8 Oversold Stocks With High Profitability, Interest Coverage Growth

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Includes: AMD, ARW, AVT, QRVO, RFP, TER, UTHR, VECO
by: Kapitall

One helpful way to gauge profitability is by comparing EBITDA (i.e., earnings before interest, taxes, depreciation, and amortization) to common equity. This measures the profits generated from shareholder investment and also standardizes earnings to compare firms of different sizes.

We used EBITDA/common equity to find stocks seeing high growth in profitability, with trailing-twelve-month (TTM) EBITDA/common equity at least 20% higher than their 5-year average. Because EBITDA does not include interest expenses, we also checked for increases in interest coverage (i.e., EBIT/Interest Expense) year-over-year, with trailing-twelve-month interest coverage at least 20% higher than the prior-year ratio. We ran these screens on technically oversold stocks, with RSI(14) under 40.

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.

Do you think the market is over-selling these companies? Use this list as a starting-off point for your own analysis.

List sorted by TTM EBITDA/common equity.

1. AbitibiBowater Inc. Common Stoc (ABH): Paper & Paper Products Industry. Market cap of $1.96B. PEG at 0.13. RSI(14) at 30.74. TTM EBITDA/common equity at 4.39 vs. 5-year average at 0.58. TTM interest coverage at 5.35 vs. prior-year TTM interest coverage at -2.15. The stock is a short squeeze candidate, with a short float at 8.17% (equivalent to 9.7 days of average volume). The stock is currently stuck in a downtrend, trading 5.95% below its SMA20, 14.62% below its SMA50, and 21.05% below its SMA200. The stock has performed poorly over the last month, losing 13.67%.

2. Advanced Micro Devices, Inc. (NYSE:AMD): Semiconductor Industry. Market cap of $4.65B. PEG at 0.76. RSI(14) at 26.43. TTM EBITDA/common equity at 0.93 vs. 5-year average at 0.14. TTM interest coverage at 3.85 vs. prior-year TTM interest coverage at 3.06. This is a risky stock that is significantly more volatile than the overall market (beta = 2.18). The stock is currently stuck in a downtrend, trading 9.08% below its SMA20, 18.77% below its SMA50, and 19.64% below its SMA200. The stock has performed poorly over the last month, losing 11.52%.

3. Veeco Instruments Inc. (NASDAQ:VECO): Semiconductor Equipment & Materials Industry. Market cap of $1.75B. PEG at 0.5. RSI(14) at 34.9. TTM EBITDA/common equity at 0.56 vs. 5-year average at 0.21. TTM interest coverage at 54.49 vs. prior-year TTM interest coverage at 5.68. This is a risky stock that is significantly more volatile than the overall market (beta = 2.46). The stock is a short squeeze candidate, with a short float at 24.62% (equivalent to 7.41 days of average volume). It's been a rough couple of days for the stock, losing 11.77% over the last week.

4. Teradyne Inc. (NYSE:TER): Semiconductor Equipment & Materials Industry. Market cap of $2.67B. PEG at 0.91. RSI(14) at 36.98. TTM EBITDA/common equity at 0.51 vs. 5-year average at 0.11. TTM interest coverage at 22.89 vs. prior-year TTM interest coverage at 1.47. The stock is a short squeeze candidate, with a short float at 11.7% (equivalent to 5.88 days of average volume). It's been a rough couple of days for the stock, losing 5.01% over the last week.

5. Avnet Inc. (NYSE:AVT): Electronics Wholesale Industry. Market cap of $4.75B. PEG at 0.48. RSI(14) at 37.66. TTM EBITDA/common equity at 0.29 vs. 5-year average at 0.11. TTM interest coverage at 10.54 vs. prior-year TTM interest coverage at 6.58. The stock has gained 22.91% over the last year.

6. Arrow Electronics, Inc. (NYSE:ARW): Electronics Wholesale Industry. Market cap of $4.41B. PEG at 0.59. RSI(14) at 37.17. TTM EBITDA/common equity at 0.28 vs. 5-year average at 0.14. TTM interest coverage at 10.71 vs. prior-year TTM interest coverage at 4.76. It's been a rough couple of days for the stock, losing 8.88% over the last week.

7. TriQuint Semiconductor, Inc. (TQNT): Semiconductor Industry. Market cap of $1.64B. PEG at 0.59. RSI(14) at 33.09. TTM EBITDA/common equity at 0.23 vs. 5-year average at 0.11. TTM interest coverage at 93.25 vs. prior-year TTM interest coverage at 74.50. The stock is currently stuck in a downtrend, trading 7.14% below its SMA20, 16.7% below its SMA50, and 17.9% below its SMA200. The stock has performed poorly over the last month, losing 16.82%.

8. United Therapeutics Corp. (NASDAQ:UTHR): Drug Manufacturers Industry. Market cap of $3.16B. PEG at 0.54. RSI(14) at 38.49. TTM EBITDA/common equity at 0.22 vs. 5-year average at 0.08. TTM interest coverage at 9.41 vs. prior-year TTM interest coverage at 3.51. The stock is a short squeeze candidate, with a short float at 11.18% (equivalent to 6.66 days of average volume). The stock has gained 11.01% over the last year.

*EBITDA/common equity and interest coverage data sourced from Screener.co, 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.