Do you prefer searching for stocks that appear to be undervalued? We ran a screen with this idea in mind.
We began by screening the large-cap sector for stocks that appear undervalued relative to earnings growth, with PEG below 1.
Then we screened that universe for those that appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.
It is based off of a stock's EPS and book value per share (BVPS).
Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)
The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
Do you think these stocks are being undervalued? Use this list as a starting point for your own analysis.
1. The Goldman Sachs Group, Inc. (NYSE:GS): Provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide. Market cap at $66.27B, most recent closing price at $141.01. Diluted TTM earnings per share at 10.42, and a MRQ book value per share value at 140.58, implies a Graham Number fair value = sqrt(22.5*10.42*140.58) = $181.55. Based on the stock's price at $137.13, this implies a potential upside of 32.39% from current levels. PEG at 0.48.
2. Marathon Petroleum Corporation (NYSE:MPC): Engages in refining, transporting, and marketing petroleum products primarily in the United States and internationally. Market cap at $22.18B, most recent closing price at $65.38. Diluted TTM earnings per share at 7.36, and a MRQ book value per share value at 33.83, implies a Graham Number fair value = sqrt(22.5*7.36*33.83) = $74.85. Based on the stock's price at $61.99, this implies a potential upside of 20.74% from current levels. PEG at 0.85.
3. The Travelers Companies, Inc. (NYSE:TRV): Provides various commercial and personal property and casualty insurance products and services to businesses, government units, associations, and individuals primarily in the United States. Market cap at $28.95B, most recent closing price at $75.90. Diluted TTM earnings per share at 7, and a MRQ book value per share value at 67.81, implies a Graham Number fair value = sqrt(22.5*7*67.81) = $103.34. Based on the stock's price at $74.85, this implies a potential upside of 38.07% from current levels. PEG at 0.87.
EPS and BVPS data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.