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When a company's P/E ratio has fallen over time, while earnings steadily rise, it is a sign that price has not proportionately increased with earnings. In other words, the earnings may not be fully priced into the stock, and the stock may be undervalued.

We ran a screen on companies exhibiting these trends, but we also wanted to look at companies with good corporate governance policies.

RiskMetrics Group gives ratings for four areas of corporate governance, on risks related to: the board, the audit committee, the compensation committee, and shareholder rights.

We screened for companies that received "low risk" ratings on all four corporate governance areas, as well as those seeing a falling P/E ratio (comparing the trailing-twelve-month ratio to the 3-year average) and rising EPS over the same time period.

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 (sorted by market cap).

  1. Microsoft Corporation (MSFT): Application Software Industry. Market cap of $227.01B. TTM P/E at 9.97 vs. 3-year average at 12.30. Last year diluted EPS at $2.69 vs. 2-year prior EPS at $2.10. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock has gained 7.17% over the last year.
  2. Wal-Mart Stores Inc. (WMT): Discount, Variety Stores Industry. Market cap of $178.07B. TTM P/E at 11.92 vs. 3-year average at 14.32. Last year diluted EPS at $4.18 vs. 2-year prior EPS at $3.72. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock is currently stuck in a downtrend, trading 5.81% below its SMA20, 5.73% below its SMA50, and 5.78% below its SMA200. The stock has gained 1.89% over the last year.
  3. JPMorgan Chase & Co. (JPM): Money Center Banks Industry. Market cap of $158.55B. TTM P/E at 8.52 vs. 3-year average at 15.86. Last year diluted EPS at $3.96 vs. 2-year prior EPS at $2.24. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock is currently stuck in a downtrend, trading 5.03% below its SMA20, 5.41% below its SMA50, and 8.94% below its SMA200. The stock has lost 2.01% over the last year.
  4. The Coca-Cola Company (KO): Beverages Industry. Market cap of $156.58B. TTM P/E at 12.78 vs. 3-year average at 16.35. Last year diluted EPS at $5.06 vs. 2-year prior EPS at $2.93. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock has gained 24.5% over the last year.
  5. Wells Fargo & Company (WFC): Money Center Banks Industry. Market cap of $144.39B. TTM P/E at 10.60 vs. 3-year average at 17.40. Last year diluted EPS at $2.21 vs. 2-year prior EPS at $1.75. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock has lost 1.52% over the last year.
  6. Loews Corporation (L): Property & Casualty Insurance Industry. Market cap of $15.67B. TTM P/E at 13.73 vs. 3-year average at 29.89. Last year diluted EPS at $3.12 vs. 2-year prior EPS at $1.31. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock is currently stuck in a downtrend, trading 7.32% below its SMA20, 8.41% below its SMA50, and 8.19% below its SMA200. The stock has gained 1.38% over the last year.
  7. Ingram Micro Inc. (IM): Computers Wholesale Industry. Market cap of $2.86B. TTM P/E at 9.77 vs. 3-year average at 81.03. Last year diluted EPS at $1.94 vs. 2-year prior EPS at $1.22. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock has gained 4.22% over the last year.
  8. Tenet Healthcare Corp. (THC): Hospitals Industry. Market cap of $2.54B. TTM P/E at 2.58 vs. 3-year average at 5.35. Last year diluted EPS at $2.01 vs. 2-year prior EPS at $0.43. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. This is a risky stock that is significantly more volatile than the overall market (beta = 2.3). It's been a rough couple of days for the stock, losing 8.79% over the last week.
  9. Alliant Techsystems Inc. (ATK): Aerospace/Defense Products & Services Industry. Market cap of $2.16B. TTM P/E at 6.86 vs. 3-year average at 11.40. Last year diluted EPS at $9.32 vs. 2-year prior EPS at $8.33. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock is currently stuck in a downtrend, trading 5.04% below its SMA20, 6.34% below its SMA50, and 10.12% below its SMA200. The stock has performed poorly over the last month, losing 11.16%.
  10. RLI Corp. (RLI): Property & Casualty Insurance Industry. Market cap of $1.30B. TTM P/E at 9.23 vs. 3-year average at 11.88. Last year diluted EPS at $6.00 vs. 2-year prior EPS at $4.32. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock is a short squeeze candidate, with a short float at 9.37% (equivalent to 20.99 days of average volume). The stock has gained 25.8% over the last year.
  11. Nelnet Inc. (NNI): Credit Services Industry. Market cap of $976.39M. TTM P/E at 5.25 vs. 3-year average at 7.09. Last year diluted EPS at $3.81 vs. 2-year prior EPS at $2.78. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock has gained 3.71% over the last year.
  12. Resource Capital Corp. (RSO): REIT. Market cap of $414.72M. TTM P/E at 9.27 vs. 3-year average at 41.87. Last year diluted EPS at $0.41 vs. 2-year prior EPS at $0.25. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. This is a risky stock that is significantly more volatile than the overall market (beta = 2.14). The stock has performed poorly over the last month, losing 10.5%.
  13. Oppenheimer Holdings Inc. (OPY): Investment Brokerage Industry. Market cap of $338.21M. TTM P/E at 14.06 vs. 3-year average at 20.32. Last year diluted EPS at $2.76 vs. 2-year prior EPS at $1.45. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. The stock is currently stuck in a downtrend, trading 7.42% below its SMA20, 7.84% below its SMA50, and 11.05% below its SMA200. The stock has performed poorly over the last month, losing 10.86%.
  14. Standard Motor Products Inc. (SMP): Auto Parts Industry. Market cap of $302.31M. TTM P/E at 8.73 vs. 3-year average at 190.30. Last year diluted EPS at $1.09 vs. 2-year prior EPS at $0.30. According to RiskMetrics, the company has "low risk" in all four corporate governance categories. This is a risky stock that is significantly more volatile than the overall market (beta = 2.39). It's been a rough couple of days for the stock, losing 10.43% over the last week.

*RiskMetrics ratings sourced from Yahoo! Finance, P/E and EPS 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.

Source: 14 Companies With Rising EPS, Falling P/E, And Good Corporate Governance