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To create this list we chose names with projected 5 year EPS growth above 20%, market caps above $300M, and high levered free cash flow vs. enterprise value (LFCF/EV) over 10%.

For those unfamiliar with Enterprise value, it is considered by many to be a more straightforward and exact way of valuing a company’s worth. To calculate EV, add the market cap, interest, preferred shares, and debt, and then subtract the total cash and cash equivalents. The final number is equivalent to the net cost of purchasing the company.

Levered free cash flow is the amount of cash available to stockholders after interest payments on debt are made

By finding the LFCF/EV ratio we can identify stocks that may be undervalued.

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.

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.



List sorted by LFCF/EV.

1. Comtech Telecommunications Corp. (CMTL):
Communication Equipment Industry. Market cap of $620.27M. 5 year EPS growth at 35%. LFCF at 94.90M vs. EV at 231.33M (implies a LFCF/EV of 41.02%). The stock is a short squeeze candidate, with a short float at 9.54% (equivalent to 9.35 days of average volume). It's been a rough couple of days for the stock, losing 12.17% over the last week.

2. Insperity, Inc. Common Stock (NSP):
Staffing & Outsourcing Services Industry. Market cap of $774.38M. 5 year EPS growth at 28.18%. LFCF at 105.66M vs. EV at 454.22M (implies a LFCF/EV of 23.26%). Might be undervalued at current levels, with a PEG ratio at 0.94, and P/FCF ratio at 7.3. The stock has gained 25.32% over the last year.

3. Tessera Technologies Inc. (TSRA):
Semiconductor Equipment & Materials Industry. Market cap of $811.27M. 5 year EPS growth at 25%. LFCF at 63.52M vs. EV at 311.74M (implies a LFCF/EV of 20.38%). The stock is currently stuck in a downtrend, trading -7.81% below its SMA20, -11.66% below its SMA50, and -15.36% below its SMA200. The stock has performed poorly over the last month, losing 16.08%.

4. Bridgepoint Education, Inc. (BPI): Education & Training Services Industry. Market cap of $1.24B. 5 year EPS growth at 21.67%. LFCF at 179.73M vs. EV at 940.94M (implies a LFCF/EV of 19.1%). The stock is a short squeeze candidate, with a short float at 16.23% (equivalent to 14.96 days of average volume). The stock has had a good month, gaining 12.88%.

5. Tower Group Inc. (TWGP): Property & Casualty Insurance Industry. Market cap of $951.42M. 5 year EPS growth at 22.73%. LFCF at 217.12M vs. EV at 1.27B (implies a LFCF/EV of 17.1%). The stock is a short squeeze candidate, with a short float at 11.38% (equivalent to 13.44 days of average volume). The stock has gained 7.32% over the last year.

6. ASM International NV (ASMI): Semiconductor Equipment & Materials Industry. Market cap of $2.06B. 5 year EPS growth at 22.6%. LFCF at 278.40M vs. EV at 1.66B (implies a LFCF/EV of 16.77%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.36). The stock has performed poorly over the last month, losing 13.58%.

7. TIM Participacoes S.A. (TSU): Wireless Communications Industry. Market cap of $12.06B. 5 year EPS growth at 30.37%. LFCF at 1.99B vs. EV at 13.01B (implies a LFCF/EV of 15.3%). The stock has gained 79.64% over the last year.

8. Concur Technologies, Inc. (CNQR):
Technical & System Software Industry. Market cap of $2.47B. 5 year EPS growth at 24.12%. LFCF at 297.58M vs. EV at 2.14B (implies a LFCF/EV of 13.91%). The stock is a short squeeze candidate, with a short float at 17.26% (equivalent to 16.3 days of average volume). The stock has gained 5.98% over the last year.

9. CTC Media, Inc (CTCM): Broadcasting Industry. Market cap of $3.13B. 5 year EPS growth at 67.6%. LFCF at 396.14M vs. EV at 2.97B (implies a LFCF/EV of 13.34%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.27). The stock has gained 42.87% over the last year.

10. MedAssets, Inc. (MDAS): Healthcare Information Services Industry. Market cap of $757.83M. 5 year EPS growth at 21.64%. LFCF at 219.97M vs. EV at 1.67B (implies a LFCF/EV of 13.17%). The stock is a short squeeze candidate, with a short float at 8.74% (equivalent to 6.5 days of average volume). It's been a rough couple of days for the stock, losing 7.84% over the last week.

11. CNinsure Inc. (CISG): Insurance Brokers Industry. Market cap of $777.98M. 5 year EPS growth at 26.95%. LFCF at 52.58M vs. EV at 416.71M (implies a LFCF/EV of 12.62%). The stock is a short squeeze candidate, with a short float at 13.75% (equivalent to 11.64 days of average volume). The stock has had a good month, gaining 15.83%.

12. PDL BioPharma, Inc. (PDLI): Biotechnology Industry. Market cap of $817.13M. 5 year EPS growth at 26%. LFCF at 141.41M vs. EV at 1.15B (implies a LFCF/EV of 12.3%). The stock is a short squeeze candidate, with a short float at 13.89% (equivalent to 7.56 days of average volume). It's been a rough couple of days for the stock, losing 5.34% over the last week.

13. Great Lakes Dredge & Dock Corporation (GLDD): Heavy Construction Industry. Market cap of $310.52M. 5 year EPS growth at 32.7%. LFCF at 54.48M vs. EV at 462.48M (implies a LFCF/EV of 11.78%). The stock is a short squeeze candidate, with a short float at 5.45% (equivalent to 6.76 days of average volume). It's been a rough couple of days for the stock, losing 9.12% over the last week.

14. Neurocrine Biosciences Inc. (NBIX):
Biotechnology Industry. Market cap of $395.78M. 5 year EPS growth at 35%. LFCF at 29.21M vs. EV at 274.15M (implies a LFCF/EV of 10.65%). It's been a rough couple of days for the stock, losing 6.88% over the last week.

15. DepoMed Inc. (DEPO)
: Drug Manufacturers Industry. Market cap of $442.24M. 5 year EPS growth at 30%. LFCF at 33.94M vs. EV at 319.70M (implies a LFCF/EV of 10.62%). The stock is a short squeeze candidate, with a short float at 10.5% (equivalent to 6.14 days of average volume). The stock has gained 176.51% over the last year.

16. Internet Initiative Japan Inc. (IIJI):
Internet Service Providers Industry. Market cap of $756.38M. 5 year EPS growth at 31.1%. LFCF at 84.18M vs. EV at 837.84M (implies a LFCF/EV of 10.05%). Might be undervalued at current levels, with a PEG ratio at 0.61, and P/FCF ratio at 7.39. The stock has had a couple of great days, gaining 5.66% over the last week.

*Levered free cash flows and enterprise values sourced from Yahoo Finance, rest of 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.

Source: 16 High Growth Stocks Undervalued by Enterprise Value