5 Highly Efficient Services Stocks Offering Good Value

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 |  Includes: AIT, DENN, GME, MED, NETC
by: Kapitall

The following is a list of services stocks with Price to Earnings Growth (PEG) ratios below 1. In addition, all of the names mentioned below have proven to be more efficient than their competitors when compared to the following metrics:

  • Trailing 12-Month Asset Turnover
  • Trailing 12-Month Inventory Turnover
  • Trailing 12-Month Receivables Turnover

This list might offer an interesting starting point to a value-oriented investor. Full details below.

PEG ratios sourced from Finviz, efficiency data sourced from Fidelity.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the 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.

1. Applied Industrial Technologies, Inc. (NYSE:AIT): Industrial Equipment Wholesale Industry. Market cap of $1.35B. PEG at 0.83.

TTM Asset Turnover 2.39 vs. industry average at 1.05. TTM Inventory Turnover 8.16 vs. industry average at 6.98. TTM Receivables Turnover 8.29 vs. industry average at 8.27.

Short float at 4.25%, which implies a short ratio of 4.11 days. The stock has gained 42.41% over the last year.

Other Highlights:

The company outperformed analyst earnings estimates during the most recent quarter, suggesting that the analyst community is underestimating the stock. The company reported earnings of $0.49 per share and exceeded the First Call Consensus of $0.44 (Q2 Earnings on 01/21/11). The company also outperformed analyst estimates over the last year, reporting earnings per share at $1.54, beating the consensus view at $1.28 (based on the estimates of eight analysts).

2. Denny's Corporation (NASDAQ:DENN): Restaurants Industry. Market cap of $384.84M. PEG at 0.92.

TTM Asset Turnover 1.78 vs. industry average at 0.89. TTM Inventory Turnover 109.68 vs. industry average at 70.53. TTM Receivables Turnover 40.32 vs. industry average at 31.77.

Short float at 3.03%, which implies a short ratio of 3.78 days. The stock has gained 41.91% over the last year.

Other Highlights:

The company has demonstrated rapid cash flow growth over the last five years, which may lower its risk going forward. Five-year average cash flow growth at 31.25%, much higher than the industry average at 7.49%.

Institutional and mutual fund investors have been net purchasers of the company's shares over the last two quarters, suggesting that the smart money thinks there's more upside to the stock. Institutional investors have been net buyers of 6.3M shares during the most recent quarter, vs. 2.3M net shares purchased in the previous quarter. Mutual fund investors have also been optimistic on the stock. They were net buyers of 861.9K shares during the most recent quarter, vs. 683.0K net shares purchased in the previous quarter.

3. GameStop Corp. (NYSE:GME): Electronics Stores Industry. Market cap of $2.98B. PEG at 0.54.

TTM Asset Turnover 1.95 vs. industry average at 1.77. TTM Inventory Turnover 5.15 vs. industry average at 4.22. TTM Receivables Turnover 183.19 vs. industry average at 67.78.

Short float at 25.45%, which implies a short ratio of 9.96 days. The stock has gained 4.35% over the last year.

Other Highlights:

When comparing the company's price relative to earnings, it's clearly undervalued. The P/E ratio, based on the most recent quarter's earnings, stands at 13.67, lower than the industry average at 21.46, while the P/E ratio, based on trailing 12-month earnings, stands at 8.23, which is lower than the industry average at 15.91.

Judging by the company's cash holdings, shares look to offer good value at current levels. Price / Cashflow per Share, based on the most recent quarter's cash flow numbers, came in at 7.49, lower than the industry average of 12.57. It's also worth pointing out that the company's trailing 12-month Price / Cashflow per Share came in at 5.4, lower than the industry average of 12.

The company appears to be undervalued relative to book value. Price/Book ratio at 1.12, much lower than the industry average of 2.66.

The company's capital spending accelerated by 10.75% over the last five years, much faster than the industry average of -7.51%. At least theoretically, this makes it more competitive over the coming years, since its operational assets are more up-to-date.

4. Medifast Inc. (NYSE:MED): Specialty Retail Industry. Market cap of $383.03M. PEG at 0.76.

TTM Asset Turnover 3.11 vs. industry average at 1.48. TTM Inventory Turnover 3.81 vs. industry average at 3.42. TTM Receivables Turnover 251.5 vs. industry average at 17.56.

Short float at 25.04%, which implies a short ratio of 10.34 days. The stock has gained 18.45% over the last year.

Other Highlights:

Analysts expect the company to generate higher than normal earnings growth in the future. EPS growth for the next year is projected at 30.28%, higher than the industry average at 16.81%. EPS growth over the next five years projected at 25.00%, vs. the industry average at 10.99%.

The company's capital spending accelerated by 20.01% over the last five years, much faster than the industry average of 6.67%. At least theoretically, this makes it more competitive over the coming years, since its operational assets are more up-to-date.

The company has low debt and great liquidity, which significantly reduces its risk over the coming months. During the most recent quarter, the total Debt/Assets ratio stood at 6.61% vs. the industry average at 18.48%. Total Debt/Equity came in at 8.75%, lower than the industry average at 46.2%. The company also appears to be more liquid than its competitors. The TTM Current Ratio stands at 4.05, higher than the industry average at 1.9. (Note: All ratios based on the most recent quarter, annualized.)

5. Net Services (NASDAQ:NETC): CATV Systems Industry. Market cap of $3.66B. PEG at 0.9.

TTM Asset Turnover 0.7 vs. industry average at 0.61. TTM Inventory Turnover 50.88 vs. industry average at 30.42. TTM Receivables Turnover 17.76 vs. industry average at 10.31.

Short float at 1.34%, which implies a short ratio of 1.3 days. The stock has lost 11.52% over the last year.

Other Highlights:

The company's capital spending accelerated by 70.5% over the last five years, much faster than the industry average of 3.38%. At least theoretically, this makes it more competitive over the coming years, since its operational assets are more up-to-date.

The company has demonstrated rapid cash flow growth over the last five years, which may lower its risk going forward. Five-year average cash flow growth is at 89.32%, much higher than the industry average at 9.37%.

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