Momentum Ideas: 7 Companies Undervalued Relative to Cash, Boosting Earnings Guidance

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 |  Includes: AET, CBL, CEPH, LXK, MTZ, RCII, TTMI
by: Kapitall

If you feel better owning companies with healthy piles of cash, you may appreciate this stock list.

Below are 7 companies that have recently announced earnings guidance above analysts’ estimates. These companies also have significant amounts of levered free cash flow for the trailing twelve-month period. Here we present TTM levered FCF as a percentage of market cap.

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Levered free cash flow is the free cash flow available after paying interest to bondholders and re-paying any principal as it comes due.

Because both dividends and firm growth are valuable to shareholders, levered free cash flow is a particularly relevant measure to consider.

Whether you are a value investor or a growth investor, levered free cash flow is an important consideration. Do you think these cash flows will sufficiently fund their corporate strategies? Use this list as a starting-off point for your own analysis...

List sorted by levered free cash flow as a percentage of market cap.

1. Rent-A-Center Inc. (NASDAQ:RCII): Rental & Leasing Services Industry. Market cap of $2.21B. Guided Q1 at $0.82-$0.88 vs. estimate of $0.80. Guided FY11 at $2.90-$3.10 vs. estimate of $3.01. TTM Levered Free Cash Flow at $608.52M, which is 27.49% of market cap. The stock is a short squeeze candidate, with a short float at 8.66% (equivalent to 9.11 days of average volume). The stock has gained 45.75% over the last year.

2. CBL & Associates Properties Inc. (NYSE:CBL): REIT. Market cap of $2.58B. Guided FY11 at $2.10-2.15 vs. estimate of $2.01. TTM Levered Free Cash Flow at $450.33M, which is 17.47% of market cap. This is a risky stock that is significantly more volatile than the overall market (beta = 3.3). Short float at 13% (equivalent to 11.44 days of average volume), indicating CBL is a short squeeze candidate. The stock has gained 20.5% over the last year.

3. Aetna Inc. (NYSE:AET): Health Care Plans Industry. Market cap of $14.59B. Guided FY11 at $3.70-3.80 vs. estimate of $3.27. TTM Levered Free Cash Flow at $2.22B, which is 15.22% of market cap. AET might be undervalued at current levels, with a PEG ratio at 0.82, and P/FCF ratio at 12.99. The stock has gained 8.18% over the last year.

4. TTM Technologies Inc. (NASDAQ:TTMI): Printed Circuit Boards Industry. Market cap of $1.52B. Guided Q4 at $0.45-0.50 vs. estimate of $0.39. TTM Levered Free Cash Flow at $194.11M, which is 12.75% of market cap. TTMI is exhibiting strong upside momentum--currently trading 13.41% above its SMA20, 11.49% above its SMA50, and 50.13% above its SMA200. The stock has gained 8.9% over the last week.

5. Cephalon Inc. (NASDAQ:CEPH): Biotechnology Industry. Market cap of $5.83B. Guided FY11 at $8.70-9.00 vs. estimate of $8.15. TTM Levered Free Cash Flow at $670.61M, which is 11.51% of market cap. The stock is a short squeeze candidate, with a short float at 19.89% (equivalent to 6.05 days of average volume). The stock has had a couple of great days, gaining 33.61% over the last week.

6. Lexmark International Inc. (NYSE:LXK): Computer Based Systems Industry. Market cap of $2.88B. Guided Q1 at $1.18-1.28 vs. estimate of $1.14. TTM Levered Free Cash Flow at $328.69M, which is 11.43% of market cap. Short float at 7.59% (equivalent to 5.13 days of average volume), indicating the stock is a short squeeze candidate. The stock has lost 0.82% over the last year.

7. MasTec, Inc. (NYSE:MTZ): Heavy Construction Industry. Market cap of $1.72B. Guided Q1 at $0.23 vs. estimate of $0.21. Guided FY11 at $1.20-1.23 vs. estimate of $1.20. TTM Levered Free Cash Flow at $195.04M, which is 11.35% of market cap. MTZ is exhibiting strong upside momentum--currently trading 8.18% above its SMA20, 21.34% above its SMA50, and 61.65% above its SMA200. The stock has had a couple of great days, gaining 9.04% over the last week.

*Levered FCF data sourced from Yahoo! Finance, all other data sourced from Finviz.

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