414.9 8.97 0.51 0.1 0.84 5.66
PBNY 358.7 16.77
3.03 0.86 10.3
WATG 237.7 7.71 0.42 0.87 1.05 3.92
DCO 230.79 18.63 1.43 0.56 0.92 128.93
AOB 176.04 6.79 0.97 0.55 0.42 1.9
AHCI 105.88 12.15 1.22 0.39 0.7 3.06
JGBO 80.07 1.97
0.79 0.51 0.65
CSKI 78.58 2.03
0.58 0.5 1.09
FBMI 53.36 25.37
0.74 0.36 2.11
FSBK 52.36 9.26
1.17 0.6 3.21
USBI 48.86 16.94
1.07 0.58 4.1
EVK 30.24 6.83
0.29 0.83 10.15
NFEC 21.85 4.27
0.94 0.85 44.6
IMH 21.37 10.19 2.55 0.02 0.82 2.02
CZFC 17.67 11.96
1.01 0.46 1.19
Looking at this list we notice a few interesting ratios. First, their market caps are quite small with only a few stocks being above the $300 million cut-off. PEG is only listed on some of the stocks, as many of these stocks do not have 5-year forecasts available (check out these 7 Low Modified-PEG Stocks that uses a different approach if a 5-year forecast does not exist). A price-to-sales under 1 is considered a good metric by Ken Fisher, and low price-to-book and price-to-cash should provide some support for these stocks.
Price Performance
With a couple exceptions, these stocks have all had a rocky year and are contrarian stock picks with falling prices.
Ticker Performance (Week) Performance (Month) Performance (Quarter) Performance (Half Year) Performance (Year)
ANAT -6.05% -7.79% 1.14% 8.41% -23.04%
GTU 2.41% 7.02% 2.29% 9.26% 19.15%
LEO -2.98% -1.83% -6.95% -13.89% -5.30%
ESA -7.73% 4.37% 3.61% 26.47% 67.97%
ANW -4.61% -21.76% -10.49% -41.77% -69.57%
PBNY -2.09% -3.40% -1.68% 19.62% 10.34%
WATG 4.93% -6.15% -16.33% -5.65% -28.66%
DCO -2.18% -1.96% -1.70% 14.06% 27.49%
AOB -3.03% -5.49% -2.61% -1.32% -46.02%
AHCI 4.74% -3.19% -21.10% 21.50% -12.27%
JGBO 11.11% -4.40% -15.66% -29.13% -43.40%
CSKI -1.06% -13.01% -37.85% -52.00% -69.86%
FBMI -3.11% 3.63% 37.27% 47.63% 9.95%
FSBK -1.83% -11.82% -34.51% -43.35% -47.76%
USBI -23.16% -26.49% -14.87% -21.45% -41.34%
EVK -3.76% -14.23% 1.99% -24.08% -40.41%
NFEC 0.00% -10.68% -5.75% -39.26% -48.75%
IMH -2.83% -1.08% 1.85% 1.10% -30.90%
CZFC 12.83% 17.87% 24.58% 32.89% 37.37%
Some of the stocks on the list are ones I have previously shied away from. AOB is one such pick with falling profit margins. However, based solely on rising book value, cash, and sales, it could be near a bottom - but future forecasts would need to improve first. If this happened, a big pop in valuation could occur. If margins continue to slide or stay low, this could sit and slide more yet.
What are future expectations? Forward P/E is usually made on the future 12 months, as opposed to PEG being made on 5 year growth. If forward P/E is lower, we can expect an earnings increase next year when compared to this year. (Keep in mind that upcoming quarters could be expecting an EPS drop, with recovery next year. So current PE could theoretically be higher than next year's forward EPS, despite a year-over-year anticipated growth ratio. Forward PE compared to current PE may not reflect future negative quarters in this years EPS.)
Ticker P/E Forward P/E EPS growth next year
ANAT 15.14 19.08 9.02%
GTU 4.74
LEO 10
ESA 10.24 11.78
ANW 8.97 16.42 3.92%
PBNY 16.77 16.47 7.55%
WATG 7.71 5.62 28.87%
DCO 18.63 10.27 12.63%
AOB 6.79 7.47 15.38%
AHCI 12.15 12.79 11.76%
JGBO 1.97 3.13 0.00%
CSKI 2.03 3 -14.29%
FBMI 25.37 19.03 38.46%
FSBK 9.26
USBI 16.94 5.11 32.50%
EVK 6.83
NFEC 4.27 3.28 21.36%
IMH 10.19
CZFC 11.96
So what is your take on these stocks? Is there one or more on the list you'd feel comfortable investing in? Are you more inclined to invest with the price droppers or the price poppers? Do you prefer upwards momentum that is still undervalued compare to book value and P/E, or low-priced stocks with intrinsic value?
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