Seeking Alpha
, Portfolio123 (1,581 clicks)
Long only, value, research analyst, dividend investing
Profile| Send Message|
( followers)  

I have searched for profitable companies with very strong growth prospects. Those stocks would have to show a very low debt and have their enterprise value well below their market cap.

Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. Since the enterprise value can serve as the theoretical takeover price of the company, when its value is well below the market cap it is possible to consider the company's stock in a deep discount.

I have elaborated a screening method which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with all following demands:

  1. Average annual sales growth for the past 5 years is greater than 20%.
  2. Average annual earnings growth for the past 5 years is greater than 20%.
  3. Average annual earnings growth estimates for the next 5 years is greater than 20%.
  4. The PEG Ratio is less than 1.00.
  5. Debt to equity is less than 0.10.
  6. The Enterprise Value is less than the Market Cap of the company.

After running this screen on December 24, 2012, after the market close, I obtained as results the 8 following stocks:

(click to enlarge)

(click to enlarge)

(click to enlarge)

Acacia Research Corporation (NASDAQ:ACTG)

Acacia Research Corporation, through its subsidiaries, acquires, develops, licenses, and enforces patented technologies in the United States.

Acacia Research Corporation has no debt at all and the PEG ratio is very low at 0.65. The current ratio is very high at 11.37. ACTG records strong growth on all key parameters; the average annual earnings growth for the past 5 years was very high at 113.9%, the average annual sales growth for the past 5 years was also very high at 37.68% and the average annual earnings growth estimates for the next 5 years is very high at 38%. The company is trading 46% below its 52-week high and has 71% upside potential based on the consensus mean target price of $41.63. Analysts recommend the stock, among the six analysts covering the stock two rate it as a strong buy, three rate it as a buy and only one rates it as a hold.

On November 16, Acacia Research announced (here) that the company's board has authorized a program for repurchases of shares of the company's outstanding common stock. The stock repurchase program will be put into effect immediately. Under the stock repurchase program, the company is authorized to purchase in the aggregate up to $100M of its common stock through the period ending May 15, 2013. The compelling valuation metrics, the strong growth prospects, the analyst's recommendation and the buy back program; all these factors make the ACTG stock very attractive.

(click to enlarge)

Chart: finviz.com

Echo Global Logistics, Inc. (NASDAQ:ECHO)

Echo Global Logistics, Inc. provides technology-enabled transportation and supply chain management services in the United States.

Echo Global Logistics has no debt at all and the PEG ratio is quite low at 0.92. The current ratio is at 2.09 and the price to sales ratio is very low at 0.57. ECHO records strong growth on all key parameters; the average annual earnings growth for the past 5 years was very high at 25.45%, the average annual sales growth for the past 5 years was also very high at 78.57% and the average annual earnings growth estimates for the next 5 years is very high at 30.4%. The company is trading 13.27% below its 52-week high and has 25.3% upside potential based on the consensus mean target price of $21.70. Analysts recommend the stock, among the eleven analysts covering the stock eight rate it as a strong buy, two rate it as a buy and only one rates it as a hold. On October 25, Echo Global Logistics reported its 3Q financial results (here). On that occasion, Doug Waggoner, Chief Executive Officer of Echo said:

Echo posted another strong quarter in terms of its revenue growth, achieving record revenue of over $192 million, which is an increase of more than 21% from the third quarter of 2011. This strong growth has been achieved in spite of a softer than anticipated overall freight environment, and was again driven by the investments we are making in our business.

The low multiples, the strong growth prospects and the analyst's recommendation; all these factors make the ECHO stock quite attractive.

(click to enlarge)

Chart: finviz.com

Francesca's Holdings Corporation (NASDAQ:FRAN)

Francesca's Holdings Corporation, through its subsidiary, Francesca's Collections, Inc., operates a chain of retail boutiques under the francesca's collections brand in the United States.

Francesca's Holdings has no debt at all and the PEG ratio is very low at 0.86. FRAN records strong growth on all key parameters; the average annual earnings growth for the past 5 years was very high at 32.39%, the average annual sales growth for the past 5 years was also very high at 47.03% and the average annual earnings growth estimates for the next 5 years is very high at 33.13%. The company is trading 30.47% below its 52-week high and has 45% upside potential based on the consensus mean target price of $37.58. Analysts recommend the stock, among the fourteen analysts covering the stock five rate it as a strong buy, six rate it as a buy and three rate it as a hold. On December 05, Francesca's Holdings reported its 3Q financial results (here), which beat expectations on EPS and on revenues.

Operating and financial highlights:

  • Q3 2012 net sales increased 44% to $72.0 million; comparable boutique sales increased 16.7%
  • Q3 2012 adjusted diluted EPS was $0.24, a 71% increase over the prior year adjusted diluted EPS of $0.14
  • Q4 2012 diluted EPS guidance set at $0.27 to $0.28
  • FY 2012 adjusted diluted EPS guidance increased to a range of $1.00 to $1.01

The cheap valuation, the strong growth prospects, the analyst's recommendation and the good 3Q financial results; all these factors make the FRAN stock quite attractive.

