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These seven stocks have above industry average returns on equity, positive Reuters ratings and PEG ratios of less than 1. The PEG ratio is a broadly-used indicator of a stock's prospective worth. It is preferred by numerous analysts over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued. Many financiers use 1 as the cut-off point for PEG ratios. A PEG of 1 or less is believed to be favorable. These are bullish indicators regarding a stock's possible future performance.

Nonetheless, this is only the first step in finding winners for your portfolio. Now that we have cut the wheat from the chaff, let's take a closer look to distinguish the driving factors behind these remarkable statistics and ensure the stories are intact.

Below are four tables with detailed statistics regarding company summaries, price performance, fundamentals and earnings and dividends followed by a brief analysis of each company's current events. Please use this as a starting point for your own due diligence.

Summary Statistics


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Price Performance


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Fundamentals


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Earnings & Dividends
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Company Reviews

ACE Limited (NYSE:ACE) - Through its subsidiaries, provides a range of insurance and reinsurance products to commercial and individual customers worldwide.

ACE recently reported net income for the quarter ended March 31, 2011, of $0.76 per share, compared with $2.22 per share for the same quarter last year. Income excluding net realized gains (losses) was $0.79 per share, compared with $1.70 per share for the same quarter last year. Net after-tax catastrophe losses for the first quarter of 2011 were $443 million, including reinstatement premiums, or $1.30 per share, compared with $149 million, or $0.44 per share, for the first quarter of 2010. Book value increased $402 million, or 2%, during the quarter. Book value per share of $69.33 and tangible book value per share of $55.31 were up 1% from December 31, 2010. Annualized operating return on average equity for the quarter was 4.9%. The property and casualty (P&C) combined ratio for the quarter was 105.0%.

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented:

"Our revenue growth was better than we originally anticipated when we planned the year and the renewal persistency of our business was excellent. We also benefited in the quarter from positive client payroll and sales growth due to improved economic conditions. Finally, rates for our renewal business declined at the slowest pace we have experienced in a number of quarters."

The company is trading significantly below analysts' estimates. ACE has a median price target of $75 by 17 brokers and a high target of $83. The last up/downgrade activity was on Mar 22, 2011 when, JMP Securities initiated coverage on the company at Market Outperform. Please review the illustration for ACE's summary and key statistics.

Arch Capital Group Ltd. (NASDAQ:ACGL) - Together with its subsidiaries, provides insurance and reinsurance products worldwide. It operates in two segments, Insurance and Reinsurance.

Arch Capital recently implemented a three-for-one split of the company's common shares. Holders of common shares as of the close of business on May 6, 2011 (the record date) received two additional common shares for each common share owned. Shareholders' accounts were credited with the additional shares on May 11, 2011. On May 12, 2011, solely as a result of the share split, the per share market price for the common shares was proportionately reduced to one-third of the price it would have otherwise been.

Arch Capital Group Ltd. reports that net income available to common shareholders for the 2011 first quarter was $19.3 million, or $0.41 per share, compared to $210.5 million, or $3.79 per share, for the 2010 first quarter. The company also reported after-tax operating income available to common shareholders of $7.9 million, or $0.17 per share, for the 2011 first quarter, compared to $98.7 million, or $1.78 per share, for the 2010 first quarter. All earnings per share amounts discussed in this release are on a diluted basis.

The company is trading significantly below analysts' estimates. ACGL has a median price target of $37.33 by 12 brokers and a high target of $113. The last up/downgrade activity was on Nov 4, 2010 when, UBS downgraded to Buy from Neutral. Please review the illustration for ACGL's summary and key statistics.

The Chubb Corporation (NYSE:CB) - Through its subsidiaries, provides property and casualty insurance to businesses and individuals.

The Chubb Corporation recently reported that net income in the first quarter of 2011 was $509 million compared to $464 million in the first quarter of 2010. Net income per share increased 22% to $1.70 from $1.39 per share. Operating income, which the company defines as net income excluding after-tax realized investment gains and losses, was $405 million in the first quarter of 2011 and $381 million in the first quarter of 2010. First quarter operating income per share increased 18% to $1.35 in 2011 from $1.14 in 2010.

The impact of catastrophes in the first quarter of 2011 was $270 million before tax, including winter storms in the U.S., flooding in Australia, and earthquakes in New Zealand and Japan. In the first quarter of 2010, the impact of catastrophes was $344 million before tax. The impact of catastrophes on first quarter net income and operating income per share was $0.59 in 2011 and $0.67 in 2010. The impact of catastrophes includes losses and loss expenses net of reinsurance recoverable and also includes reinsurance reinstatement premiums.

The company is trading below analysts' estimates. CB has a median price target of $66 by 16 brokers and a high target of $74. The last up/downgrade activity was on Jan 21, 2011 when, RBC Capital Markets downgraded the company from Outperform to Sector Perform. Please review the illustration for CB's summary and key statistics.

