These six Nasdaq stocks have positive catalysts for future growth, above industry average profit margins, and PEG ratios of less than 1. The PEG ratio is a broadly-used indicator of a stock's prospective worth. It is preferred by numerous analysts over the price/earnings ratio because it also accounts for growth. Similar to the P/E ratio, a lower PEG means that the stock is more undervalued. Many financiers use 1 as the cut-off point for PEG ratios. A PEG of 1 or less is believed to be favorable. As Warren Buffett would say, "Price is what you pay, value is what you get."
These are bullish indicators regarding a stock's possible future performance. Robust profit and sales margins are traits of notable names. Moreover, most of these stocks are trading well below consensus analysts’ estimates; several have recent upgrades and positive analyst comments. Nonetheless, this is only the first step in finding winners for your portfolio. Let's take a closer look to distinguish the driving factors behind these remarkable statistics and ensure the stories are intact.
Below is a table with detailed statistics regarding each company’s current summary information followed by a brief review of each company, detailed current analysts' estimates and up/downgrade activity followed by a chart of the company's key statistics.
Summary Statistics
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Apple Inc. (AAPL), together with its subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide.
Apple recently announced financial results for its fiscal 2011 third quarter ended June 25. The company posted record quarterly revenue of $28.57 billion and record quarterly net profit of $7.31 billion, or $7.79 per diluted share. These results compare to revenue of $15.70 billion and net quarterly profit of $3.25 billion, or $3.51 per diluted share, in the year-ago quarter. Gross margin was 41.7 percent compared to 39.1 percent in the year-ago quarter. International sales accounted for 62 percent of the quarter’s revenue.
The company is trading significantly below analysts' estimates. Apple has a median price target of $450 by 48 brokers and a high target of $612. The last up/downgrade activity was on March 16, when JMP Securities downgraded the company from Market Outperform to Market Perform.
First Solar, Inc. (FSLR) manufactures and sells solar modules using a thin-film semiconductor technology. It also designs, constructs, and sells photovoltaic solar power systems.
First Solar and KGAL GmbH & Co. (KGAL) recently announced the purchase of a 9.9 megawatt solar power plant near Zamora, Spain by European Solar Power Fund — a renewable energy-focused fund for institutional investors managed by KGAL — from First Solar.
The company is trading significantly below analysts' estimates. First Solar has a median price target of $165 by 34 brokers and a high target of $200. The last up/downgrade activity was on Jul. 25, when Auriga initiated coverage on the company with a Buy rating.
Gilead Sciences Inc. (GILD), a biopharmaceutical company, engages in the discovery, development, and commercialization of therapeutics for the treatment of life threatening diseases worldwide.
Gilead Sciences recently announced its results of operations for the quarter ended June 30. Total revenues for the second quarter of 2011 were $2.14 billion, up 11 percent compared to total revenues of $1.93 billion for the second quarter of 2010. Net income for the second quarter of 2011 was $746.2 million, or $0.93 per diluted share, compared to net income for the second quarter of 2010 of $712.1 million, or $0.79 per diluted share. Non-GAAP net income for the second quarter of 2011, which excludes after-tax acquisition-related, restructuring and stock-based compensation expenses, was $797.7 million, or $1.00 per diluted share, compared to non-GAAP net income for the second quarter of 2010 of $760.7 million, or $0.85 per diluted share.
The company is trading below analysts' estimates. Gilead Sciences has a median price target of $45 by 18 brokers and a high target of $53. The last up/downgrade activity was on Nov. 16, 2010, when UBS initiated coverage on the company with a Buy rating.
Intel Corporation (INTC) engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Intel Corporation was founded in 1968 and is based in Santa Clara, California.
On July 20, Intel reported its fifth consecutive quarter of record revenue, with double-digit revenue growth across all business segments. On a Non-GAAP basis, revenue was $13.1 billion, operating income was $4.2 billion, net income was $3.2 billion, and EPS was 59 cents. On a GAAP basis, the company reported second-quarter revenue of $13.0 billion, operating income of $3.9 billion, net income of $3.0 billion, and EPS of 54 cents. The company generated approximately $4.0 billion in cash from operations, paid cash dividends of $961 million, and used $2.0 billion to repurchase 93 million shares of common stock.
Paul Otellini, Intel president and CEO said:
We achieved a significant new milestone in the second quarter, surpassing $13.0 billion in revenue for the first time. Strong corporate demand for our most advanced technology, the surge of mobile devices and Internet traffic fueling data center growth, and the rapid rise of computing in emerging markets drove record results. Intel's 23 percent revenue growth in the first half and our increasing confidence in the second half of 2011 position us to grow annual revenue in the mid-20 percent range.
The company is trading below analysts' estimates. INTC has a median price target of $26 by 37 brokers and a high target of $31.50. The last up/downgrade activity was on Apr. 20, when FBR Capital upgraded the company from Market Perform to Outperform.
Microsoft (MSFT) develops, manufactures, licenses, and supports a range of software products and services for various computing devices worldwide. Microsoft was founded in 1975 and is headquartered in Redmond, Washington.
Microsoft recently announced record fourth-quarter revenue of $17.37 billion for the quarter ended June 30, an 8% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $6.17 billion, $5.87 billion, and $0.69 per share, which represented increases of 4%, 30%, and 35%, respectively, when compared with the prior year period.
For the fiscal year ended June 30, Microsoft reported record revenue of $69.94 billion, a 12% increase from the prior year. Operating income, net income, and diluted earnings per share for the year were $27.16 billion, $23.15 billion, and $2.69, which represented increases of 13%, 23%, and 28%, respectively, when compared with the prior year.
The company is trading below analysts' estimates. MSFT has a median price target of $33 by 25 brokers and a high target of $38. The last up/downgrade activity was on Feb. 17, when Collins Stewart initiated coverage on the company with a Buy rating.
SanDisk Corp. (SNDK) designs, develops, manufactures, and markets NAND-based flash data storage card products that are used in various consumer electronics products.
SanDisk recently announced results for the second fiscal quarter ending July 3. Total second quarter revenue of $1.375 billion increased 17% on a year-over-year basis and increased 6% on a sequential basis. Second quarter net income, in accordance with U.S. GAAP, was $248 million, or $1.02 per diluted share, compared to net income of $258 million, or $1.08 per diluted share in the second quarter of fiscal 2010 and $224 million, or $0.92 per diluted share, in the first quarter of fiscal 2011.
On a non-GAAP basis, which excludes the impact of share-based compensation expense, amortization of acquisition-related intangible assets, non-cash economic interest expense associated with the convertible debts and related tax adjustments, second-quarter net income was $278 million, or $1.14 per diluted share, compared to net income of $258 million, or $1.08 per diluted share, in the second quarter of fiscal 2010 and net income of $251 million, or $1.03 per diluted share, in the first quarter of fiscal 2011.
Sanjay Mehrotra, president and CEO, SanDisk said:
We delivered record quarterly revenue, driven by our broad product offerings and our well diversified Retail and OEM channels. Solid execution on product cost reductions enabled strong profitability. Our integration of Pliant Technology is progressing well and we are excited by our business prospects in the enterprise storage segment.
The company is trading significantly below analysts' estimates. SanDisk has a median price target of $58.50 by 218 brokers and a high target of $70. The last up/downgrade activity was on Jan. 25, when Avian downgraded the company from Neutral to Negative.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
