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The following is a list of deeply undervalued stocks, based on the price to free cash flow (P/FCF) ratio, and the current price relative to the average analyst target price (used as a proxy for fair value).

Yes, there are many limitations to using analyst target price to establish fair value, but the goal here is to give value-oriented investors a starting point for their own analysis.

To compile this list, we started with a universe of stocks with P/FCF ratios below 5, which means that free cash flow makes up more than 20% of each company's valuation. We then narrowed down the list by only focusing on those companies that are trading at steep discounts relative to the average analyst target price.

All data sourced from Finviz.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.


The list has been sorted by the discount to average analyst target price.

1. Rite Aid Corp. (NYSE:RAD)

Drug Stores Industry. Market cap of $855.67M. Current price at $0.97 vs. average analyst target price at $1.70 (implies a discount of -42.94%). P/FCF ratio at 4.68. Short float at 3.03%, which implies a short ratio of 4.84 days. The stock has lost -42.17% over the last year.

2. Entercom Communications Corp. (NYSE:ETM)

Radio Industry. Market cap of $414.15M. Current price at $11.23 vs. average analyst target price at $16 (implies a discount of -29.81%). P/FCF ratio at 4.75. Short float at 12.18%, which implies a short ratio of 16.17 days. The stock has gained 50.81% over the last year.

3. Valassis Communications Inc. (NYSE:VCI)

Marketing Services Industry. Market cap of $1.57B. Current price at $31.21 vs. average analyst target price at $43.33 (implies a discount of -27.97%). P/FCF ratio at 3.47. Short float at 9.72%, which implies a short ratio of 8.25 days. The stock has gained 54.31% over the last year.

4. ICICI Bank Ltd. (NYSE:IBN)

Foreign Regional Banks Industry. Market cap of $27.26B. Current price at $46.16 vs. average analyst target price at $60 (implies a discount of -23.07%). P/FCF ratio at 4.44. Short float at 1.62%, which implies a short ratio of 1.84 days. The stock has gained 24.64% over the last year.

5. Wilmington Trust Corporation (NYSE:WL)

Regional Bank. Market cap of $404.34M. Current price at $4.45 vs. average analyst target price at $5.74 (implies a discount of -22.47%). P/FCF ratio at 2.76. Short float at 3.46%, which implies a short ratio of 0.86 days. The stock has lost -65.11% over the last year.

6. PH Glatfelter Co. (NYSE:GLT)

Paper & Paper Products Industry. Market cap of $579.21M. Current price at $12.56 vs. average analyst target price at $16 (implies a discount of -21.5%). P/FCF ratio at 4.9. Short float at 5.14%, which implies a short ratio of 12.74 days. The stock has lost -1.64% over the last year.

7. SUPERVALU Inc. (NYSE:SVU)

Grocery Stores Industry. Market cap of $1.95B. Current price at $9.16 vs. average analyst target price at $11.43 (implies a discount of -19.86%). P/FCF ratio at 2.87. Short float at 13.61%, which implies a short ratio of 4.49 days. The stock has lost -26.2% over the last year.

8. US Airways Group, Inc. (LCC)

Major Airlines Industry. Market cap of $1.79B. Current price at $11.25 vs. average analyst target price at $14 (implies a discount of -19.64%). P/FCF ratio at 3.1. Short float at 13.2%, which implies a short ratio of 3.9 days. The stock has gained 118.07% over the last year.

9. China Life Insurance Co. Ltd. (NYSE:LFC)

Life Insurance Industry. Market cap of $117.92B. Current price at $61.98 vs. average analyst target price at $76.47 (implies a discount of -18.95%). P/FCF ratio at 4.21. Short float at 0.25%, which implies a short ratio of 2.64 days. The stock has lost -15.66% over the last year.

10. Bank of America Corporation (NYSE:BAC)

Banking Industry. Market cap of $146.23B. Current price at $14.62 vs. average analyst target price at $17.99 (implies a discount of -18.73%). P/FCF ratio at 1.37. Short float at 1.12%, which implies a short ratio of 0.52 days. The stock has lost -11.26% over the last year.

11. Gannett Co., Inc. (NYSE:GCI)

Newspapers Industry. Market cap of $3.66B. Current price at $15.46 vs. average analyst target price at $18.86 (implies a discount of -18.03%). P/FCF ratio at 4.38. Short float at 11.16%, which implies a short ratio of 5.71 days. The stock has lost -5.78% over the last year.

12. Cash America International, Inc. (NYSE:CSH)

Credit Services Industry. Market cap of $1.12B. Current price at $37.73 vs. average analyst target price at $46 (implies a discount of -17.98%). P/FCF ratio at 4.54. Short float at 14.66%, which implies a short ratio of 19.84 days. The stock has gained 6.42% over the last year.

13. NRG Energy, Inc. (NYSE:NRG)

Electric Utilities Industry. Market cap of $4.86B. Current price at $19.46 vs. average analyst target price at $23.35 (implies a discount of -16.66%). P/FCF ratio at 3.76. Short float at 4.06%, which implies a short ratio of 3.92 days. The stock has lost -20.71% over the last year.

14. Micron Technology Inc. (NASDAQ:MU)

Semiconductor Industry. Market cap of $8.51B. Current price at $8.66 vs. average analyst target price at $10.3 (implies a discount of -15.92%). P/FCF ratio at 3.43. Short float at 8.05%, which implies a short ratio of 2.34 days. The stock has lost -23.89% over the last year.

15. Hertz Global Holdings, Inc. (NYSE:HTZ)

Rental & Leasing Services Industry. Market cap of $6.14B. Current price at $14.68 vs. average analyst target price at $17.43 (implies a discount of -15.78%). P/FCF ratio at 2.94. Short float at 8.83%, which implies a short ratio of 7.61 days. The stock has gained 28.14% over the last year.

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