DIRECTV (NASDAQ:DTV) - Provides digital television entertainment in the United States and Latin America.

DIRECTV nearly doubled net additions with 611,000 in the most recent quarter. DIRECTV Latin America set all-time records for gross and net additions with 765,000 and 427,000, respectively, in the quarter. DIRECTV U.S. Increased net additions 84% to 184,000 in the quarter. Revenues grew 13% to $6.32 Billion. Increase driven by strong subscriber growth coupled with higher ARPU of 11.7% at DIRECTV Latin America and 3.9% at DIRECTV U.S. Operating Profit before depreciation and amortization increased 12% to $1.77 billion and operating profit grew 21% to $1.16 billion compared to last year’s first quarter.

The company is trading significantly below analysts' estimates. DTV has a median price target of $66 by 16 brokers and a high target of $74. The last up/downgrade activity was on Mar 9, 2011 when, RBC Capital Markets initiated coverage with a Sector Perform rating. Please review the illustration for DTV's summary and key statistics.

Diamond Offshore Drilling, Inc. (NYSE:DO) - Operates as an offshore oil and gas drilling contractor worldwide.

Diamond recently announced the company has declared a special quarterly cash dividend of $0.75 per share of common stock and a regular quarterly cash dividend of $0.125 per share of common stock. Both dividends are payable on June 1, 2011 to shareholders of record on May 2, 2011.

Diamond recently reported net income for the first quarter of 2011 of $250.6 million, or $1.80 per share on a diluted basis, compared with net income of $290.9 million, or $2.09 per share on a diluted basis, in the same period a year earlier. Revenues in the first quarter of 2011 were $806.4 million, compared with revenues of $859.7 million for the first quarter of 2010.

The company is trading significantly below analysts' estimates. DO has a median price target of $75 by 29 brokers and a high target of $92. The last up/downgrade activity was on Apr. 29, when Canaccord Genuity initiated coverage on the company with a Hold rating. Please review the illustration for DO's summary and key statistics.

Frontier Oil Corporation (NYSE:FTO) - Together with its subsidiaries, engages in refining crude oil and marketing refined petroleum products.

Frontier Oil recently announced today that it has commenced a solicitation of consents from holders of its 8.5% Senior Notes due 2016 in aggregate principal amount outstanding of $200 million and from its 6.875% Senior Notes due 2018 in aggregate principal amount outstanding of $150 million to effect proposed amendments to the indentures governing the notes. Frontier Oil has established a record date and a meeting date for the special meeting of its shareholders to consider and vote upon, among other things, the proposal to adopt the previously announced Agreement and Plan of Merger, dated as of February 21, 2011, between Frontier and Holly Corporation.

Frontier Oil Corporation recently announced record first quarter results. For the quarter ended March 31, 2011, the company earned net income of $139.9 million, or $1.32 per diluted share, compared to a net loss of $40.3 million, or $0.39 per share, for the quarter ended March 31, 2010. First quarter 2011 results benefited from an increase in refinery throughput and improvements in crude oil differentials and product margins, due largely to the growing crude oil inventories in Cushing, Oklahoma and surrounding areas.

The company is trading significantly below analysts' estimates. FTO has a median price target of $33 by 8 brokers and a high target of $38. The last up/downgrade activity was on Feb 28, 2011 when, Barclays Capital upgraded the company from Underweight to Equal Weight. Please review the illustration for FTO's summary and key statistics.

Eli Lilly and Company (NYSE:LLY) - Develops, manufactures, and sells pharmaceutical products worldwide.

According to 13F filings with the SEC after the closing bell Monday, Eli Lilly found its way into Bruce Berkowitz’s Fairholme Capital Management’s portfolio over the first three months of 2011.

Lilly will have more than 40% of its current sales facing generic competition by 2013. Lilly is selling at a valuation significantly below its peers. Lilly has generated $5,882.3 million in free cash flow over the trailing 12 months. Lilly has a robust set of future R&D projects underway. The street seems focused on the current uptick of generic competition rather than future prospects, creating an opportunity for value hunters like Berkowitz.

The company is trading on par with analysts' estimates. LLY has a median price target of $35 by 15 brokers and a high target of $39. The last up/downgrade activity was on Mar 12, 2010 when, Jefferies & Co initiated coverage on the company with a Buy rating. Please review the illustration for LLY's summary and key statistics.

Information was gathered from CNBC, Yahoo Finance and respective company websites. Based on the current market conditions I would suggest scaling in to any position to reduce risk. I believe all these stocks are currently undervalued and provide significant opportunities for long term investors. Please use this information as a starting point for your own due diligence.

Source: 7 Highly Rated, Vastly Undervalued Equities With Significant Upside Potential