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The following is a list of undervalued stocks, as defined by the Price to Free Cash Flow ratio (P/FCF). All of the management teams mentioned below have proven themselves to be more efficient than their industry competitors over the past five years.

To compile the list, we started with a universe of about 200 stocks with low P/FCF ratios. We then narrowed down the list by only focusing on those companies that have outperformed their competitors based on the Return on Assets, Return on Equity and Return on Invested Capital ratios.

This list might offer an interesting starting point for value investors. Full details below.

P/FCF ratios sourced from Finviz, and management data and industry comps sourced from Reuters.

Interactive Chart: Press Play to compare analyst ratings for the top five stocks mentioned below. Analyst ratings have been sourced from Zacks. Note: The numbers on top of the items represent the forward P/E ratio.


The list has been sorted alphabetically.

1. Advance America, Cash Advance Centers Inc. (NYSE:AEA): Credit Services Industry. Market cap of $323.8M. P/FCF ratio at 2.65. 5-year average ROA at 12.38% vs. industry average at 2.07%. 5-year average ROI at 14.48% vs. industry average at 2.16%. 5-year average ROE at 21.91% vs. industry average at 18.19%. Short float at 2.69%, which implies a short ratio of 4.6 days. The stock has lost -10.94% over the last year.

2. Amedisys Inc. (NASDAQ:AMED): Home Health Care Industry. Market cap of $801.23M. P/FCF ratio at 5.3. 5-year average ROA at 11.32% vs. industry average at 3.29%. 5-year average ROI at 14.12% vs. industry average at 4.24%. 5-year average ROE at 17.74% vs. industry average at 6.06%. Short float at 20.21%, which implies a short ratio of 10.61 days. The stock has lost -32.05% over the last year.

3. AmSurg Corp. (NASDAQ:AMSG): Hospitals Industry. Market cap of $630.66M. P/FCF ratio at 3.09. 5-year average ROA at 15.92% vs. industry average at 3.29%. 5-year average ROI at 18.33% vs. industry average at 4.24%. 5-year average ROE at 11.38% vs. industry average at 6.06%. Short float at 5.94%, which implies a short ratio of 15 days. The stock has lost -6.47% over the last year.

4. Brookfield Homes Corp. (BHS): Residential Construction Industry. Market cap of $301.35M. P/FCF ratio at 2.94. 5-year average ROA at 3.77% vs. industry average at 2.23%. 5-year average ROI at 4.7% vs. industry average at 3.95%. 5-year average ROE at 14.93% vs. industry average at 9.14%. Short float at 2.72%, which implies a short ratio of 21.53 days. The stock has gained 62.56% over the last year.

5. ITT Educational Services Inc. (NYSE:ESI): Education and Training Services Industry. Market cap of $1.99B. P/FCF ratio at 4.21. 5-year average ROA at 30.88% vs. industry average at 7.26%. 5-year average ROI at 58.58% vs. industry average at 9.88%. 5-year average ROE at 103.46% vs. industry average at 14.45%. Short float at 24.08%, which implies a short ratio of 6.98 days. The stock has lost -31.5% over the last year.

6. Excel Maritime Carriers, Ltd. (NYSE:EXM): Shipping Industry. Market cap of $485.5M. P/FCF ratio at 5.28. 5-year average ROA at 6.89% vs. industry average at 4.88%. 5-year average ROI at 7.56% vs. industry average at 6.56%. 5-year average ROE at 16.36% vs. industry average at 12.28%. Short float at 5.9%, which implies a short ratio of 3.97 days. The stock has lost -6.58% over the last year.

7. PH Glatfelter Co. (NYSE:GLT): Paper and Paper Products Industry. Market cap of $594.8M. P/FCF ratio at 5.03. 5-year average ROA at 4.73% vs. industry average at 1.82%. 5-year average ROI at 5.57% vs. industry average at 2.59%. 5-year average ROE at 12.88% vs. industry average at 5%. Short float at 5.45%, which implies a short ratio of 14.23 days. The stock has gained 9.18% over the last year.

8. Quanex Building Products Corporation (NYSE:NX): General Building Materials Industry. Market cap of $683.71M. P/FCF ratio at 4.23. 5-year average ROA at 5.39% vs. industry average at 2.41%. 5-year average ROI at 6.8% vs. industry average at 3.37%. 5-year average ROE at 8.27% vs. industry average at 5.46%. Short float at 5.04%, which implies a short ratio of 6.64 days. The stock has gained 7.44% over the last year.

9. Res-Care Inc. (RSCR): Personal Services Industry. Market cap of $389.52M. P/FCF ratio at 4.14. 5-year average ROA at 3.63% vs. industry average at 3.29%. 5-year average ROI at 4.43% vs. industry average at 4.24%. 5-year average ROE at 7.31% vs. industry average at 6.06%. Short float at 1.62%, which implies a short ratio of 1.36 days. The stock has gained 20.8% over the last year.

10. World Acceptance Corp. (NASDAQ:WRLD): Credit Services Industry. Market cap of $810.67M. P/FCF ratio at 4.5. 5-year average ROA at 12.05% vs. industry average at 2.07%. 5-year average ROI at 12.91% vs. industry average at 2.16%. 5-year average ROE at 21.33% vs. industry average at 18.19%. Short float at 26.74%, which implies a short ratio of 19.71 days. The stock has gained 60.42% over the last year.

Disclosure: No positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 Undervalued Companies With Solid Management Teams