Two Undervalued Small Cap Value Stocks

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Includes: GD, SPU
by: Simon Monger

Force Protection (NASDAQ:FRPT): Undervalued Defense Play

Click to enlargeForce Protection, which provides survivability solutions to the support the US armed forces and its allies, trades at just 13x earnings despite an analyst projected 25% growth rate in 2011 and projected 43% growth over the next five years. At the same time, the firm appears to be trading for less than its enterprise value.

While the defense company posted a weak first quarter, many analysts agree that the rest of the year remains on track. A discounted cash flow analysis assuming a modest 13% growth rate yields a valuation of over $10.00 per share. Meanwhile, the firm’s net reproduction cost appears to stand at approximately $5.50 per share, suggesting that it is undervalued.

SkyPeople (NASDAQ:SPU): A Cheap China Play

Click to enlargeSkyPeople Fruit Juice, which produces and sells fruit juice concentrates in China, is trading at just 6.5x its trailing 12-month earnings despite posting strong historic growth rates with analysts projecting 30% annual growth over the next five years. Of particular note are the firm’s strong free cash flows that hit $2.80 per share TTM.

In the fourth quarter of 2009, the fruit juice company posted revenue growth rates of 86% and net income growth of 77%. With analysts expecting the firm to grow at a 30% clip over the next five years, the firm’s price-earnings to growth ratio stands at a low 0.21. A fair value PEG ratio of 1.0 would yield a share price closer to $25 per share, making this stock undervalued.

Disclosure: No positions