(click to enlarge)

Chart: finviz.com

Globecomm Systems Inc. (NASDAQ:GCOM)

Globecomm Systems Inc. provides satellite-based managed network solutions to government, communications service providers, commercial enterprises, and media and content broadcasters in the United States, Europe, South America, Africa, the Middle East, and Asia.

Globecomm Systems has a very low debt (the total debt to equity is only 0.09) and the PEG ratio is very low at 0.56. The trailing P/E is very low at 11.80 and the forward P/E is quite low at 14.71. The price to free cash flow for the trailing 12 months is very low at 7.67 and the price to sales ratio is also very low at 0.67. GCOM records strong growth on all key parameters; the average annual earnings growth for the past 5 years was very high at 20.29%, the average annual sales growth for the past 5 years was very high at 20.43% and the average annual earnings growth estimates for the next 5 years is also very high at 21%. The company is trading 29.19% below its 52-week high and has 34% upside potential based on the consensus mean target price of $15.20. Analysts recommend the stock, among the three analysts covering the stock two rate it as a strong buy or as a buy. On November 29, 2012, Globecomm Systems announced (here) that the company has been awarded option year two of a five year contract from a US Government agency valued at $6.8 million. Globecomm previously announced approximately $6.0 million in contracts from this US Government agency, bringing the combined contract value to approximately $12.8 million. GCOM shares displayed both attractive valuation metrics and strong growth metrics. All these factors should push the stock higher.

(click to enlarge)

Chart: finviz.com

Mellanox Technologies, Ltd. (NASDAQ:MLNX)

Mellanox technologies, Ltd., a fabless semiconductor company, produces and supplies interconnect products for computing, storage, and communication applications in the computing, Web 2.0, storage, financial services, database, and cloud markets.

Mellanox has a very low debt (the total debt to equity is only 0.01) and the PEG ratio is extremely low at 0.37. The trailing P/E is at 27.14 and the forward P/E is quite low at 14.52. Mellanox records strong growth on all key parameters; the average annual earnings growth for the past 5 years was extremely high at 90.51%, the average annual sales growth for the past 5 years was very high at 39.81% and the average annual earnings growth estimates for the next 5 years is also very high at 74%. The company is trading 49.58% below its 52-week high and has 77% upside potential based on the consensus mean target price of $107.15.

Mellanox will report its latest quarterly financial results on Monday, January 21, 2013. MLNX is expected to post a profit of $1.05 a share (here), a rise of 239% from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the short-term stock price.

(click to enlarge)

Chart: finviz.com

POZEN Inc. (NASDAQ:POZN)

POZEN Inc., a pharmaceutical company, develops products for the treatment of acute and chronic pain, and other pain-related conditions in the United States.

POZEN has no debt at all and the PEG ratio is extremely low at 0.12. The price to free cash flow for the trailing 12 months is very low at 3.40 and the current ratio is very high at 20.92. POZN records strong growth on all key parameters; the average annual earnings growth for the past 5 years was very high at 74.08%, the average annual sales growth for the past 5 years was also very high at 74.08% and the average annual earnings growth estimates for the next 5 years is very high at 30%. The company is trading 36.58% below its 52-week high and has 71% upside potential based on the consensus mean target price of $8.81. On November 08, POZEN Inc. reported its 3Q financial results (here). On that occasion, the company announced that it presented positive results from two pivotal Phase 3 clinical trials of PA32540 at two scientific meetings.

The very low multiples make the POZN stock quite attractive.

(click to enlarge)

Chart: finviz.com

Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR)

Questcor Pharmaceuticals, Inc., a biopharmaceutical company, provides prescription drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications.

Questcor has no debt at all and it has a very low trailing P/E of 11.51 and even lower forward P/E of 7.42 and an extremely low PEG ratio of 0.34. QCOR records strong growth on all key parameters; the average annual earnings growth for the past 5 years was very high at 38.05%, the average annual sales growth for the past 5 years was also very high at 76.36% and the average annual earnings growth estimates for the next 5 years is very high at 33.50%. The price to free cash flow for the trailing 12 months is very low at 10.59. The forward annual dividend yield is quite high at 2.66% and the payout ratio is only 7.0%. The company is trading 48.2% below its 52-week high and has 40% upside potential based on the consensus mean target price of $41.86. On October 23, Questcor Pharmaceuticals reported its 3Q financial results (here). The company beat expectations on both top and bottom lines. Compared to the prior-year quarter, sales and EPS grew significantly and margins expanded across the board. The very low multiples and the high dividend yield make QCOR stock quite attractive.

(click to enlarge)

Chart: finviz.com

Silver Wheaton Corp. (NYSE:SLW)

Silver Wheaton Corp., a mining company, together with its subsidiaries, operates as a silver streaming company worldwide.

See my post (here), where I explain why Silver Wheaton is a better investment than silver.

(click to enlarge)

Chart: finviz.com

 

Source: 8 High Growth Stocks At A Big Discount And With Low PEG, Low Debt