4 Undervalued Companies With a Strong Economic Moat

Includes: AMGN, EPAX, GA, SNY
by: Vuru

The following companies are undervalued and show a strong competitive advantage. We calculate the strength of each company’s competitive advantage through their net profit margin over 10 years. If their net profit margins are consistently high, it is likely that there are strong barriers to entry for potential competitors.

Using our proprietary tool, we screened over 5,500 companies to find you these companies. These stocks are undervalued according to their growth rate (FCF), using a 15% discount rate. We hope you’ll use this list as a starting point for your analysis.

Amgen Inc. (NASDAQ:AMGN)

Amgen is a biotechnology medicines company which discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the U.S., Europe and Canada. Amgen has recently received approval for the Xgeva drug that can treat cancer-related bone fractures.


  • Rising positive Free Cash Flow since 2001 (1.04B in 2001 to 5.21B in 2010)
  • Healthy Balance Sheet with TL-to-TA at 0.45 in 2010
  • History of stock buybacks


  • Mixed history of Retaining Earnings (-31.82% in 2005 and 18.83% in 2010)
  • Overvalued according to Stability Price and Net Current Asset Price

Current Price: $55.27

Growth Price: $91.77

Undervalued by: 66.04%

Net Profit Margin: 30.74%

Vuru Grade: 90.50

Find the full report here: Vuru's AMGN Report.

Sanofi-Aventis SA (NYSE:SNY)

SNY engages in the discovery, development and distribution of therapeutic solutions. They own a broad-based product portfolio in prescription drugs, OTC/OTX, generics, vaccines and animal health. Sanofi is the largest producer of influenza vaccine in the U.S. and will deliver about 70 million doses of the vaccine in the upcoming season.


  • Excellent positive Free Cash Flow over the last decade (8.19B in 2010)
  • Strong balance sheet but, liabilities are growing (TL-to-TA 0.38 in 2010)
  • Very strong Pricing Power (72.79% Gross Margin in 2010)


  • Slightly capital intensive (27.50% Capital Expenditure Ratio in 2010)
  • A mixed history of investing capital productively, improving Since 2008

Current Price: $38.83

Growth Price: $78.30

Undervalued by: 101.65%

Net Profit Margin: 17.86%

Vuru Grade: 87.58/100

Find the full report here: Vuru's SNY Report.

Giant Interactive Group Inc. (NYSE:GA)

GA develops and operates online games in the People’s Republic of China. The company focuses on massive multiplayer games that are played through networked game servers. The company also markets and sells its prepaid game cards and game points through various distributors and retail outlets.


  • Impressive CROIC in the last 3 years. (267.86% in 2010)
  • Very strong balance sheet with a healthy cash balance (TL-to-TA 0.10 in 2010)
  • Maintained a strong Pricing Power since 2006 (85.06% in 2010)


  • Inconsistent Free Cash Flow but, slowly improving
  • Overvalued according to Stability Price and Net Current Asset Price

Current Price: $7.11

Growth Price: $8.57

Undervalued by: 20.49%

Net Profit Margin: 60.86%

Vuru Grade: 86.83/100

Find the full report here: Vuru's GA Report.

Ambassadors Group Inc. (NASDAQ:EPAX)

Ambassadors Group, Inc., an educational company organizes and promotes educational travel and sports programs for students, athletes and professionals. They also provide opportunities for grade school, middle school and high school students to travel to different domestic and foreign destinations to learn about the country’s unique history and culture.


  • Net profit margin has been over 20% in 8 out of 10 years
  • Maintained an incredibly high Pricing Power (86.1% Gross Margin in 2010)


  • Capital intensity is abnormally high for the last 3 years (Capital Expenditure Ratio 10.08% in 2005 to 54.97% in 2010)
  • Overvalued by 71.93% according to Net Current Asset Price
  • Very poor CROIC but slowly improving in the last 2 years

Current Price: $8.84

Growth Price: $11.21

Undervalued by: 26.79%

Net Profit Margin: 10.66%

Vuru Grade: 74.78/100

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.