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Levered free cash flow, or the free cash flow available after paying interest on debt, is a helpful way to measure firm value because it is the cash flow available to shareholders.

We used levered free cash flow to search for potentially undervalued stocks, by looking at levered free cash flow relative to market cap. The larger the percentage, the more likely the company is undervalued. We ran this screen on technically oversold stocks, with RSI(14) below 30.

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 these stocks are undervalued? Use this list as a starting-off point for your own analysis.

List sorted by levered free cash flow as a percent of market cap.

1. United Continental Holdings, Inc. (NYSE:UAL): Major Airlines Industry. Market cap of $6.70B. RSI(14) at 27.26. TTM Levered Free Cash Flow at $4.93B, which represents 73.56% of the company's market cap. The stock is a short squeeze candidate, with a short float at 12.66% (equivalent to 6.15 days of average volume). It's been a rough couple of days for the stock, losing 6.54% over the last week.

2. Southwest Airlines Co. (NYSE:LUV):
Regional Airlines Industry. Market cap of $8.31B. RSI(14) at 28.88. TTM Levered Free Cash Flow at $1.47B, which represents 17.69% of the company's market cap. The stock is currently stuck in a downtrend, trading 6.08% below its SMA20, 8.34% below its SMA50, and 15.11% below its SMA200. The stock has lost 8.38% over the last year.

3. US Airways Group, Inc. (LCC):
Major Airlines Industry. Market cap of $1.12B. RSI(14) at 18.98. TTM Levered Free Cash Flow at $711.75M, which represents 63.61% of the company's market cap. The stock is currently stuck in a downtrend, trading 16.93% below its SMA20, 21.37% below its SMA50, and 28.12% below its SMA200. It's been a rough couple of days for the stock, losing 13.21% over the last week.

4. Artio Global Investors Inc. (NYSE:ART): Asset Management Industry. Market cap of $622.02M. RSI(14) at 29.81. TTM Levered Free Cash Flow at $106.57M, which represents 17.04% of the company's market cap. The stock is a short squeeze candidate, with a short float at 8.34% (equivalent to 9.27 days of average volume). The stock is currently stuck in a downtrend, trading 7.83% below its SMA20, 17.81% below its SMA50, and 28.69% below its SMA200. It's been a rough couple of days for the stock, losing 9.38% over the last week.

5. Industrias Bachoco S.A.B. de C.V. (NYSE:IBA): Meat Products Industry. Market cap of $1.13B. RSI(14) at 26.57. TTM Levered Free Cash Flow at $142.67M, which represents 12.53% of the company's market cap. It's been a rough couple of days for the stock, losing 5.89% over the last week.

6. GameStop Corp. (NYSE:GME): Electronics Stores Industry. Market cap of $3.29B. RSI(14) at 25.66. TTM Levered Free Cash Flow at $411.85M, which represents 12.48% of the company's market cap. Might be undervalued at current levels, with a PEG ratio at 0.75, and P/FCF ratio at 6.43. The stock is a short squeeze candidate, with a short float at 24.61% (equivalent to 8.76 days of average volume). It's been a rough couple of days for the stock, losing 6.17% over the last week.

7. Research In Motion Limited (RIMM):
Diversified Communication Services Industry. Market cap of $13.96B. RSI(14) at 28.42. TTM Levered Free Cash Flow at $1.40B, which represents 10.03% of the company's market cap. The stock is currently stuck in a downtrend, trading 5.84% below its SMA20, 24.76% below its SMA50, and 49.47% below its SMA200. It's been a rough couple of days for the stock, losing 6.46% over the last week.

*Levered free cash flow 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.

Source: 7 Highly Oversold Stocks Undervalued by Levered Free Cash Flow