We took a look at the undervalued shares of low-priced stocks. Here are the names we uncovered in our research:
Ford (NYSE:F): Alan Mullaly continues to pay down debt and produce cars that consumers want. Ford is still trading at a very low $14-15 per share, well below where it could trade a year from now. On a discounted cash flow basis, shares will be worth just under $30 apiece in 2012. EPS for 2011 is forecast at 113% with a five-year projection of nearly 13%. Broad trends suggest that Ford is stealthily improving its position in the competitive landscape: A consolidation of brands, a gain in market share over the past year and the shedding of debt. On this last point, it was just announced that Ford will redeem, in cash, all 6.50% convertible trust preferred securities, effectively taking $3 billion in debt off its books and reducing total debt to $16 billion. As earnings announcements loom, these dual events could act as a catalyst to bring Ford's stock price nearer to fair value. We use an 11% discount rate for the company.
ATP Oil and Gas (ATPG): Shares could fetch $30 apiece on higher production by year's end. This oil and gas company primarily focuses on extracting oil from regions on the continental shelf in which larger companies no longer have an interest. This continental strategy appears promising and has worked in the past. Apache (APA) and Andarko Petroleum (APC) began with the same humble beginnings as ATP, looking for cheap, proven reserves to drill profitably. Volatility has steadily reduced as fears over the BP (BP) oil spill subside and the pace of permit approval from the Bureau of Ocean Energy Management, Regulation and Enforcement picks up again. The stock trades at $18.26 at the time of writing and is reasonably close to a break out near the 52-week high of $23.97. The 52-week low of the stock is $8.16 and the price-earnings ratio is -2.67. Earnings per share were negative last year, given ATPG's capex program and collateral costs from the BP spill. We think ATP is ripe for a short squeeze.
Cloud Peak Energy (NYSE:CLD): On the heels of Alpha (ANR) bidding for Massey (NYSE:MEE), Cloud Peak looks ripe for a buyout. We think shares could fetch $30 apiece and, independent of a buy-out, CLD's earnings multiple has plenty of room to expand. Cloud Peak generated $1.37 billion in revenues in 2010, which was a decrease of 1.96%, after rising 12.78% in 2009. The EBT margins in 2010 and 2009 were 15.46% and 18.2%, respectively. The respective ROEs were 8.6% and 150.9%. The 30-day put/call ratio is 0.5. Cloud Peak Energy is the third-largest U.S. coal producer and the only pure-play Powder River Basin coal company.
First American (NYSE:FAF): First American is the second-largest title insurance operation in the U.S. and has some exposure to the rest of North America and many emerging markets abroad. This insurer retains an 11% stake in CoreLogic (NYSE:CLGX), the business information entity spun out from First American last year. We think shares could trade around $30 apiece by early next year. FAF has done a great job scaling back its cost structure in the wake of the recent housing bust. As transactions return to a more normal level, FAF will benefit tremendously and most of the benefit will translate into strong bottom line numbers. The next earnings call is April 28.
UTI Worldwide (NASDAQ:UTIW): Operating through subsidiaries, UTIW is a supply chain services and solutions company. UTIW has a market cap of only $1.92B. Analysts say the company is focused on improving its efficiency and profitability through its processes rather than acquisitions. The stock currently trades at a 36 P/E multiple around $20 per share. The company had EBITDA of $176.47M in the last 12 months at a 2.65% operating margin. Looking forward, we think shares could trade around $30 apiece even as the company's multiple contracts on the back of very strong earnings growth over the next 12 months.
Cisco (NASDAQ:CSCO): Shares have been weak as of late, but a return to its core focus should permit CSCO shares to approach $30 by year's end. Citibank (C) recently forecast a return to IT growth rates to 1.5-2xs GDP growth. Cisco should be pleased as the world’s largest purveyor of data networking equipment. It is trading relatively low at $17/share while analysts are forecasting fair value nearer to $30. Its forward P/E of 9.8 also suggests it is currently attractive for investors. With a coordinated effort to stabilize Japan and the world’s currently meek-voiced economic momentum, it is reassuring for the analysts at Citi as much as it is for those who decided to lever their portfolios to this trend through Cisco.
General Electric (NYSE:GE): GE has a market cap of $204.09B and a P/E ratio of 18.10. The stock also offers a dividend of $0.50 (2.80%). GE is one of the most diversified companies around, with operations all over the world in many different fields, including finance, technology, energy and more. Despite billions in profits, the company managed to pay zero U.S. corporate taxes the last two years. In 2010, this Buffett favorite made $150.21 billion in revenues, which was a drop of 4.19%, after dropping by 14.1% in 2009. GAAP/non-GAAP EPS crept up by 4.95% to $1.06, after dropping by 41.28% in 2009. Also, the EBT margin improved from 6.6% to 9.46%. In 2011, analysts expect EPS to be between $1.24 (+16.9%) and $1.38 (30.1%). Q1 2011 results come out on April 21. Analysts expect between $0.25 and $0.30. In comparison, the Q1 2010 EPS was $0.21. GE shares trade with a P/S multiple of 1.4. In the earlier part of the 2000s, these shares traded 2.0 to 2.5 times sales per share. Because the company has a debt to equity ratio of 2.47, we expect GE shares to continue to trade in the neighborhood of 1.5 times sales per share, which means shares could fetch around $30 apiece in 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.