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Summary

  • The S&P 500 is hovering around record highs.
  • Opinion among analysts is divided as to whether we are due for a market correction.
  • Many companies with beaten-down share prices have sound fundamentals within the context of a recovering economy.
  • Undervalued companies in this scenario may be good buys when the market dips.

US stocks receded on Tuesday over valuation concerns as the S&P 500 closed near records for the duration of the week. Chad Morganlander, a fund manager at Stifel Nicolaus & Co., predicts a 5% contraction in the index, but doesn't expect we're headed to bear market territory.

Short selling appears to be on the rise: 11% of the S&P 500 is sold short, the highest percentage since 2012. But the fundamentals of many companies are strong, and the US economic recovery, while not blowing the doors off, appears to be sound.

That means corrections may be the time to look for bargains, and to that end, we ran a screen for undervalued stocks.

With the earnings season behind us, now is an appropriate time to look for mismatches between earnings growth and share price. Since stocks usually trade with earnings, this is a good way to spot companies that might be undervalued.

We started our screen with a universe of stocks between $5 and $10. Then we narrowed it for companies that had strong upward momentum by checking to see that they were rallying above their 20-day, 50-day, and 200-day simple moving averages.

We took the 180 stocks that remained, and then looked for price mismatches. That left us with 5.

Click here for the full, interactive chart.

1. Affymetrix Inc. (NASDAQ:AFFX): Engages in the development, manufacture, sale and servicing of consumables and systems for genetic analysis in the life sciences and clinical healthcare markets. Market cap at $616.19M, most recent closing price at $8.47. The EPS estimate for the company's current year increased from $0.12 to $0.14 over the last 30 days, an increase of 16.67%. This increase came during a time when the stock price changed by 7.41% (from $7.69 to $8.26 over the last 30 days). SMA 20: 4.88%, SMA 50: 12.77%, SMA 200: 13.67%.

2. Commercial Vehicle Group Inc. (NASDAQ:CVGI): Designs and manufactures integrated system solutions for commercial vehicle markets worldwide. Market cap at $289.97M, most recent closing price at $9.76. The EPS estimate for the company's current year increased from $0.35 to $0.37 over the last 30 days, an increase of 5.71%. This increase came during a time when the stock price changed by -1.04% (from $9.62 to $9.52 over the last 30 days). SMA 20: 1.47%, SMA 50: 3.37%, SMA 200: 17.50%.

Click here for the full, interactive chart.

3. FormFactor Inc. (NASDAQ:FORM): Designs, develops, manufactures, sells and supports precision and high-performance advanced semiconductor wafer probe cards. Market cap at $416.63M, most recent closing price at $7.50. The EPS estimate for the company's current year increased from $0.1 to $0.14 over the last 30 days, an increase of 40.%. This increase came during a time when the stock price changed by 22.84% (from $5.91 to $7.26 over the last 30 days). SMA 20: 16.72%, SMA 50: 20.50%, SMA 200: 19.74%.

4. Halcon Resources Corp. (NYSE:HK): Engages in the acquisition, exploration and development of mineral properties in British Columbia, Canada. Market cap at $2.69B, most recent closing price at $6.40. The EPS estimate for the company's current year increased from $0.13 to $0.16 over the last 30 days, an increase of 23.08%. This increase came during a time when the stock price changed by 15.77% (from $5.39 to $6.24 over the last 30 days). SMA 20: 2.94%, SMA 50: 13.56%, SMA 200: 35.82%

5. Office Depot, Inc. (NASDAQ:ODP): Office Depot, Inc., together with its subsidiaries, supplies office products and services. Market cap at $2.78B, most recent closing price at $5.20. The EPS estimate for the company's current year increased from $0.11 to $0.15 over the last 30 days, an increase of 36.36%. This increase came during a time when the stock price changed by 20.75% (from $4.24 to $5.12 over the last 30 days). SMA 20: 6.04%, SMA 50: 18.88%, SMA 200: 13.03%.

Click here for the full, interactive chart.

Source: Deal Or No Deal: 5 Undervalued Stocks Under $10 To Buy On Rallies