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Here we offer an interesting way to find potentially undervalued stocks -- by finding those that do not proportionately increase in price for a given increase in analyst EPS estimates.

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)(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.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

All of the stocks mentioned below have just exhibited the “golden cross,” where the 50-day moving average has crossed above the 200-day moving average. These stocks have also seen an increase in the current year EPS analyst projection over the last 30 days.

For every stock in this list, the price change has lagged the change in EPS projections (most actually decreasing), which indicates that these stocks may still have to price in some good news. Their recent bullish momentum may indicate that turnaround.

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.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks should be priced higher?

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

1. Scientific Games Corporation (NASDAQ:SGMS): Multimedia & Graphics Software Industry. Market cap of $912.41M. SMA50 at $9.45 vs. SMA200 at $9.45 (current price at $9.87). Over the last 30 days, the current year EPS consensus has increased by 25.00% (from $0.24 to $0.30), while price decreased by 5.47% (from $10.43 to $9.86).

2. Navigant Consulting Inc. (NYSE:NCI): Management Services Industry. Market cap of $518.28M. SMA50 at $10.05 vs. SMA200 at $9.95 (current price at $10.10). Over the last 30 days, the current year EPS consensus has increased by 2.74% (from $0.73 to $0.75), while price decreased by 10.53% (from $11.30 to $10.11). The stock has performed poorly over the last month, losing 15.12%.

3. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL): Drug Manufacturers Industry. Market cap of $433.48M. SMA50 at $7.78 vs. SMA200 at $7.78 (current price at $8.34). Over the last 30 days, the current year EPS consensus has increased by 4.00% (from $-1.50 to $-1.56), while price decreased by 8.79% (from $9.10 to $8.30). The stock is a short squeeze candidate, with a short float at 6.16% (equivalent to 8.85 days of average volume). The stock has gained 27.15% over the last year.

4. BioScrip Inc. (NASDAQ:BIOS): Drug Stores Industry. Market cap of $396.74M. SMA50 at $5.43 vs. SMA200 at $5.02 (current price at $7.59). Over the last 30 days, the current year EPS consensus has increased by 80.00% (from $0.15 to $0.27), while price increased by 68.14% (from $4.52 to $7.60). The stock is a short squeeze candidate, with a short float at 5.22% (equivalent to 5.96 days of average volume). The stock has had a good month, gaining 64.86%.

5. Coinstar Inc. (CSTR): Business Equipment Industry. Market cap of $1.66B. SMA50 at $49.89 vs. SMA200 at $49.68 (current price at $53.02). Over the last 30 days, the current year EPS consensus has increased by 7.94% (from $2.77 to $2.99), while price decreased by 3.69% (from $54.95 to $52.92). The stock is a short squeeze candidate, with a short float at 41.02% (equivalent to 10.65 days of average volume). The stock has lost 1.55% over the last year.

6. Genpact Ltd. (NYSE:G): Management Services Industry. Market cap of $3.52B. SMA50 at $15.59 vs. SMA200 at $15.33 (current price at $15.93). Over the last 30 days, the current year EPS consensus has increased by 5.00% (from $0.80 to $0.84), while price decreased by 1.42% (from $16.16 to $15.93). The stock has lost 5.68% over the last year.

7. Discovery Communications, Inc. (NASDAQ:DISCA): CATV Systems Industry. Market cap of $12.18B. SMA50 at $41.98 vs. SMA200 at $41.58 (current price at $43.43). Over the last 30 days, the current year EPS consensus has increased by 2.63% (from $2.28 to $2.34), while price decreased by 2.58% (from $44.65 to $43.50). The stock has gained 16.06% over the last year.

8. Hospira Inc. (NYSE:HSP): Drug Delivery Industry. Market cap of $9.23B. SMA50 at $55.53 vs. SMA200 at $55.53 (current price at $55.04). Over the last 30 days, the current year EPS consensus has increased by 0.50% (from $3.97 to $3.99), while price decreased by 3.14% (from $57.00 to $55.21). The stock has gained 5.69% over the last year.

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

Source: 8 Bullish Momentum Movers Undervalued by EPS Trends