18 Large Caps Undervalued by EPS Trends

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 |  Includes: BBVA, CAT, COP, CS, CVX, DD, E, F, ITUB, LFC, SAP, SIEGY, SU, TOT, UNH, VEDL, WBK, XOM
by: Kapitall

One interesting way to find potentially undervalued stocks is by finding those that do not proportionately increase in price for a given increase in EPS estimate.

To create this list, we started with a theoretical observation about P/E ratios. If the Price / Earnings Per Share ratio is equal to some constant K, it follows that there should be a linear relationship between Price and Earnings per Share. In other words:

If P/E = K

then P = (K)((NYSE:E))

If there is a mismatch between growth rates in projected earnings per share values and price, a mis-pricing may have occurred, presenting an opportunity to value investors.

click for expanded images

All of the stocks mentioned below are large caps that have also seen an increase in the current year EPS analyst projection over the last 30 days. For each of these stocks, the price change has lagged the change in EPS projections (actually decreasing), which indicates that these stocks may still have to price in some good news.

Yes, this approach isn't 100% accurate. There is no reason to believe that P/E should be equal to a constant at all times (that is, after all, a simplifying assumption to build a screen). But the goal here is to give you a starting point in finding potentially undervalued stocks.

Do you think these stocks should be priced higher?

List sorted by difference between change in EPS and change in price.

1. Westpac Banking Corporation (NYSE:WBK): Foreign Money Center Banks Industry. Market cap of $68.80B. Over the last 30 days, the current year EPS consensus has increased by 11.62% (from $10.33 to $11.53), while price decreased by 15.72% (from $137.22 to $115.65). The stock has performed poorly over the last month, losing 12.84%.

2. Siemens AG (SI): Telecom Services Industry. Market cap of $115.90B. Over the last 30 days, the current year EPS consensus has increased by 18.75% (from $9.60 to $11.40), while price decreased by 8.20% (from $139.20 to $127.78). The stock might be undervalued at current levels, with a PEG ratio at 0.69, and P/FCF ratio at 13.42. The stock has gained 50.39% over the last year.

3. Suncor Energy Inc. (NYSE:SU): Independent Oil & Gas Industry. Market cap of $62.40B. Over the last 30 days, the current year EPS consensus has increased by 7.66% (from $2.74 to $2.95), while price decreased by 10.27% (from $44.89 to $40.28). The stock has performed poorly over the last month, losing 12.33%.

4. Sterlite Industries (India) Ltd. (SLT): Copper Industry. Market cap of $48.87B. Over the last 30 days, the current year EPS consensus has increased by 4.44% (from $1.35 to $1.41), while price decreased by 12.27% (from $16.55 to $14.52). This is a risky stock that is significantly more volatile than the overall market (beta = 2.38). The stock has gained 7.54% over the last year.

5. Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA): Foreign Regional Banks Industry. Market cap of $49.48B. Over the last 30 days, the current year EPS consensus has increased by 5.19% (from $1.35 to $1.42), while price decreased by 10.95% (from $12.15 to $10.82). The stock has performed poorly over the last month, losing 10.31%.

6. Caterpillar Inc. (NYSE:CAT): Farm & Construction Machinery Industry. Market cap of $65.69B. Over the last 30 days, the current year EPS consensus has increased by 7.52% (from $6.25 to $6.72), while price decreased by 6.71% (from $108.85 to $101.55).The stock has gained 75.7% over the last year.

7. Credit Suisse Group (NYSE:CS): Foreign Money Center Banks Industry. Market cap of $48.31B. Over the last 30 days, the current year EPS consensus has increased by 6.04% (from $4.47 to $4.74), while price decreased by 7.40% (from $43.81 to $40.57). The stock has gained 8.7% over the last year.

8. Ita (NYSE:ITUB): Foreign Money Center Banks Industry. Market cap of $97.27B. Over the last 30 days, the current year EPS consensus has increased by 2.53% (from $1.98 to $2.03), while price decreased by 10.55% (from $24.35 to $21.78). The stock has performed poorly over the last month, losing 12.25%.

9. Total SA (NYSE:TOT): Major Integrated Oil & Gas Industry. Market cap of $131.37B. Over the last 30 days, the current year EPS consensus has increased by 2.86% (from $8.04 to $8.27), while price decreased by 9.45% (from $61.30 to $55.51). The stock has gained 30.51% over the last year.

10. China Life Insurance Co. Ltd. (NYSE:LFC): Life Insurance Industry. Market cap of $94.95B. Over the last 30 days, the current year EPS consensus has increased by 1.28% (from $3.12 to $3.16), while price decreased by 10.90% (from $56.61 to $50.44). The stock has performed poorly over the last month, losing 10.69%.

11. Ford Motor Co. (NYSE:F): Auto Manufacturers Industry. Market cap of $56.21B. Over the last 30 days, the current year EPS consensus has increased by 6.01% (from $1.83 to $1.94), while price decreased by 6.05% (from $15.54 to $14.60). This is a risky stock that is significantly more volatile than the overall market (beta = 2.38). The stock has gained 34.42% over the last year.

12. SAP AG (NYSE:SAP): Application Software Industry. Market cap of $73.02B. Over the last 30 days, the current year EPS consensus has increased by 1.14% (from $2.63 to $2.66), while price decreased by 10.80% (from $66.97 to $59.74). The stock has gained 44.83% over the last year.

13. Eni SpA (E): Major Integrated Oil & Gas Industry. Market cap of $91.32B. Over the last 30 days, the current year EPS consensus has increased by 1.58% (from $6.32 to $6.42), while price decreased by 9.63% (from $50.78 to $45.89). The stock has gained 32.6% over the last year.

14. ConocoPhillips (NYSE:COP): Major Integrated Oil & Gas Industry. Market cap of $100.83B. Over the last 30 days, the current year EPS consensus has increased by 0.61% (from $8.15 to $8.20), while price decreased by 10.56% (from $80.48 to $71.98). The stock has performed poorly over the last month, losing 10.84%.

15. EI DuPont de Nemours & Co. (NYSE:DD): Conglomerates Industry. Market cap of $47.92B. Over the last 30 days, the current year EPS consensus has increased by 3.50% (from $3.71 to $3.84), while price decreased by 6.93% (from $55.12 to $51.30). The stock has gained 50.7% over the last year.

16. Exxon Mobil Corporation (NYSE:XOM): Major Integrated Oil & Gas Industry. Market cap of $397.39B. Over the last 30 days, the current year EPS consensus has increased by 4.56% (from $8.34 to $8.72), while price decreased by 5.63% (from $86.22 to $81.37). The stock has gained 37.33% over the last year.

17. Chevron Corp. (NYSE:CVX): Major Integrated Oil & Gas Industry. Market cap of $203.78B. Over the last 30 days, the current year EPS consensus has increased by 5.46% (from $12.27 to $12.94), while price decreased by 4.70% (from $107.42 to $102.37). The stock has gained 42.67% over the last year.

18. Unitedhealth Group, Inc. (NYSE:UNH): Health Care Plans Industry. Market cap of $53.26B. Over the last 30 days, the current year EPS consensus has increased by 11.11% (from $3.78 to $4.20), while price increased by 1.03% (from $47.71 to $48.20). The stock has gained 72.92% over the last year.

*EPS 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.